Tuesday, February 20, 2007

Man Up ! for social values and integrity

Clean tech sure is catching up. I am all glad for that.

Serial entrepreneur Sunil Paul has this brilliant post in Venturebeat on why he’s veered into clean tech – for social values he upholds or for the profit that it might entail. Excerpts.

“We investors and entrepreneurs in the cleantech world have a guilty conscience. People often ask us, “Are you motivated by the money or by the mission?” It’s become unfashionable and a little shameful to say you’re driven by anything but profit, but I’m not afraid to say I’m a clean energy investor because of my values.

The money vs. mission question comes from fear. Environmentalists and energy security hawks fear capitalists will sell out their social goals in favor of profit. Investors fear a venture investor or entrepreneur will subvert their financial return for a social agenda.

Venture capitalists are beholden to their limited partners who are weighing whether to put money into venture capital versus, say, currency arbitrage. Those investors don’t want to hear that the venture capitalist has any motivation other than giving them a great return. That mentality rubs off on venture capitalists, and trickles down to entrepreneurs and management teams.

But it doesn’t have to be a choice between social and economic goals. Clean energy is like the love child of John Muir and Adam Smith. It joins environmentalism with capitalism. Cleantech companies have great value not captured by the price of the good or service. Their entire business model generates excess social return. In addition, the energy market is huge, and is ripe for change – and so the opportunity for profits is tremendous”.

This reminds me of a paper on leadership posted by Jason Drohn on Howard Schultz vision of Starbucks [ you may have to download a 4 page PDF file, but it’s good stuff – it has some exclusive finds ; like the lawyer who organized capital for Starbucks acquisition was Bill Gates’ Father !]. I think all these people are where they are today because of the level of genuine social commitment they carry.

Jason opines – “Schultz has a wonderful degree of integrity. As he was growing up, his father worked mid level jobs to pay the bills, without health coverage or worker’s compensation. So if he got laid off, his employment was simply terminated. If he got hurt on the job, he didn’t have anything to go back to.

In a 60 Minutes interview, Schultz commented on remembering what it was like to walk into his house, with his dad on the couch, cast on his leg. No job, nowhere to go to work, just a stack of bills and nothing to pay them with.

For this reason, Starbucks offers health insurance to anyone who works more than 20 hours a week, even in unmarried, spousal situations. They offer stock options to their employees throughout the whole company. And Schultz said that those benefits were something that would never be reconsidered.

This is the primary reason that coffee is as expensive as it is. Starbucks pays more in health care than they do the coffee beans to make the coffee !

So if you spend $4.10 on coffee, the majority of the cost goes to the health care being consumed by the person across the counter from you (the barista, in Schultzian terms..).

Adding to the integrity of Schultz and his company, he pays the coffee bean growers above market value for their crops. He feels that if he overpays a farmer, more passion and consistency will be given to their coffee beans. His social responsibility also plays a role in the decision as well.”

When you are asked, “are you in this to make money or change the world?” bring yourself to reply like Sunil bravely does. “Of course we wanted to change the world! Making money was just validation that it worked. Virtually every early internet entrepreneur I knew recognized the opportunity to change the world for the better by growing the Net. It wasn’t until many years later that the hordes of profit-only entrepreneurs came to the scene. Indeed, if you want a sign of over-investment in cleantech, look for an invasion of founders and CEOs who are in it only for the money.”

Would you not like to leave a green planet behind for your grandchildren ? This way, you will. You can convince your limited partners – for they too will have grandchildren !

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