Dear Mom:
First off - I love you - thanks for the call last night during the President’s State of the Union Address. Yes - you are right - there is a lot of money going to green companies. No - I don’t have any yet. Yes - I know I should try to get some. Yes - I heard Obama say he is going to create green jobs. Yes - our company makes solar panels; we have green jobs. No - we don’t have money from the government. Yes - I think we should apply. Mom I heard you loud and clear - I understand - you think we should get millions from the government - BUT PLEASE LET ME EXPLAIN.
The government is not giving away money to create green jobs to just anyone. The government is flowing money into new and existing programs that will distribute some of it according to their rules and ability. A lot of it will be eaten up by earmarks where a company lobbies their congressman to say - we want $10M of that DOE program.
OK the rules go like this Mom - if the government gives you money - you need to have money first - in most cases. It is called matching. So if they give you a million dollars you need to match it with a million dollars. Sometimes they just give you money but that is usually through a University or some national lab - we don’t fall into that category. Let me repeat - we need the matching funds.
The government doesn’t have the ability to manage thousands of little investments - they are not a VC. So they give out a few small grants to a handful of companies then they give HUGE grants and loan guarantees to more established companies that can hire 1000 people overnight - like a Dow Chemical or Ford. They want jobs now - not a bunch of technology startups. A company that can hire 50 folks to install Chinese solar panels on roofs in Colorado is more likely to get funding than us because they can hire 50 folks. We can only hire 2 more engineers to help develop our technology to cut solar panel costs in half; but because we are a year or two away from building a factory - we can get no money today from those job creation programs.
We need to get money from R&D programs which have their own rules and politics. Typically you can’t get big money until you’ve gotten a little money first and proven you can handle it. So we applied for $150K - 30 page application for $150K with a detailed budget! So did 300 other jokers. Only 10 got it (4 of the 10 winners had an affiliation with MIT BTW). That process from applying to notification took 6 months. We have to reapply again for $150K - if we get it, then in another 6 to 12 months we can apply for one to three million. Only a four companies got $3M in this recent round.
Also Mom it takes time. If you apply for a grant it takes months before you get the money at best - which doesn’t work for us - our business moves too fast. We need money now. Government money isn’t predictable - you can’t run your business on grants - it is simply in addition to whatever you already raised. It shows up like a lottery ticket or a check from an aunt that remembered your birthday for some reason. Since you can’t bank on it - you simply apply and forget.
But mom I really don’t want the government to be a VC. I’d rather they incent the VCs to make more investments in clean-tech. Or better yet implement policy that puts some sort of price on carbon emissions - that way green energy won’t cost such a premium - it can stand on its own merit.
Mom you know me - if there is a way for me to legitimately milk the system to get something for free I will. We will keep applying for everything that makes sense - but spending 5 days on an application for $150K is bogus. Our government green investment strategy is short-sighted - jobs now. To build a real clean-tech economy we need smart policy not just cash for short lived programs and manual labor jobs. The government R&D funding process is broken too - better to just give all the money to universities and national labs - let the private sector choose which companies will be the winners and losers.
I know it sounds like we should get money in the press - but the reality is the money isn’t for startups - it is for the well funded or more established companies.
OK I got to go.
Love - Paul
