Why you can believe in climate change and be anti-GMO

Liberals.

They will beat you over the head with The Facts that 97% of scientists agree that humans are causing climate change.

But you offer them one upgraded-by-Monsanto™ banana, reminding them of The Facts that nearly the same level of consensus exists within the scientific community that genetically modified foods are safe to eat, and they still say, “Yeah, but I have a right to know so I want a label.”

I’ve seen these two juxtaposed often enough as prima facie proof that liberals employ double-think when it comes to believing scientists. Even though I don’t have a strong opinion on GMOs, I’m going to wade in here a little bit. What I would like to do is lay out the argument that it is possible to both believe in climate change and be anti-GMO. More specifically it’s important to take a holistic look at the scientific questions, the implications and the proposed policy solutions. In any case science never boils down to “which of these assertions is 100% correct.” So what I’ll specifically argue here is not a purely academic argument of whether the two scientific beliefs are compatible, but I’ll argue that you can rationally look at the science behind both and be proponent of action to mitigate climate change AND action to limit or identify GMOs without contradicting yourself.

Much of my thinking here evolves from this paper on the Precautionary Principle by N. N. Taleb et al. This principle argues that you should evaluate not just the probability of a risk, as implied by scientific consensus on an issue, but the consequences of the consensus being right or wrong. In particular it argues that we should pay close attention when our probability-adjusted cost-benefit analysis includes any probability of ruin or total irreversible damage. If ruin is a possibility, we should exercise extreme caution with regards to policies that have a chance of leading to it, even if the probabilities are small.

The Precautionary Principle leaves no room for nut jobs, crazies or conspiracy theorists. It takes as a presupposition that you agree that people should use the scientific method and generally behave rationally and that we should give very very strong weight to the current scientific consensus on any given issue. But it also argues that you should look at the nature of the implications if the current scientific consensus is right and if it is wrong, and what are the cost/benefits of proposed policies in both cases.

In the case of climate change, the PP yields an obvious asymmetry. If the scientific consensus on climate change happens to be wildly and totally wrong and the climate would be totally fine and humans and their emissions have nothing to do with it; but we go ahead and enact reforms to accelerate emissions reductions, the cost is relatively small. We incur some incremental energy costs, but also catalyze innovation in a number of stale sectors of the economy. There are also side-benefits of reducing air pollution and so on. On the other hand, if the scientific consensus is correct and yet we do nothing, the damage is enormous. Economic damages that tend towards the incalculable coupled with potentially irreversible damage to the livability of our entire planet… Ruin.

The asymmetry of being wrong is obvious here and the Precautionary Principle leads us to believe that we really should act to mitigate climate change.

But with the GMO debate, I would argue that the asymmetry goes the other way, opening the door for a different conclusion.

First it’s important to note that there are, as I see it, two primary and independent objections to GMOs. The first is that eating them consistently may cause deleterious health effects to an individual, leading to an increased risk of cancer or some other disease where the root causes are not very well understood anyway. The second is that the genetic fiddling involved in creating GMOs goes so far beyond Mendel’s peas that there is a risk we create some sort of mutant monster crop that kills all the monarch butterflies, cascading us into an Interstellar-style dystopian future of widespread ecosystem collapse. The policy conclusions from these diverge a bit. GMO labeling laws, that have captured so much of the public debate, really only address the former, whereas an outright ban like in the European Union would target both concerns. At the risk of oversimplification, I’ll lump both together and just consider an opinion that GMOs are risky to individuals and ecosystems and should be more heavily regulated and their use pared back.

The scientific community rejects with strong agreement both of these scenarios. But let’s run the same analysis. If the scientific consensus on GMOs being safe to eat and benign to the environment is correct, but we label them and limit their use the cost is probably small. The cost of labeling seems very small indeed. People pay a bit more by only buying organic bananas. But the cost of materially limiting the use and distribution of GMOs is a bit more problematic. GMOs have improved crop yields dramatically and played a key part in the global reduction in poverty. But the cost of labeling plus being a bit more cautious is probably not that large. On the other hand, if some of the bigger concerns of the risks of GMOs turn out to be true, but we take no extra precaution because of the current scientific consensus, we could find ourselves in a future where Matthew Mcconaughey traveling though a time dilation field is the Earth’s only hope. Seriously though, It isn’t totally inconceivable to believe that there is some small risk that exponentially faster tinkering with the genes of crops could lead to some cascading ecosystem imploding disaster.

