Waste in, money out. And a greener world
Creating an international, Latvia-based 50-million-euros-worth company might not be among the easiest tasks this life offers. Yet a bunch of SSE Riga graduates did it. In just four years.
At the peak of the global financial meltdown, 2009, all these guys had was a moderate background in finance and an interest in the growing renewable energy industry. And some money, too, which they wanted to turn into a successful investment.
That was the start of EcoGen, a company specializing in biogas technology solutions.
The existing market conditions at the time, however, didn’t make their life easier. Wind energy industry, the initially desired market, was heavily politicized. A switch to biogas energy production meant a fierce fight for limited state-backed quotas. In addition, the international ‘know-how’ technology providers took such a high margin that the only sustainable option was to build the biogas stations on their own. This required blueprints, which, by the way, they didn’t have.
This harsh reality skewed the business model, and from investors they gradually turned to technology providers. In a few years they developed new biogas station technology solutions (and, by now, have built four stations) with the help of German experts and newly attracted leading engineers from RTU.
Their financial background came in handy, too. The business is based not only on providing tech and selling electricity to the state, but also on asset managament and investing.
The team anually manages to get back roughly 30% of the start-up cost of 6 million dollars per factory. But not all of the money roll in their pockets, as a big chunk is taken by a Greek investor and Latvian banks (Ecogen received an enormous loan topped only by McDonald’s). The 800 Ha of land required to produce an extra 1 MW of electricity is also a significant liability, and so is technology development and research.
Now Ecogen is among the two leading biogas energy providers in the country. Yet the market is highly fragmented, and hundreds of local biogas producers (mostly farmers) limit Ecogen’s market share to the moderate 10%.
At the same time, the company is growing rapidly. Financial aid is provided by two of the four shareholders (the buisness angels) , with the other two managing the company on a daily basis. A clear-cut structure of several departments specializing, for instance, in Legal, Construction and Project managament sectors also helps. This has allowed the mean salary of the 30 company employees to reach levels of 800 – 900 LVL per month, bonuses excluded.
If the growth continues as planned, the first exit is set to occur in 2014. With the price of no less than 50 million euros, most of the biogas stations will be sold, provided that Ecogen continues to operate them.
„Doing everything for the first time”, „no previous experience in start-up’s” and „no experience in partnership building” were among the highest challenges mentioned by the manager of Ecogen. He also said that managing people is tough (no one way how to do it), as is firing or hiring them. This, along with the regular work, is typically done in a long, challenging 12 hour working day that gives little breaks, but certainly provides great fun.
And if it also provides 50 million euros by the end of the first exit, who can blame them for the career choice, huh? The Five wheels certainly can’t.
P.S. Presentation will be based on business model canvas #LOE2012 Report
