Oakland investment coalition might fund green startups

Oakland investment coalition might fund green startups

East Bay Business Times - August 24, 2007

by Mavis Scanlon

Stephanie Secrest | East Bay Business Times
James Nixon with Sustainable Systems Inc.

Oakland aims to form a green finance network that would invest in startup companies, a move to encourage its emerging clean technology, green building and energy efficiency industries.

The effort is still in the early stages, and the final shape of the network and number of participants is yet to be determined.

The Green Finance Network will line up prospective startup businesses with potential investors.

The network is just one facet of the economic development strategy Oakland is undertaking under the auspices of the Oakland Partnership, a collaboration among government, business, education, labor and the community.

The network's potential members include the more than two dozen investment organizations in Oakland and the Bay Area characterized as green or socially responsible, or that look for a so-called double bottom line that considers profits as important as social and environmental goals.

The idea percolated for at least a year, starting with a conversation between Karen Engel, director of economic development for the Oakland Metropolitan Chamber of Commerce, and James Hurd Nixon, chair of Oakland's Sustainable Systems Inc., a business and economic development firm.

Engel and the chamber commissioned a study by consulting firm McKinsey & Co., released in May, that looked at the burgeoning business clusters Oakland could nurture. Those clusters include green industry, international trade, health care and digital arts.

"In the course of that conversation the proverbial light bulb went off," Nixon said. "There are a whole lot of double-bottom-line investment organizations in Oakland, and we have never convened those organizations and had them look at Oakland in a coordinated way to encourage investing in deals in Oakland," he added.

Nixon has been working with a green finance subgroup of the Oakland Partnership's green industry cluster that includes Peter Liu, a founder and vice chairman of New Resource Bank in San Francisco; Jacob Singer, the CEO of OBDC Small Business Finance in Oakland; Dan Adler, vice president of the California Clean Energy Fund; Paresh Patel, vice president, corporate finance, Shoreline Pacific LLC in San Francisco; David Schecter of Oakland's Community and Economic Development Agency; and Brian Garrett, president and CEO of Oakland's Community Bank of the Bay.

The network would be modeled on the Bay Area Community Investment Network, or BACIN, the San Francisco network of commercial and community financial institutions, investors and funds that invest in low-income neighborhoods. BACIN and the Bay Are Council in San Francisco have agreed to co-sponsor the Green Finance Network.

At an Aug. 16 meeting, Nixon presented an initial business plan that called for twice-annual meetings, at which four to six companies would present their business plans in hopes of securing startup capital. Nixon's firm, Sustainable Systems, would coach the companies in advance to ensure they were well-prepared. At these meetings network companies could also share underwriting criteria in an effort to encourage joint equity or debt investments. Presenting companies would also be advised or directed on the best resources to help them grow.

The network business plan will be presented at the next Oakland Partnership meeting on Sept. 5.

Success will be measured by several criteria, including the number of firms that join the network, the number of Oakland green businesses that receive funding and the amount of capital invested, the number of jobs created and the quality of the semi-annual meetings.

Engel of the Oakland chamber said the network is a visible way for the city to communicate the positive aspects of investing here. "Since we've identified (the green cluster) as a very important sector that's critical," she said.

Nixon "has a lot of experience putting these networks together," said Patel of Shoreline Pacific. Over the last five decades Oakland has not been a strong draw for business, he added, but "if properly positioned and properly used Oakland can draw amazing green businesses. The key is developing a coherent and progressive strategy to do it."

Another key will be targeting the right kinds of companies. Companies in the clean-tech space are more likely to be plugged in to Silicon Valley, where venture capital firms have a well-established lead and plenty of capital to invest.

Green companies outside of tech may actually be a more-interesting space to focus on, said Singer of OBCD, as they are the types of firms that could become more entrenched in the local community. "As community economic development lenders, that's really what's of interest to us." he said, "How do we work with companies that are going to create a variety of jobs?"

The network itself would be "very straightforward" to start, Nixon said. "We know the drill." In the green space, it's not the serial entrepreneur or the later-stage companies that typically need the type of investment he envisions the network making.

Rather, he says, minority entrepreneurs or very young companies need a better understanding of how to access the financial markets. If successful, the network could provide that. Under the theory of cluster-based economic development, in which many businesses going in a similar direction drive additional investment, the network could be a boon for Oakland as well.

mscanlon@bizjournals.com | 925-598-1405