The important point here is not to start immediately comparing the probabilities associated with climate change versus GMOs but to see that the two are mirror images of each other in terms of the asymmetry of the consequences of the scientific consensus. That’s why, if one is very cautious, it can be completely rational to want to act to mitigate climate change AND to want to more tightly restrict GMOs, despite that fact that one is swimming against the scientific consensus on the one hand and relying completely on it in the other.

But, Tyler!?!?

Before you say it, the Precautionary Principle is not a cure all and it does not solve the question of needing to make a judgement call about the relative probabilities at some level.

For example, when the CERN laboratory in Switzerland was finalizing it’s tests for the Higgs-Boson particle, certain bloggers/crackpots and what have you, asserted that the experiments could potentially create a black hole that would swallow up the Earth and all of human civilization in an instant. A tiny probability but with an implied infinite risk. Should a rigorous application of the Precautionary Principle have shut down the CERN experiments based on any risk of total annihilation of humanity?

Additionally a cautious approach to GMOs could be extended to the anti-vaccination argument. If the costs of a small subset of the population abstaining from vaccination are small, and the risks, an increased rate of child autism, very large, shouldn’t a rigorous application of the Precautionary Principle endorse the anti-vaccination position as much as the anti-GMO position?

Well, first there’s a weak answer to this. The cost of abstaining from vaccinations are not small with herd-immunity playing a key role in the virtual elimination of certain very nasty diseases like measles. And the risk is very very small given that basically no scientists at all agrees with the proposition that vaccinations increase the risk of autism.

But that doesn’t give us the clear answer that we’re looking for does it? Should we trust science or not? Are certain people of a certain political spectrum anti-science nut jobs or unquestioning automatons. I don’t have the answers. But the believe/don’t believe science question is a vast over-simplification. We need to expand our thinking on these issues and looking at the asymmetry of consequences is an important part of the toolkit for doing so.

Closing SolarList: a cleantech post-mortem

The punchline first: SolarList is basically closing. We haven’t been actively operating the core business since the end of 2013. The founders are currently working on other projects. We spent most of 2014 trying to find a suitable partner

for the business and software, but we currently do not see a way forward. We would still love to find someone to work with to help more people go solar. As you’ll see from the rest of the post, we still fundamentally think it’s a great idea. But the fact for now is we’re closing up shop.

What’s next

We have built a ton of cool software and learned a lot about finding, educating and turning homeowners into happy solar customers. If you are interested to work with us, license our technology or have a compelling non-profit use case. Please give us a shout.

The story

SolarList encompasses a three year saga of failures and hard-won triumphs. There’s another blog post coming attempting to glean some generalized lessons from the story, but I wanted to put the full gory narrative out there for the cleantech community and for aspiring entrepreneurs. Hope you find it more useful than tedious.

Origins

Before SolarList, I worked at a cleantech consulting startup called New Energy Finance, since acquired by Bloomberg LP. One of my main roles was producing the Levelised Cost of Energy Quarterly Outlook. The goal of this paper was to examine the apples-to-apples to cost of all renewable and non-renewable forms of electricity generation across every market and every geography. Since the nascence of renewable energy in the 1970s the single dominant problem for the entire industry was that the cost of the equipment (solar panels, wind turbines, electric batteries) needed to come down. As I tracked these numbers quarter by quarter, it became clear in 2008 that many technologies in many markets were approaching an inflection point where they would be become broadly cost-competitive with traditional electricity. All the industry’s brainpower, all the venture capital and all the entrepreneurs were still investing time and energy in incremental improvements to the capital cost of equipment, meanwhile manufacturers of the dominant variants of solar panels and wind turbines reached critical mass.

