With momentum building for clean energy, Chicago entrepreneurs Elizabeth Iwanicki and Giovanni Bonomi say demand for their wind turbines is accelerating.
Once they seal deals with prospective customers in the United States and abroad, their start-up, Tempest Wind Energy Inc., plans to add workers and move to a larger manufacturing facility, they said. We know we will get the orders. I want to bring this business to Chicago. The whole idea is to get employment here, Iwanicki said.
But they don’t have the wind at their backs yet. Tempest Wind needs to raise millions of dollars to move from design to prototype, funds that are elusive at the moment.
To put up a prototype, we need money and we’ve run out of it, said Iwanicki, who also is president and chief executive of 20-employee Microtech Machine Co. in Wheeling. Microtech makes precision machine parts for equipment manufacturers and aerospace.
It’s a problem that many alternative energy start-ups can relate to. Despite President Obama’s call for the nation to embrace a clean-energy future, getting there will be capital intensive. While entrepreneurs can launch an information-technology business for tens of thousands of dollars, renewable energy innovations often require millions, experts said.
Funding issues aside, Illinois is well-positioned to benefit from the growth of alternative energy, experts said. This is where the manufacturing base is, said Bonomi, a design engineer at Catiad LLC, an engineering and consulting firm.
Tempest Wind initially plans to assemble two prototypes that will prove that the machines’ proprietary pitch control makes the turbines more efficient, compact and quieter, Iwanicki said. The small turbines, ranging from 65 kilowatts to 175 kilowatts in output, can be transported on a truck or 40-foot container to remote locations and installed without a crane. As a result, Tempest is getting interest from rural communities in Italy, the Middle East and Asia, as well as Alaska.
But the first step is finding the necessary capital. Compared with IT start-ups, energy companies have a longer path to market, so they need to think more creatively about financing, said Amy Francetic, managing director of Invention Bridge, a Chicago firm that helps commercialize research-based science. The energy space requires entrepreneurs to get even more savvy and look at a larger variety of funding sources, she said.
Tempest Wind has applied for government grants and is seeking private-equity investments, Bonomi said. But competition is fierce. Venture capitalists have put about 10 percent of their investment dollars in energy-related start-ups during the past 12 months, Francetic said. But they generally want to see some proof that the business concept will be profitable.
The U.S. Department of Energy has provided additional funding for alternative energy through the American Recovery and Reinvestment Act, while the Small Business Administration’s Office of Technology administers grants through the Small Business Innovation Research program and the Small Business Technology Transfer Program, awarding about $2 billion a year, said Karen Mills, administrator of the U.S. Small Business Administration.
Start-ups also should look for state and local grants, as well as foundation support, Francetic said. Getting a grant can help in more ways than one, Francetic said. It serves not only as capital, but it [also] provides the credibility some investors are looking for, she said.
Arlington Heights-based MagDrive LLC, which devised an intelligent power controller to improve the performance of small wind turbines, received an $80,000 Entrepreneur in Residence grant last year supported by the Illinois Department of Commerce and Economic Opportunity and administered by the Chicagoland Entrepreneurial Center.
The start-up, which was launched in 2007 by two doctorate students at Illinois Institute of Technology, also works closely with the Knapp Entrepreneurial Center at the university, said Igor Stamenkovic, chief scientist. He and student Nikola Milivojevic found a third partner, entrepreneur Anthony Baroud, now managing director, to help fund development of the company’s intelligent power controller for use on wind turbines, Stamenkovic said.
The company is currently field testing the technology at Lake Shore Technical College in Cleveland, Wis., and have plans to test it at their office in Arlington Heights this fall, Stamenkovic said. The company’s power controller manages to make a small wind turbine a more affordable and competitive solution compared with other sources of energy, he said.
Stamenkovic said he and two partners have invested about $700,000 in the business, while cutting time to market by implementing design techniques learned at IIT. The company also is raising revenue by selling the component to small wind-turbine manufacturers.
Strategic corporate partnerships are a sound strategy for finding the capital that a start-up needs to move its technology forward, Francetic said. With alternative energy a hot issue, private foundations also can be a funding source, she said.
With the oil spill catastrophe in the Gulf of Mexico as a backdrop, small businesses — and not just those in the alternative-energy space — are big proponents of clean energy, experts said. A recent poll indicates 61 percent of small-business owners said moving to clean energy will help restart the economy and help create jobs, according to the nonprofit Small Business Majority. In addition, 58 percent of the 800 business owners surveyed support the adoption of new energy policies and want their businesses to be a part of it, the group reported.
If you want to bring back manufacturing and improve the employment picture with good-paying jobs, we have to invest in research and development to come up with sustainable technologies that can live out the next 10 or 20 years, said James Wurtz Jr., vice president of marketing and sales at National Railway Equipment Co. in Dixmoor, Ill.