Air Date: Week of June 10, 2005

Green entrepreneurs are entering competitions, run by business schools across the country, to get their eco-friendly ventures off the ground. Reporter Claire Schoen follows one hopeful in the Haas School at the University of California, Berkeley, as he competes to win the $25,000 prize with his biodiesel invention.

Transcript

CURWOOD: It’s Living on Earth. I’m Steve Curwood. An increasing number of young, environmentally-minded entrepreneurs are trying to develop businesses based on green energy technology , like wind, solar and conservation Bio-diesel is considered one of the "green energy" fuels, because it's made from sustainable resources -- mainly plant oils -- and produces little pollution. Biodiesel can be poured right into the tank of any diesel truck, bus or car, and mixed in any proportion with diesel made from fossil fuel. It can even go right into your home heating oil tank. Claire Schoen reports on one young man who is trying to jump-start a biodiesel venture.

CARSTENS: We're Homeland Fuels. We're pro-Business, pro-American, and pro-environment.

SCHOEN: Chris Carstens is neither a starry-eyed environmentalist, nor a hard-edged businessman, but an interesting mix of the two.

CARSTENS: I'm a Berkeley alumni. Mechanical engineer. And started a business with a friend doing a new technology for biodiesel production. .

SCHOEN: Chris sees biodiesel as a viable alternative to gas-powered vehicles, which are a major source of greenhouse emissions. But there's another angle to the green energy movement that is attracting such burgeoning businessmen.

MAN FROM BOEGESKOV: Well, I'm going to coin a new phrase here for you. “Green Robber Baron.” If this does what we expect it to do, I become wealthy and I can clean up the world at the same time.

HENRY: Doing good's good. But making money's also nice.

[CROWDED ROOM, PEOPLE MINGLING, GLASSES AND SILVERWARE]

SCHOEN: The Haas School of Business at University of California, Berkeley has a Business Plan Competition which is becoming a magnet for green entrepreneurs looking for recognition for their ideas. This year, four green energy groups made it into the semi-finals round of the Haas B-Plan Competition: Helios, Boegeskov, Diamond Energy and Homeland Fuels, headed up by Chris Carstens.

WOMAN: Christopher, congratulations on making the semi-final rounds.

CARSTENS: Okay.

WOMAN: So, go out there and mingle.

CARSTENS: This evening is the "Mentor Mixer," so to speak. And we're going to find out what it's about.

SCHOEN: Business students, engineers and entrepreneurs are milling about here where terms like "business opportunity" and "VC" are bandied about, that's venture capitalist, not Viet Cong, by the way. Also, "the elevator pitch" in which you pare down your concept to 30 seconds, short enough to pitch to a VC in an elevator ride, should you find yourself in this fortunate circumstance. Tonight, each semi-finalist team is offered a mentor who will help them craft their business plan for the finals round.

CARSTENS: It's a unique opportunity, really. You have all these seasoned executives helping people like us for free.

SCHOEN: Tonight Chris will meet Richard Caro, who runs a small company called Tangible Future. Richard specializes in helping budding entrepreneurs start successful businesses, a perfect match for Chris.

CARO: I don't really know yet anything about what they're doing. So I'm probably on a rapid learning curve.

CARSTENS: Should I give you the elevator pitch here?

CARO: Sure.

CARSTENS: Alright, so basically we're working on a new production method for bio-diesel. Specifically focused toward small-scale production, for community-based, school bus fleets, municipal bus fleets.

CARO: So, it sounds like you're trying to combine ecological friendliness with making a profit, is that right?

SCHOEN: But can a company who's out to "do good" actually come out on top? Last year's first-place winner was, indeed, a green energy team, called Proton Power. They developed a solid acid fuel cell technology that provides power, heat and electricity to long-haul freight trucks so they don't have to keep their engines idling when they stop to sleep. This saves the average trucker 26 hundred dollars a year in fuel and significantly reduces pollution and noise. Jerry Engel runs the Haas B-Plan Competition.

ENGEL: What this team did was they found a market that was ready to accept this technology today. Deploy it today. Have an impact today.

SCHOEN: Winning first place is the ring that all the teams are reaching for.

ENGEL: Twenty-five thousand dollars for first place, so this is not insignificant. But if you make it to semifinals, one of the other major opportunities is that you get to pitch your opportunity to a panel of experienced venture capitalists. This exposure sometimes leads to outcomes that are unforeseen.

BOEGESKOV MAN 1: Clean technology is up and coming. Venture money’s been pouring into it in recent years.

BOEGESKOV MAN 2: Last year, 500 million dollars was invested in clean energy companies, an all-time high.

[DOOR OPENS. FOOTSTEPS]

SCHOEN: The following week, Richard met with Chris to see what he's been cooking up in his lab.

[DOOR SLAMS SHUT]

CARO: Wow, so you really do have a garage for your lab. That's perfect for a little start up. Let's have a look at your prototype.

CARSTENS: Well, this is our high-pressure reactor, that we bought online at a great discount. And the thermal mass on the thing is great. It's kinda scary actually, when you drop it into a thing of water. It moans and whines and "Whiiiirrrrrr".