There was a bloodbath of startups and investors who bet on new technologies to reduce the cost of equipment. At the same time almost nobody was looking at how the industry would scale up. How would it develop 10x or 100x more projects, how would it market and acquire 1,000x new retail customers. The best project developers still didn’t have basic CRMs or any process automation. Marketers of solar panels and other retail products had not innovated beyond plowing huge sums of money on Adwords, driving up cost per click to soaring heights, or paper door hangers. Meanwhile, nobody, almost literally zero people, in the entire industry had any competency in web scale software development. As the cost of equipment fell, soft costs like sales and marketing and customer acquisition composed a greater share of final consumer cost. I saw the opportunity and quit my job with the vague aim of building software to attack these soft costs with automation, simplicity and education.

It’s worth pointing out here that at this point, beyond reading the Rails Tutorial book, I too knew basically nothing about software development. But I had that special blend of overconfidence and ignorance that makes twenty-somethings want to start a company and disrupt an industry.

Failing to launch, then failing again

With a crisp copy of The Lean Startup on my desk I set about interviewing everyone remotely associated with the industry, doing “customer development” in Lean parlance. I had dozens of interviews with project developers, consultants, homeowners, friends, facilities managers and random people surveyed via Mechanical Turk. It became clear that this overall problem, inefficiencies in scaling and soft costs, was most acute in the residential (home) solar industry. What was needed was an easy to use website that let people who were interested in solar educate themselves about the costs and benefits and options. They would self-identify as interested in solar and the app would then connect them with best solar companies. Something vaguely like a Craigslist for solar: hence SolarList. At the time it was not crazy for solar companies to spend $5,000 – $10,000 per customer purely on sales and marketing costs so this matchmaking would be exceptionally valuable.

So the next step was obvious, another friend in the industry, who also knew nothing about software, and I would go hit up some angel investors, raise some money, hire a developer to build the first version of our product, one or two more steps, and we would revolutionize the solar market! I continued to do customer interviews, gather data, create and tweak Powerpoint decks. And we did a lot of pitching. At this point it should be obvious to most that we were not super successful with this strategy. A decade ago it was possible to raise money as two non-technical people with a software idea. But for most people who aren’t incredibly connected within the Silicon Valley scene, this is a fool’s errand. However, through shear brilliance of my then-co-founder we did actually get a term sheet for $100k from one angel investor. Fortunately I had been consuming books — highly recommend this one — and blog posts on venture term sheets non-stop for a month and saw that the document was so riddled with every horrible term sheet trickery that it would be better not to build the company at all than to do so with this as the foundation.

We killed the idea and the strategy of trying to get angel money in pre-product. We then spent several months exploring partnerships with app development shops. The problem with these deals is that you as the entrepreneur bring just the idea to the table and really have no leverage. Several months of work later we scrapped any version of this strategy. It became clear that SolarList needed an individual technical co-founder to move forward. It was also clear that the current team wasn’t a good fit for that strategy. There was a series of awkward conversations, several things left unsaid that should have been. I’m still not happy with myself about how it all went down but SolarList lost one co-founder before there was even a glimmer of forward motion.

Bootstrapping is hard

At this point I am about nine months out of a job and completely back to square one. I was still living in NYC at the time and I began networking furiously in my hunt for a technical co-founder. I went to every Meetup, mini-conference and hackathon I could. From the very beginning I believed that I needed to learn enough to be dangerous about web development and had been studying hard. By this point I was a founder with a good idea, industry expertise, and, critically, some basic coding skills. With this song and dance I was able to attract a decent number of interested developers and eventually found Matt, an insanely talented Ruby developer with experience working in the solar industry. On paper we were the perfect combination. We had a few discussion and quickly agreed on a shared IP agreement to get to work on a prototype. He lived out of town so, about two weeks after meeting, he moved in to my apartment, sleeping on the couch for a week while we coded 16 hours a day.

From a technical standpoint we started with a hugely ambitious goal for the software. We wanted to completely automate the entire customer acquisition process, building a web app that would generate a complete solar quote and financing package for any home in the US without any interaction with sleazy sales guys who we assumed were a big part of the very high cost of customer acquisition (We later leanred a great deal of respect for those sales guys). After a week of non-stop coding we actually had a pretty decent proof of concept and a good idea of what else we needed to build. But we had a big problem. Both us of were pretty much broke. To get our plan off the ground we needed time to finish the product, launch it and ramp up monetization. I sublet my apartment to cut rent from my cash burn, put my laptop in a backpack and flew to Spain (on miles), lived in hostels and Airbnb (charged to credit cards) and worked every day from cafés. We kept pushing the product forward but struggled with remote collaboration. We spent a painful amount of time entering app competitions and applying for grants to no avail. We launched a version of the product but couldn’t afford any marketing to drive traffic to it. We felt we urgently needed a seed investment to get SolarList jumpstarted.

