Business Rx: Sustainable Systems International

The entrepreneur

John Spears has been in the solar energy industry since the early 1970s. In the mid-1990s, he spent time in South Africa, helping rebuild the housing infrastructure as the country emerged from apartheid. He saw first-hand the challenges and threats a lack of modern infrastructure poses to communities. He established a nonprofit that has built a number of sustainable communities around the world. Spears also has a for-profit business, Sustainable Design Group, that specializes in designing and building zero-energy homes and commercial buildings in the United States. More recently, he saw an opportunity for yet another venture focused on helping developing countries replace inefficient diesel generators with sustainable solar-powered options.

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The business was an outgrowth of his experience working on a project in Pakistan a few years ago that had to be discontinued because of the unstable political climate. Spears thought there must be an easier way to get sustainable resources to remote communities, so he came up with a model for manufacturing systems that can be shipped to developing regions and be easily set up on site.

As a demonstration of the idea, he connected with contacts at India’s largest dairy cooperative that were seeking better generators to chill milk. Spears set out to engineer the generators, but quickly realized a solar-powered milk chiller would be the better solution. Now he is perfecting the milk chiller and finalizing relationships with the dairy co-op, and the world’s largest dairies, to roll out the first product in his new venture, Sustainable Systems International.

The pitch

Spears

“I organized Sustainable Systems International as a Benefit LLC, based in Gaithersburg, under the state’s recent benefit corporation designation. Currently, I am running this business and my design-build business, which is helping to fund some of this venture. But I can’t build this company with my own money; I don’t have enough of it.

“Last year, we competed in the national Clean Tech Open business competition and won the regional round and the national sustainability prize. I participated at every level to really hone my business pitch and learned how to raise money. Meanwhile, I put as much of this business together that I could without raising any money. I went out for every grant I could. I have a Maryland Industrial Partnerships Grant that will help a lot. I also got an early angel investor — one of the judges in the Clean Tech Open. He’s extremely well-connected worldwide and a great asset to our growth as a company. I’ve learned that all investors aren’t created equal — when you’re growing a business, you don’t just want anybody’s money. Having really good investors who can help with the right connections matters.

“Once we bring our milk chillers to market, we can use the proceeds from those sales to develop new sustainable products and scale up. We need about $500,000 in capital to get manufacturing up and running. For me, this is a whole new ball game. I have a lot of experience running companies that don’t need a lot of start-up capital. We are exploring all options — seeking investors, bank financing and more grant opportunities that are available because of our mission-driven business model. Everything is taking twice as long as I expected it to, and I didn’t anticipate that. I am still running my design-build firm full-time to make ends meet and finding the time to do everything has been one of my greatest challenges.

The advice

Melissa Carrier, assistant dean, Center for Social Value Creation, Robert H. Smith School of Business

“Your vision for what you can create and offer to the emerging marketplace is quite compelling. Your business savvy and years of experience in the solar industry as well as emerging markets make you highly credible, which is extremely important to potential investors.

“On the fundraising side, you’re right — everything takes much longer than you think it should. At some point you’re going to need to commit to this venture full-time. You have to decide what that jumping point is for you, as it will become increasingly difficult to be successful in both businesses in this current model. Figure out when you will make the transition. Is it the completion of the demonstration unit in market, your first paying customer order, raising the money and how much, etc.? Set key milestones with go/no-go decision points that are clearly defined. This will enable you to make smarter choices about your time investment and financial commitment. Be aware that when you’re going through the fundraising process, investors are going to look at your commitment level as a factor in your ability to be successful … and make them money. Working on a venture only part-time can be a red flag for investors and something they will ask you about. You need to have a plan. And be prepared for investors to change your plan!

“As you think about the $500,000 you need to raise, seek out organizations that focus on impact investing — supporting entrepreneurs that use capital markets to create social and environmental change. Try Investor Circle, a national coalition of high impact investors and wealthy individuals who exclusively invest in impact companies. They’ll be more receptive to the fact that you’re a Benefit LLC. On the West Coast, you can look into the Social Capital Markets investor community. Once you start to connect into these organizations, you’ll find it’s a tight-knit group. Use your strong connections to build reputational capital with impact investors. The right people will be within your sightline soon enough.

The reaction

Spears

“I have been thinking about when I will make a full-time transition. Right now, we’re pushing to get our first demonstration unit in the field, which should help prove the business to investors.

“I will look into the organizations you mentioned. I think we can get the initial capital we need to ramp up in an angel investment round with people who really want to do something good for the planet and people — making the world a better place and making money at the same time. That will get us a building, get us some staff and cash flow for the first year to start taking orders. Then our orders can finance the operation and allow us to expand to additional products. Next up: Solar-powered cold storage units for produce and solar-powered water purification units.”

 
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