In 2022, we wrote that “West Biofuels Making the Leap to Commercial Plants”.  Now it is clear they made that leap.  We checked in with COO Matt Summers recently and discovered they are charging ahead with one plant operating, one nearly ready to operate under commercial conditions and two more ready to go once PG&E approves their interconnection requests.  These 4 will each thermally convert biomass to fuel a 3 MW power plant.  One uses rice straw (Williams) and the remainder use forestry thinnings (Hat Creek, Mariposa, and Mammoth Lake).  Due to a special utility tariff (the Bioenergy Market Adjusting Tariff (BioMAT), utilities are required to procure up to 250 MW of power from plants that are 3 MW or less and pay premium prices that are a multiple of what they otherwise would pay.  The tariff was developed by the State because it recognized the many benefits of community-scale bioenergy facilities including a source of baseload power, assisting in reducing open burning and forest fires, and developing community jobs and local rural economy.  The program has clearly been a real boost for the industry and the local community.  

West Biofuels (WBF) stands out from others pursuing these prices by switching to an entirely different power generation system, one based on an indirect-fired Organic Rankine Cycle (ORC) generator.  One of the big challenges in a gasifier system is dealing with the variability of the available biomass feedstock, which affects the quality of the gas and the amount of undesirable by-products in it that impact engine generator performance.  WBF’s approach sidesteps that problem by using a system that is much less sensitive to such variations.  The gas burns cleanly and it’s heat vaporizes a liquid to turn a turbine hooked to a generator.  As a result of their switch, WBF plants are running well and with a higher uptime and lower operating cost than most others.  There is still some of the 250 MW allocation unused that WBF wants to go after.  To fully utilize the allocation, the CPUC may need to extend the expiration date beyond the end of next year.  Matt believes that the program has a good chance of extension since one of the main reasons plants are delayed is the amount of time (measured in years) utilities are taking to approve and implement grid interconnection requests.

Still at some point, these allocations will run out and WBF will need to find a product worth more than electricity to stay in the game.  Realizing this long ago, WBF started a program in 2015 with funding from the CEC to make clean fuels from the syngas.  That too is a tricky business with most catalysts to produce clean renewable “natural” gas or clean renewable diesel being inefficient or too costly to operate.  WBF believes they have found better catalysts and are ready to start producing renewable “natural” gas (RNG) in its Woodland facility as a pilot demonstration. This $15 million effort is partly funded by PG&E through their RNG Pilot Program and is awaiting California Public Utilities Commission approval.  The plant will be ready to start producing gas after installing the gas upgrading unit and will start injecting RNG into PG&E’s pipeline in 2026.  The plant will process 5 tons per day of biomass for a 3-year pilot demonstration.

WBF has also done very well lining up contracts and grants to subsidize their power plants.  In all they have received $44.5 million from the CEC, US DOE, USDA, and CAL FIRE to get its four plants constructed.

In a tough market using a tricky technology, WBF now stands out as one of those rare commercial success stories in biomass gasification as it has found ways to overcome the challenges that have stymied many others.

Farid Dibachi likes to do things differently.  That approach has served him well in building Simpl Global.  One is his technical approach.  The other is his way of funding growth.

An electrical engineer, Farid founded the company in 2018 based on a very clever—and simple–way to provide modular battery storage behind each solar panel on a home rooftop.  This was a departure from the usual way of having one big battery bank somewhere in a garage or at the side of a house.  As a side benefit, his architecture improved the net output from the array of panels.  That turned out to be a very popular product.  In the next five years, he added load management, commercial scale storage, a thermostat that serves as a network gateway, and a monitoring system.  All embodied his simplified approach and his customer base has grown as a result. 

But Farid’s ideas on funding a company are even more interesting.  Because of some bad experiences in a prior company, Farid was determined to avoid bringing in multiple equity investors at an early stage.  He was determined to grow his company solely by plowing his profits back into the company—or “bootstrapping” it.  This choice has two big consequences.  First, you need a substantial profit margin on each sale to generate growth capital.  Most small companies have to be content with a small initial profit margin that grows over time.  They run short on cash before they can grow significantly.  Farid made sure he had a healthy profit.  Second, investing only earned profits into the growth of a company restricts the rate of growth in almost all cases when making a physical product.  One has to be content with allowing competitors who can grow faster with outside money to take market share.  The risk is that if the competitor can get established in the market, they could marginalize your product.

Farid’s notion is that if he grows slowly and uses the time to improve his products, he could develop a great reputation in the market and develop a fiercely loyal set of customers.  Then it might be time to bring in outside money, from carefully vetted sources, to get to the scale needed to secure a significant market share.  