A big solar company was sponsoring a Cleanweb (cleantech + web software) hackathon in San Francisco. It was so up our alley that we both bought one-way tickets with the intention of winning the hackathon and parlaying that into an angel investment to launch the company. We arrived at the hackathon and pitched our idea to the developers, designers and marketers in the crowd. At that point Matt and I had a clear and compelling understanding of our market, and a foundational product already built. So we easily attracted the all-stars in attendance, including a hackathon legend. We easily won the top prize ($2,000 + a free consultation and incorporation from a top Silicon Valley law firm). So far so good. The next step was an SF road show and an angel investment. We hammered absolutely everyone we knew for intros and pitched everyone who would listen. We spent a month in San Francisco. Crashing everywhere from friends’ couches, hotels in sketchy neighborhoods (booked with miles) to the even sketchier Startup House, a horrible hostel for SF’s legions of broke bootstrapping founders.

Here we learned a hard fact that haunted SolarList from day one. There were, and still are, exactly zero investors interested in early stage cleantech companies. When we first started out, two funds, Sunil Paul’s Spring Ventures and the incubator Greenstart, were making angel investments in cleanweb companies but by they time we got there, both had moved elsewhere. Beyond that, every investor had heard nothing but horror stories from big shot VCs getting hit with $100 million write-offs in the cleantech sector. Never mind that those investments were in massive factories and physical products while we were a lean consumer web company. Funds had been burned or seen their colleagues get crushed in cleantech and they were having none of it. Of course they didn’t come out and say that. We had brief meetings and pitched a ton of investors, because investors like to take meetings and hear pitches. And of course we never got an explicit “No” because investors like to keep their options open and see if anybody will be a first-mover, but none of the conversations ever went anywhere.

Burning through money, not making progress on fundraising, we began to fight about how to code our way out of this corner. I was convinced the only way to make meaningful revenues was to convert our product to a B2B SaaS service and sell it to solar companies. Eventually we stalemated on product development. Making no progress on any fronts our only option was to part ways. I am really sorry that this partnership didn’t work out and tons of lessons were learned, most importantly that startups are freaking hard.

Going it alone

Matt was a much better developer than I was so the code base we had built together was way over my head and I had to scrap it. It’s about 14 months since I quit and I’m back to square one again. A good friend, Sustainable John, offered to let me crash his place in Berkeley while he was out of the country for a month. Despite making lots of technical progress, Matt and I had never launched a fully working product that could truly make money, so I decided it was now or never. I had been sharpening my coding skills for over a year while failing three times to solve the problem of how to really build the app. I thought, what the hell, I’ll try to build it on my own. I gave myself 10 days to build a working product that I could sell to solar companies or I would quit the whole thing. I finished in 8 days, bleary-eyed and jittery from too much coffee and a lack of sunlight and exercise but with a working, sellable product.

I started the slow process of pitching solar companies on my B2B software solution. I put every company in my personal network plus the entire member list of the Solar Energy Industry Association in a lead list and started with A. In short order my time in Berkeley was up and I needed a super low cost place to hang out and continue emailing and cold-calling. South America looked good and cheap and there was a pretty girl I could meet up with there. I hopped a flight to Buenos Aires (I had a lot of frequent flyer miles at the time) and set up shop. It was on this flight that I built Storemapper, the only product I have launched that actually got some traction.

About 400 sales pitches later it was clear I was off track. The very reason I felt there was an opportunity in the market, that the industry didn’t have anybody who understoond the value of web software, meant that none of the companies I was pitching had anybody on staff who could be the internal champion for the product. A few companies, like Clean Power Finance, succeeded in selling software to this market primarily because the software so obviously worked and added value by automating repetitive tasks done on paper, but selling software to solar companies has so far proven to be a tough model. The current iteration of SolarList required that companies make a small bet (the price of SaaS) that the app would lead to more higher quality leads and in turn more revenues. I got the same answer over and over again: “Bring us warm leads and we’ll buy them all day long but we don’t to pay for lead generation tools.” If you’re losing count this is the fourth attempt with more or less nothing to show for it.