CARO: So, what is it here that's your unique thing?

CARSTENS: The idea is that it will be a refrigerator-sized machine or maybe a double-wide refrigerator. And, vegetable oil, alcohol. That's what they need to start with. Then the machine calibrates the two. And then spits out glycerin and biodiesel.

SCHOEN: Chris' design does have some unique technical innovations which will allow him to develop and patent a small appliance that can produce a moderate amount of bio-diesel, perhaps 250,000 gallons a year, in a clean efficient manner with low labor costs. However, while Richard is helping him figure out how to pitch the technology, he discovers that there is another, very compelling angle to Chris' plan.

CARO: But, if I had to put my finger on what's different about your approach than everybody else's, who might be playing in this space?

CARSTENS: We're trying to cater to smaller and community-based production.

SCHOEN: Chris thinks that communities could use his machine to make their own biodiesel, on-site, for a particular fleet of cars or trucks. For example, a school district could make biodiesel for their own buses. Or a farming co-op could use their agricultural waste to run their tractors. Making biodiesel on-site would save the huge cost of transportation -- and the middle-men.

[TALKING ON CELL PHONE, CAR DOOR SLAMS, CAR ENGINE STARTS]

CARSTENS: Hey Bill, it's Chris. Pretty good. We were just coming over, is that okay? Alright, we'll probably be there in 15 minutes.

SCHOEN: Chris and Richard decide to focus on the marketing angle in their pitch to the VC judges.

CARSTENS: We're going to Bill's house.

SCHOEN: So, Chris is taking Richard to visit Bill Michael, a local "home brewer" who is making biodiesel for his personal use.

CARSTENS: Bill is very professional, very clean. And he's got a very nice setup.

[GARAGE DOOR OPENS]

MICHAEL: This is a 20 gallon unit. And we're about meeting the family need. So these containers here contain oil from a restaurant. They've cooked their French fries and put it out in the dumpster.

SCHOEN: The problem is, Bill's home brewing process is extremely labor-intensive and inefficient.

MICHAEL: I mean, my greatest dream is that cities will really get into this. For example, the city I live in there's probably 100, 200 restaurants in the city. And they're producing this muck that's just getting, I dunno, turned into dog chow or something. But they could take and turn it into fuel for city vehicles and save some money.

[DOOR CLOSES, FOOTSTEPS]

CARSTENS: It's a matter of converting that kind of enthusiasm into a real business.

SCHOEN: While Chris doesn't see home brewing as the solution to the greenhouse crisis, he does see this cadre of environmental idealists as the foundation of a customer base for Homeland Fuels.

CARSTENS: It's like, you've got maybe 50 biodiesel plants in the United States that are making 98 percent of the fuel And then you've got thousands and thousands of home brewers. And the home brewers are sitting around saying, why can't I buy this at the pump? And there has to be a bridge between huge centralized plant in Nebraska and a home brewer in Berkeley. And that's what we're enabling.

CARO: And so, we have to figure out a way that we’re gonna have a profitable business, as well.

CARSTENS: Save the earth and make a profit? Sure.

SCHOEN: One potential market for Chris' appliance could be biodiesel stations, where people like Bill could buy his fuel. Today, there a few scattered stations around the country that are doing it as a political passion. But they have to buy from the big manufacturers who truck in the fuel. Their price is steep and their profit margins are minuscule. What if they could make their own fuel on-site? Chris went to visit Sarah Hope at BioFuel Oasis, one small station up the road in Berkeley, to see if they might be a customer.

CARSTENS: Alright, let's go over there. See what she has to say.
[CARS]

CUSTOMER/ATTENDANT: Getting yourself pumped? Yup. which side should I take it from? It's pretty sweet. You can pull right in. And we just pump it right directly into our tank. So here goes. It's going to make kind of a loud noise.

[LOUD WHIRRING NOISE]

CUSTOMER/ATTENDANT: Our dream is to have a map right there that has bio-diesel spots along the 5, along the 101, big corridors where you can get bio-diesel. Unfortunately, there's not much to put on the map right now. (Laughs)

SARA: You got 18 gallons and the total is $64.06. We take cash and checks. Thank you very much.

CARSTENS: We kinda want to sit down and talk to you about the potential advantages of having a biodiesel plant here, as opposed to having it trucked in.

SARA: You know, at $3.50 a gallon we're doing right now, it's like very little profit. Yeah, it's a community service project right now.

CARSTENS: And that's where local production comes in. We've come up with a product to make bio-diesel on a continuous basis. And it can use a variety of feed stocks. So you could put waste vegetable oil into it. You could put animal fats into it.

SARA: So, what's the cost per gallon for production?

CARSTENS: It's probably going to be about 35 cents above the cost of the feed stock.

SARA: Then you put in your other operating expenses and your profit margin.

CARSTENS: Is this something that sounds of interest to you?

SARA: Yeah, definitely. I mean, if you come along with something that can give us a better profit margin that makes a difference in us being able to be here next year.

CARSTENS: Terrific. Well, thank you very much.

CARSTENS: It's good! I think she was encouraged by it. As soon as I said, "Increase your profit margin," that kinda caught her attention a little (Laughs).