Many aspire to building a company without outside investment, but few have the conditions to make that possible.  So far, bootstrapping is working for Farid.  Yet there will be a point where he will have to take a bolder step.  But Farid wants to be sure, when he reaches that point, that he has a very strong hand in negotiations with investors.  

That’s a luxury most don’t have.  But that’s an advantage of doing things a different way.

Have you ever felt guilty about dumping that heavy wine bottle in the trash?  Even if you live in a community that requires separation of recyclables from general trash, the sad fact is that the bottle usually ends up in the landfill anyway–or worse places.  There just isn’t enough value in recycling that glass–unless you paid a deposit on that wine bottle.  If you did, the CRV (California Redemption Value) paid you 10 cents per bottle if you took it to a recycling center.  That worked for sodas, beer and juices, but surprisingly it was not required for wine–until now. Starting this year, bottles of wine require a 5 or 10 cent deposit under new legislation (SB1013), depending on the size of the bottle. But usually what happens is that those bottles get crushed and remelted to make new bottles.  Better, but still it seems like a waste compared to washing and reusing the bottles.

Caren McNamara founded Conscious Containers in 2017 to attack this problem head-on, and now with the new law she has been able to make some significant headway.  She wants to collect those wine bottles, wash them and send them back to the wineries to be refilled.  Seems like a simple idea.  In fact, in the first half of the last century, that is exactly how soda bottles, beer bottles, and milk bottles were handled.  Why did that stop?  It turned out that there was a lot of breakage in collecting the empties, and the public was concerned about the hygiene of reusing bottles.  Energy was cheap.  Raw materials were abundant.  It was so much easier and simpler to just make new ones.  In particular, you could do away with the need to pay for the labor-intensive collection and cleaning of used bottles.

What is different now? Energy is not so cheap.  People are increasingly unwilling to just dump things in a landfill, and there is a bounty on collecting used bottles. Caren hopes that by focusing on the wine industry as it becomes especially sensitive to the waste problem, there will be substantial support for her recycling and reuse efforts. There are 3.7 billion wine bottles filled in California each year.  

Based in Truckee, Conscious Container’s 5-member team will focus on the medium-size wineries in Sonoma and Napa.  The first planned facility will have the capacity to handle 56,000 bottles per year, a modest start.  They have already seen interest from these smaller bottlers in dealing with dozens of pallets with bottles collecting dust, waiting for a way to clean them and get them back to the production line.  With their initial angel funding, they established their proof of concept.

A big hurdle has been locating sources of patient capital to buy industrial washing equipment and get more space.   Caren stresses the importance of finding investors who possess a genuine understanding of the problem at hand and understand that establishing the infrastructure needed will require long time frames to reach profitability.  She has been focusing on more philanthropic sources of capital, such as donor-advised funds.  Her forecasts show reaching a break-even in three years.

“Some of the things I have learned as I’ve gone through the process is the importance of really surrounding yourself with talented and different people. You have to check all the key boxes, and if you don’t know something, finding someone to fill them in is crucial.” 

Caren has also learned the importance of serendipity:  “Sometimes things will walk in the door with huge opportunities you never saw coming.”  The key is to be ready to take advantage of them.

Conscious Container founder Caren McNamara discusses reusing bottles during an April 12 Napa RISE Wine & Climate Symposium workshop. Photo Katherine Martine

We occasionally check in on the latest advances in crowdfunding to see if it provides some good funding opportunities.  It does seem to have turned a corner, but there are still many perils.  We are now watching what is happening with one of our regional cluster companies to see how things turn out and what lessons can be learned.  Is it time to push this higher up on the options available?

First of all, the massive amount of money being successfully raised through crowdfunding of all types cannot be ignored.  Here are some recent statistics from Fundera and the CrowdData Center which track the industry, and consider all types of crowdfunding—donations, sales of equity, pre-sales of products, reward-based campaigns, and lending:

1. $17.2 billion is generated yearly through crowdfunding in North America.  The cumulative total since 2014 is $55 billion.
2. Funds raised through crowdfunding grew 33.7% last year.
3. There were 6,455,080 worldwide crowdfunding campaigns last year.
4. Since 2014, the average raise just for fully-funded successful campaigns is $214,000.
5. The average amount raised by all crowdfunding campaigns last year was $824.
6. The average success rate of crowdfunding campaigns is about 22%.
7. Overall crowdfunding projects have an average of (depending on the source) 47 backers (Fundera), or 341 backers (The CrowdData Center).

From the data we have reviewed, the typical successful equity raise for a business is a few hundred thousand dollars.  Raising over a million dollars is rare. 