A new hope

While still in South America (Peru at this point) it became increasingly clear that SolarList version 4 was not going anywhere. I started to spend more of my time on other projects, freelance software development, ecommerce consulting and other side projects. I had this big lesson learned from discussions with solar companies, they wanted sales leads, tons of them, and were willing to pay big bucks for them, but I didn’t have a clear path to generating my own leads and I was losing a little steam to keep pressing forward. Around that time my friend and former co-worker, Michael Conti, pitched me on an idea: Cutco for solar. We would train legions of students to educate homeowners and create warm leads that we would pass on to vetted solar companies for a fee. The idea was a perfect fit. It matched with everything I had learned to date and was a clever way to generate our own leads and quickly generate revenue. Michael was not only very well-connected in the solar industry, but also a master large-scale organizer. The perfect co-founder to recruit, train and motivate hundreds of college students to go bang on doors. We agreed immediately to join forces. Shortly thereafter, Sustainable John joined us an advisor and practically a co-founder, given how much work he put in, giving us a West Coast presence and serious eco-rapping street cred.

Great progress and a big mistake

In January of 2013 I moved back to New York City. Michael and I started work on this new version of SolarList. But I had a huge problem. I had barely been able to scrap together the cash for first month, last month and deposit for a room in an apartment in Brooklyn. I was a good enough developer at this point to charge a decent per hour rate for freelance work but I didn’t have enough clients to earn enough to afford the NYC cost of living. It was a full-time job finding clients and freelancing enough just to do work enough to afford the City, leaving little time and bandwidth left over to do hard startup things. Taking on this extra overhead without savings or passive income was the single biggest mistake I made through this whole process as it meant we either needed to quickly start generating at least $10k/month in profits or we needed to raise money just to cover our cost of living.

Trading off time with paid work, we didn’t finish retooling the product and recruiting students for our first beta test until May 2013. In early Summer we did roll out beta tests on several campuses. Dozens of totally awesome students came out, volunteering for free, to canvas their cities and test our new solar assessment mobile app. The results were fantastic. Students were able to provide accurate solar assessments and educate and qualify potential customers without any real training using our software. Theses warm leads were stored in our app’s database where we could route them via email to solar company customers. We sold some leads and gave some away to companies to get feedback on whether or not they were valuable (they were). The students were excited and felt empowered to actually effect change in their community. And all the numbers worked. We had a detailed understanding of the solar sales funnel by this point and it was clear that this method would generate new customers at a much lower cost than best in the market.

First money in

We felt we had the data we needed to go full-time. After wasting nearly a month of work applying to the Department of Energy’s Sunshot program for a $500k grant (complete waste of time) we finally caught a break. We entered SolarList in the NYC Big Apps competition. The contest had a cleantech category which we won, earning us $20,000 and the help of the city Economic Development Commission with introduction to VCs. For all my previous complaining about the high cost of NYC, it’s worth noting that without this catalyst, SolarList probably would have fizzled again at this point. Looking to capitalize on the momentum we fired up another fundraising process.

We were looking for $500k to make a few hires and fund working capital as our business still had a long sales cycle between when a student would canvas a home and when we collected from the solar companies. We wanted to scale up the students rapidly and still be able to pay them in a timely fashion. If we were aggressive in fundraising the first time around, this time we were ferocious. We pitched hundreds of investors, cold-calling and emailing basically every early stage investor and fund in the country. Michael called in every favor he could, I interrupted a date night to cold intro myself to Dave McClure at the bar in Birreria. We hammered phones and emails and got conversations with almost everyone on our list eventually even getting a final round interview at Y Combinator. But we were still beating our heads against the wall. There was money for mature cleantech companies, but absolutely nobody wanted to put early stage money into the cleantech market. We had a functioning product with operating data, an all-star team and we understood the market better than anyone, but we got basically nowhere. We closed $135k from friends and a family office, to whom we are immensely grateful, but after several months we decided it was best to do what we could with money rather than keep fundraising.

