5 success secrets for B2B cleanweb startups
Cleanweb is suddenly a buzzword. Some view it as an entirely new entrepreneurial sector; others as an evolution of the clean energy and natural resource scarcity megatrend. Either way, the use of web-based platforms to provide new marketplaces and information tools to drive resource efficiency is on the rise among entrepreneurs and investors.
The term cleanweb refers to web-based efforts to reduce environmental impacts to help people buy and sell goods, commute or otherwise engage with the physical world more efficiently. To date, however, most of this activity has been in either business-to-consumer (B2C) or consumer-to-consumer (C2C or "sharing economy") tools. Examples such as AirBnB, Waze, SideCar, Lyft, yerdle and others have enjoyed fast user growth and early success.
We're only beginning to see examples of B2B cleanweb plays, but this may represent the next big wave of creative market disruption. After all, businesses need better ways to lower procurement costs, reduce waste, motivate employees and get more customers. Web-based platforms already are helping in other contexts. Why not with a clean energy or natural resource angle? It's inevitable.
Some early consumer cleanweb successes can be ported directly over to this next opportunity. But B2C and C2C cleanweb efforts likely will look different from B2B efforts in important ways. Here are five success factors all B2B cleanweb entrepreneurs should consider before jumping in:
1. For the triple bottom line, the single bottom line matters most
In the list of consumer-oriented, fast-growing cleanweb startups above, many don't offer resource efficiency as a primary user motivation. In fact, several of these startups might not even describe themselves as cleanweb tools at all.
When selling to businesses, concerns over climate change can be a nice hook for getting initial attention. But at the end of the day, to enlist the majority of businesses you've got to offer a compelling economic value proposition. This may have little to do with social concerns at all, or at very least also has dollars-and-cents impact. Show that your offering has a compelling financial ROI.
2. It's all about aggregation
What makes cleanweb so fascinating and potentially lucrative is its opportunity to find fast-scaling businesses in an otherwise slow-moving and fragmented energy marketplace.
This is best done by taking advantage of what web platforms have over any physical-based business: very low marginal costs per user.
One of our portfolio companies, Noesis Energy, set about building a large user base among building owners very quickly, by offering free energy benchmarking and tracking tools. That’s right, free. Unsurprisingly, building managers were willing to pay that price. Noesis could do this as a web-based business. In less than a year after launch, the company aggregated over a billion square feet worth of users on its system, a number that continues to grow rapidly. Noesis is then able to offer advanced services and a marketplace for retrofit products and services to this fast-growing user base.
Building energy efficiency hardware vendors often complain that only a very small portion of property owners at any time have the magic combination of budget, authorization and motivation to do a retrofit. But if you can aggregate even that small portion of the market into one place, it ends up being a very big marketplace.
3. Before finalizing your offering, get an early customer (or three)
This isn't like selling hardware -- the right early customers will be okay with helping you develop a winning approach. And by the way, your first approach won't be a winning approach. And that's okay.
Companies such as First Fuel, Honest Buildings and kwHours are all examples of this in the building efficiency space. They all started out with fairly good initial offerings to a few customers -- but then sought out additional input from early users as to what else was needed. And so they've shifted their approaches to incorporate additional features or additional value streams, while still growing into new markets.
Don't let the perfect be the enemy of the good before getting into the marketplace. Instead, find an early customer who can help you get from good to perfect.
Another great way to go about this is to white label the product for a key early customer. At the early startup stages, there is neither a lot of brand value nor a large user base. But a startup can work with a large corporate customer, for example, to help establish a co-branded proprietary website just for employees or customers, gaining to a critical mass much more quickly. This deeper level of engagement helps engage the early customer's team in providing value through the website. It generates better quality input earlier.
4. Fit into an existing budget line item
A classic mistake in any B2B business is to offer a compelling economic value proposition to a purchaser who lacks the budget for it. Some of the smarter B2B cleanweb plays I've seen are tailoring their service to fit into existing corporate budgets, even if it's very different from what the budget originally was envisioned for.
Practically Green and SmartOES, for example, are selling employee-engagement tools to large companies. Their tools offer significant bottom line savings to these companies, by motivating employees to reduce electricity use and other wasteful cost. But rather than try to make a standalone pitch to the CFO, they're often working through the corporate sustainability group's existing budget. Not only does this give these startups a budget line item they can slot right into, it also gives the chief sustainability officer they're selling to an excuse to show the CFO and others just how much shareholder value they're creating. Helping your immediate customer contacts look smart to their management peers is always a good policy.
5. Automation captures more value than data alone
Too many startups, such as the many energy "dashboards" out there, simply provide information to a corporate user and expect to be paid for it. But if we've learned one thing about these and other analogous offerings, it's that the data is rarely acted upon or valued as it should be.
I spoke with one happy customer of a building energy dashboard. Did they look at it? Yes, once a month. Did they get value out of it? Yes, they'd identified real cost savings, which easily exceeded the dashboard's annual subscription fee. So were they going to sign up for another annual subscription? No, probably not, as it just wasn’t a priority.
This is typical. Except in a few specific exceptions, energy and waste are rarely any manager's top priority. Give them information and they'll be grateful for it but still be short on motivation to do anything about it. Without doing much about it, they won't value the information. You haven't solved their headache; you're giving them a new one.
That's why it's great to see companies such as Powerit Solutions (another Black Coral portfolio company) and Optimum Energy who are taking in data via the web and optimizing facility energy usage in automated ways. Together, their tools have been installed in hundreds of commercial and industrial sites, clearly creating real value. Unfortunately, it's mostly just been in a buildings context to date. We need to see more such automation-enabling efforts in areas such as fleet management, water infrastructure, agriculture and elsewhere.
Cleanweb B2B efforts are just barely getting started, but already we can start to see early leaders pointing the way forward. It's not as easy as setting up a sharing site or providing a web platform for information. Business customers require real tangible value before they'll adopt any solution. But for entrepreneurs who can use the unique attributes of the web to unlock such value via cleanweb applications, there's a lot of value to be created as well.
Editor's note: To learn more about cleanweb and the convergence of sustainability and technology, be sure to check out VERGE SF October 14-17.
Keyhole image by katerha via Flickr