SCHOEN: Chris and another team member, Henry Oh, meet Richard at his San Francisco office to work out their presentation for the final round of the competition.

CARO: Now, this slide worried me a bit because I started to drift off in this slide. It just was so reminiscent to me of you know when I was an undergraduate, people telling me why I should live in a commune (laughs). But the thing that really helped me picture this was the Stanford example you've mentioned, where you take all that waste from the dining hall and convert it into fuel for these shuttles. And so you're just closing that loop in an incredibly cost-effective and environmentally-friendly way.

OH: The idea is that you have a community that can create it's own energy supply from resources that have previously gone to waste. So in the Brazilian example, they pay twice as much to transport the diesel fuel to the community as it costs for the diesel fuel itself.

CARO: And I believe you have some interesting news on Brazil, don't you?

CARSTENS: The Brazilian government, they have said that they had funds available for a prototype.

OH: We have interest, I mean this is a market waiting for a product.

CARO: A business plan competition implies venture capitalists financing it. And so to do that, you need to be helping them understand how if they invest x million dollars they will make 10 x million dollars. And so if the message is, "We have a business which will be successful because it enables the manufacture of diesel that will cost less than diesel is today by a lot. And, by the way, will solve a lot of the nations' energy dependence problems and as we migrate out into other places will help solve world poverty." You know that's like, "Oh, okay (chuckle). I sort of get how that would work."

SCHOEN: The big day arrives for the presentation. The hallways are filled with competitors, laptops on laps, working out final details. The bathroom door swings open, revealing a cluster of young men trying to get their ties knotted straight. Chris, Henry and the rest of the Homeland Fuels team meet up with Richard.

CARSTENS: Afternoon, guys.

CARO: You've put on the tie and everything. (chuckle) It's pretty exciting actually. I've got my checkbook ready (chuckle).

SCHOEN: The team looks over the list of judges.

CARO: They used to invest in one of my companies.

TEAM MEMBER: Did they do well?

CARO: They did alright. Not great, actually, that one (chuckle)..

SCHOEN: The group also sized up the other green energy teams.

TEAM MEMBER 1: Boegeskov Energy which we think is fuel cells.

TEAM MEMBER 2: Helios which is probably wind or sun. Advanced Diamond Energy, that's an interesting one.

WOMAN: The Energy Panel is over here if you want to get started.

[MOVEMENT INTO ROOM, GETTING SETTLED. DOOR CLOSES]

CARSTENS: Alright, good afternoon. My name is Christopher Carstens. And I'm the founder and CEO of Homeland Fuels. What we've designed is a scalable, biodiesel appliance.

SCHOEN: Richard's coaching and Chris' hard work have paid off as Chris gives a smooth and coherent presentation.

CARSTENS: And finally we are looking for an investment of two million dollars. So I'd be happy to take any questions.

JUDGES: Chris, could you explain a little bit about the technology hurdles that you’re going to have to overcome? The vision is clearly great. So, how long? Fascinating. Very enthusiastic about it, in spite of my question.

[APPLAUSE]

CARSTENS: Shall I just give you a card? Which would be fine if I could. I'm realizing I don't know where my wallet is (laugh).

JUDGE: Email me something. Okay?

CARSTENS: Why don't you give me a card. I know we're in a rush. Nice to meet you. Thanks a lot.

TEAM MEMBER: Did you walk out with a check?

CARSTENS: Just the business cards.

CARO: Make sure you follow up with them. Because they like to invest in early stage high risk-type things just like this.

CARSTENS: Alright. I will.

CARO: Well, it's been amazing. They've worked really hard. They've gone from a really unclear concept that had this obvious nugget of interest in it. And they've crafted a compelling story. So whether he wins or not is almost secondary in that he's got a very exciting opportunity to go create something possibly world changing which is what you really look for.

SCHOEN: Homeland Fuels thought they had a winning presentation. But so did the other green energy groups.

DIAMOND ENERGY MAN: I think the judges were very interested.

HELIOS MAN: We had a lot of smiling faces.

SCHOEN: And what did the judges think?

JUDGE: Very smart people. Very energetic. I mean, that's what's made the start-up world go round from day one. These potentially hold the ability to reconcile business objectives with green objectives which I think is exactly the right way to go. And my kind of firm is their target.

CARSTENS: We're ready to ship off.

CARO: Congratulations. Nice to see all you other guys.

ALL: Alright let's go guys.

SCHOEN: An exciting race. But Homeland Fuels did not win. Helios, a team working on solar panels was one of seven teams to win this round and head into the competition finals. And out of the original 66 teams, Helios ended up winning both third place and a special technology award.

ENGEL: Today is really the moment when green energy is becoming a viable, competitive business opportunity. And the Business Plan competition has been an excellent forum for green energy companies to make their business case. It's being made and it's being made well

SCHOEN: Chris is not giving up. The competition has given him a strong business plan, which he is using to look for funding to turn his prototype into a saleable appliance. With a little luck and a lot of persistence, you may be seeing Homeland Fuels Biodiesel at your local filling station someday. For Living on Earth, this is Claire Schoen in Berkeley, California.