Episode 168: Accelerating Cleantech Startups with Pat Sapinsley of Urban Future Lab at NYU Tandon

Today's guest is Pat Sapinsley, Managing Director of Cleantech Initiatives at the Urban Future Lab at NYU Tandon School of Engineering. Pat and I cover her career leading up to Urban Future Lab, an overview of UFL's programs, and the criteria UFL looks for when determining which startups to back.

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What is the Urban Future Lab?

The Urban Future Lab is the center of all things climate tech in New York. We are the longest-running and most successful incubator in New York State. We're funded by NYSERDA, and your listeners might not know what that is. NYSERDA's a New York State agency that promotes energy efficiency in the use of renewable energy. They do that with something called the system benefits charge on everybody's utility bill. These bills are never transparent. Nobody knows what they're paying for, which is a bugaboo of mine.

But one of the things is to fund NYSERDA. So they have about five billion to spend on clean energy in New York State, and they use it very well. It's a brilliant and productive state agency.

And of course, NYU, we're part of NYU, so they provide our space and benefits and lots of administrative support to us. So our mission is that we help companies with market-ready solutions to climate change to scale up. Our goal is to deploy these things widely. We don't have a lot of time, so we focus on those that have solutions. Ideation is for someone else. That takes more time than we have. We're a tiny little staff, and we want to be able to see the impact of what we do. So we ask that companies only come to us with top-line revenue, some kind of market-ready ... It can be very small. It can be one or two pilots. But we just want to measure their seriousness. We want to be able to pick up the phone and call one of their customers and say, "Did they show up? Did it work? And if they didn't work, what did they do about it?" because that tells us a lot about the entrepreneur.

So we work with companies all through the climate value chain, data, software, business model innovation, built environment, mobility, storage, distribution, controls, DER strategies, community solar, even community fuel cells. And we do less hard tech than some of our colleagues, like the wonderful Greentown Labs in Boston that you know well, because we are in New York and because the real estate cost of providing hard tech support is huge and there is something called Newlab in the Navy Yard that does that. So we don't want to reproduce what others are doing. We take no equity. We're a not-for-profit. And we have a fabulous success rate.

How do you measure your own performance as an organization? What are the key criteria or KPIs with which you evaluate performance and success?

It's pretty simple. We have metric reporting that we have to do to NYSERDA, and there are lots and lots of things that they ask, you know, how many introductions did you make, how many sales invoices does that company have. It's very granular.

But the big things, I think, are that in the startup world in America, something like 90% of the businesses fail. Coming out of our incubator, 90% of the businesses are still up and running since 2009. That's crazy. [Laughs]. And the other one is that our companies have now raised, I'm waiting for that one billion mark. We're at 900 million. And of course, the other metric that I mentioned to you is that ... And this keeps changing as companies raise money. For every one dollar that NYSERDA has given us, our companies have raised 200 in the private market. So those are the metrics that I look at for success.

Where does policy fit into Urban Future Lab's work?

We all know that federal policy in America moves very slowly and on a kind of a jerking one step forward, two steps backward kind of way, and that given what the makeup of our Congress is now, you know, it's iffy. We have a terrific administration that's very much behind these things. But who knows what's going to happen?

In the EU yesterday or the day before, they passed a law that said greenhouse gas emissions economy-wide, we're not just talking about tailpipe emissions, we're not just talking about energy generation, economy-wide, greenhouse gas emissions have to drop 55% from the 2009 benchmark by 2030 and I think it's a net-zero economy by 2050. That's hard, but it's a great goal. We don't have anything like that on the federal level. We're back and forth on the café standards. We're back and forth on renewable portfolio standards. We're hoping all that'll happen.

The one thing we do have on the federal level is this 45Q, which is helping our companies that are in the Carbon to Value Initiative. These companies are drawing down carbon and making something out of it. So 45Q is a federal tax credit that gives companies, I think it's 35 to 50 dollars a ton, depending on how it's being used, to capture carbon and either bury it underground or make a useful end product out of it.

So as a tax credit instead of a tax, we can make that work for us. I'm okay with that because it helps us find a business model that works for capturing carbon. A tax, as opposed to a tax credit, is just not going to happen. I don't see a carbon tax happening with this Congress. So we have to work with those that are focused on tax credits, like the ones for wind and solar, like this one 45Q, and I don't think we should pin our hopes on a carbon tax coming anytime soon.

You mentioned that the success rate of companies across Urban Future Lab was over 90% since 2009, what are some things that UFL does to support the success of these companies?

Well, just, just to be clear, I said close to 90%. It's actually 88%. I have a very sharp pencil accountant on my team, and he would kill me if he heard this. But it's 88%.

I think the most important thing that we do is that we make introductions for them that are trusted, and that comes from the fact that we curate these introductions very carefully. Uh, you know, I get, I get a little annoyed when people just throw introductions into my inbox, which is groaning already, without having really vetted who it is they're introducing me to.

If I have a company that is producing that I think one of the real estate owners really could use, I'll send a description of that company to the real estate owner. And because I've been on all these boards and because my staff, too, are very active, you know, networking out in the world, they know these people, too. We will send introductions to the real estate owner or the person who's on the facility's team at that real estate entity and say, "So here's someone who's doing something with building management systems. We think it would be really useful in your buildings. Look it over. Look at their website. Call me and ask me questions. And if you want, I'll make the introduction."

And then they trust our introductions because it's not just something that's been launched into their email. They have the chance to look at it, to talk to us, to talk to others. And then the introductions are more successful. And we also kind of know which door to knock on. You know, if a utility has a thousand different customer-facing employees, or, not a thousand. Let's say they have 30. We know which one does what, who's working with clean gas, who's working with non-wire solutions, who are working with the REV program. And it's just a more successful introduction because they trust us because we curate these introductions.

So as I said, the most important thing we can do is help them get customers, and this is how we help them get customers. And then the other thing, we've had some of our companies say that Meg, our brilliant graphic designer, is our secret weapon. She helps them with their pitches. She helps them with their websites. We use pitch coaches from NYSERDA. NYSERDA has an EIR program, and we joke that there's one pitch coach here whose companies always win our competition. We're not quite sure how that happens. And I'm not quite sure I should say his name.

But we offer services that are quite valuable. The pitching is important, and you have to do it differently for customers than you would for VCs, than you would for non-dilutive grant providers. The introductions to customers have to be curated. The way your website and your deck look is very important. You know, we also have an accountant who comes in once a month if they want. We have a lawyer who comes in once a month to work with them. It's what we do.

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