Second, the SEC amended its rules to make crowdfunding more compatible with raising money in a subsequent, more traditional round.  One of the original concerns with crowdfunding was that it would result in a company having to manage hundreds of unsophisticated investors which not only could be time-consuming but a big hassle when it came time to bring in more traditional investors and existing investors would need to agree to the new investment.  The gaggle of rookies might not understand being presented with detailed terms and conditions that a more sophisticated investor would see as pretty standard.  The new rules provided for putting all the rookies in a separate entity with an established leader, and with clear rules on how decisions would be made by the group.  That would mean the main company would have only one investor to deal with.  To the extent that new money was coming into the company the leader of the special entity would arrange for a vote and have a decision rule like a supermajority (e.g., 75%) could approve a transaction, and the rest would be bound to go along.  This change made an earlier crowdfunding round much more palatable to future investors.  

Crowdfunding is appealing for several reasons.  It can provide critical early money to underwrite demo projects to provide evidence of customer traction.  It provides early exposure to some investors that would otherwise be hard to reach.  You don’t need to surrender much ownership of your company to raise early money.  Valuations tend to be very generous.

On the other hand, there are perils.  You have to expose your idea to the world, and potentially invite copycats.  Conducting a campaign requires a lot of preparation—financials, due diligence material, a slide presentation, a live Q&A session, and legal documentation.  Success is a function of the work you put into a campaign.  Close to 80% of all campaigns fail.  

You can choose a platform with very unfavorable terms, such as high fees and a requirement to refund investors’ money if the target goal is not reached.  Your platform may expect you to bring potential investors to the table.  They do not have a bench of eager investors.  You have to research the platforms very carefully.  There are scams out there. 

Platforms like Kickstarter and GoFundMe are not for equity crowdfunding.   They are more for donation-type and pre-sale campaigns.  You have to look very carefully for one that is appropriate.  There are hundreds of platforms out there now.  Research their track records carefully.  One we have identified that so far looks pretty good is netcapital.com.  It looks like they have a ready-made set of investors that visit the site often looking for deals.  And they tend to support their clients well.  There are probably others, but at least that is a place to start if you want to explore this opportunity.  But always be careful and be skeptical of anything that sounds too good to be true. Unfortunately, there are scammers out there.

This week we heard from new innovators at the local Circular Economy Pitch Competition.  Western Placer Waste Management Authority (WPWMA) is spending $120 million to upgrade their Placer County facility and they want it to spur innovation in the region. So, WPWMA collaborated with the Carlsen Center at Sac State to hold the Circular Economy Innovation competition. In its second year, the competition is an opportunity for regional innovators to pitch their ideas to WPWMA and win $20,000, a pretty serious prize.  

It is a tough competition because WPWMA is looking for innovations that could be tested and improve their new facility. Most companies are used to pitching for financing to investors, who most likely are not potential customers. WPWMA could be both, financiers and customers. So the pitch is two-fold. Show you have a genuine business opportunity that is also a fit for them as a potential customer.  The evaluation criteria are closely reflected in innovations WPWMA sees as important to their waste recovery efforts.

Companies’ innovations were evaluated on their ability to allow WPWMA to:

• Maximize recovery of materials, avoiding increases in landfill disposals
• Reducing costs (transportation, energy usage, etc.)
• Enhancing revenues
• Creating consistency (decreasing volatility of international markets)1

Eight Companies pitched Wednesday, and some addressed global issues, like FabricFeed’s ERP and platform for managing textile waste. Others focused on issues close to home, like PalmBin’s composting (currently running a Kickstarter campaign) and Clean & Go’s waste removal for the unhoused. There were even some pitches close to clean tech from Sustainable Energy Inc. (who was part of the second cohort of the CEO Crash Course) and GreenGo, a recent Sacramento State graduate who has designed a carbon capture add-on for exhaust.

The $20,000 was won by Fiber Global, which has a solution that closely fits the criteria. It is a funded company that has demonstrated traction by having a production facility in Indiana taking cardboard and creating fiber boards. But it was close. WPWMA also announced a surprise award of $5,000 for a similar but earlier-stage company Eco Builder, which are looking to convert plastic waste into building materials. Both innovations focused on recovering materials and enhancing revenues, two important parts of WPWMA’s metrics.

The Circular Economy Innovation Competition is likely to return in 2025. It is a great experience for companies looking to get their solution in front of WPWMA and learn what a potential future customer and stakeholder views as important. If you have an idea, follow the Carlsen Center and WPWMA for future opportunities.

1 https://www.csus.edu/center/carlsen/build-with-carlsen-center/circular-economy.html#:~:text=Maximize%20recovery%20of,of%20international%20markets)