$155k wasn’t nearly the capital and runway we needed to execute our original plan so we had to make a choice to focus on one part of the sales funnel. We didn’t have the time or bandwidth generate lot of leads, sell them to lots of solar companies and make sure all of them converted to actual solar sales, so we decided to focusing on showing that we could scale up the lead generation. There was tons of good data on how much leads could be sold for at volume and what percentage would convert to new customers. We hoped to get data showing we could generate X leads and raise more money based on the premise that X leads would be worth Y dollars if we had time to do the biz dev and sell them. It should be obvious by now that one of our biggest problems was being fundamentally dependent on the possibility of raising money and assuming “if we get to this next milestone, then we’ll be able to raise money and do things right.” We never focused on actually bringing dollars in the door because we assumed that investors would be able to make the extrapolation from leads to dollars if given copious data on average price per lead. This was an incorrect assumption.

Michael, John and our truly amazing interns devised and executed a plan in three weeks to launch The Solar Bowl with over a dozen college campuses across the country competing to educate the most homeowners about their solar potential. More than a hundred students signed up and used the app to create a solar assessment and hundreds of homeowners were qualified with about 300 solar leads created in less than six weeks. The software worked. Nearly all the students were able to easily give accurate solar assessments to homeowners with no training. Theoretically that would have meant about $15,000 – 30,000 in revenue at that time but the leads came from all over the country and we hadn’t had the bandwidth to vet companies and set up lead generation agreements with enough companies to monetize them effectively. The data however was very compelling. Students were fired up and it was clear we could scale the operation to 1,000s of students without hiring much more staff. On top of that the total cost of customer acquisition was dramatically lower than anything else in an industry very hungry for more customer growth.

Go big or go home

At this point we had a choice. We could more or less could see that this could be a business that would work. If we continued to grind it out we could slowly grow the number of Solarists (as we called our amazing canvassers) generate lead generation revenues and eventually build something big. But we had two problems. First, while I have tremendous respect for folks who have been out there putting solar on people’s roofs for 20 years, the customer service for many of the companies in this space was terrible. After handing off customers to these companies we found it could be nine months or more before they finally got solar on their roof. The processes were slow, inefficient and painful for the customer. We knew that we wanted to own that entire process, fully walking the customer all the way down the road to the end. But that meant hiring sales staff as there was no way the two founders could handle the sales process and manage the rest of the business. Secondly, call it what you will, but Michael didn’t want to build a tiny solar sales company and spend 5 years growing it organically. We wanted to make a big serious impact on the industry, otherwise it wasn’t worth it for us.

We agreed easily that we had to go big or go home. We had years of customer and product development, deep industry insight, demonstrable data that the we had a truly innovative and much more effective way to scale up the industry. We pulled out all the stops for a hail mary fundraising attempt. Eventually we widened our search to other solar companies, strategic partnerships and would-be competitors to try to somewhere acquire the capital to get the business to scale. But one by one we checked every one we could think of off the list and ran out of ideas. We also ran out of money. By March of this year we both had to go back to other work to pay the bills.

We spent the rest of the year looking for ways to partner with big companies in the industry to revitalize the Solarist program but at this point we just haven’t found a good fit. We have a few ideas incubating for re-launching the product but for now it’s on the shelf.

Gratitude

I (Tyler) have told this story as a first person narrative so it comes across as very me-centric. But that’s not how it really played out day to day. I could not have made any of the progress without help from co-founders, friends, investors, supporters and colleagues who helped immeasurably at every step of the way.

Several people took big gambles with their time and careers to join SolarList as co-founders. They worked their butts off and didn’t see a pay-off. Within the cleantech industry we had tons of helpful cheerleaders who made introductions and provided helpful advice. Our friends and colleagues were insanely supportive and helpful in the day to day and several of them took even bigger risks, investing some of their savings in Michael and myself. We are supremely grateful. I’m hopeful that our experience so far is useful for aspiring entrepreneurs and I’m even more optimistic about the future potential for solar and cleantech.

Thanks for the journey and for reading.

Solar Energy will be f-ing huge

Let me convince you right now
I met with a friend who recently moved from an energy efficient technology startup to a different sector. He commented on how pleasant it was to be going after a “big market”. When you go after a big market, even before your business plan is airtight and bef

ore you have traction, investors will give you resources and time to figure it out.

The implication is that startups selling clean energy systems and energy efficiency products are going after some tiny, lifestyle business market barely worthy of a Shark Tank episode.

We have pitched A LOT of investors building SolarList and it is shockingly common to hear that solar is just too small of a market. “We’re used to hearing numbers with a B guys.” Initially we were dumb-founded, the opportunity of radically shifting our electricity consumption infrastructure feels so obviously enormous that we didn’t have an articulate response to why we were clearly going after something more ambitious than photo sharing, or photo sharing with an expiration date, or photo sharing with more filters or photo sharing using both the front AND, wait for it, the back camera (big markets folks).

Total addressable market (TAM) to me consists of two parts. First what’s the raw total amount of money that is spent on your market. And second, for either structural or practical reasons, what slice of that market could you theoretically capture if you were wildly successful. For example, if you are building a flight search startup, you find that $XXXbn is spent on air travel every year. But you’re not building an airline, you’re building an app that will get paid a commission on every flight booked through it. So realistically your TAM is maybe 5% * $XXXbn. Maybe this is technically Serviceable Addressable Market, but whatever, this is the framework I’ll use below.

Markets with a B
Solar panels produce kilowatt-hours of electricity. Americans spend nearly $400 billion per year on kilowatt-hours of electricity. About $170 billion of that represents spending from houses and apartments, the rest coming from commercial and industrial sources.

This is way more than the $135b spent on hotels and lodging.
More than the $225b spent in the entire retail e-commerce market.
Shockingly it is much more than the $165b that makes up ALL US advertising spend. Even if you limit yourself to only tackling residential electricity, you are still going after a market with the same sized pool of revenue that provides all the sales (or hypothetical future sales) for Google, Facebook, Twitter, Yahoo, Instagram, Pinterest, Snapchat et al.

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But, how much of of the market can solar take over?
A Lot. And a lot more than you think is a lot.

This is a question that skeptics have continually been proven massively wrong about. See The Economist’s excellent coverage of how European utilities wiped half a trillion euros from their market cap by underestimating the power of solar.

Here is an awesome overview in very plain terms from Mark Jacobson of Stanford on how we could realistically switch to 100% clean energy.

Lest you think this is all just eco-greenie hippie talk from liberal bastions like The Economist. Jon Wellinghoff, chairman of the Federal Energy Regulatory Commission (FERC) that oversees the entire US utility industry, was recently quoted saying,

“Solar is growing so fast it is going to overtake everything.”

Jim Rogers, CEO of Duke Energy, the country’s largest utility says,

“If the cost of solar panels keeps coming down, installation costs come down and if they combine solar with battery technology and a power management system, then we have someone just using [the grid] for backup.”

David Crane, CEO of NRG Energy another huge electric utility, echoes the sentiment,

“[Consumers are realizing] they don’t need the power industry at all, … That is ultimately where big parts of the country go.”

The expectation, and on some level fear, of a huge solar boom permeates the utility industry. The Edison Electric Institute, the trade group that represents all the electric utilities, which has historically down-played the future role of renewables, outlined in a recent report the probability of asolar viral loop, others have inverted it into the utility death spiral. Solar is a direct alternative to getting electricity from your utility. Each customer that leaves their utility for solar will slightly increase the cost to other utility customers, making them in turn more likely to switch to solar. Solar, it turns out, benefits from a network effect.

And there is still so much more room to grow it’s insane
Germany now gets 7% of its power from solar, most of which is owned by average citizens, and on sunny Summer days the German grid will sometimes be completely powered by solar.
In 2012 in the US, solar represented just 0.2% of all electricity consumption. 35x less market penetration than Germany.
In 2012 annual US solar installations were valued at $11.5b meaning we would need another $400bn in investment just to catch up to Germany
The US electric grid is the world’s largest machine. It is old and dilapidated and the highly regulated, monopolistic nature of the utility industry means it has gone largely undisrupted for a century. Distributed solar represents a scaleable opportunity to capture entirely one of the largest slice’s of US spending ($400b) replacing it with a technology, that for millions of America homes means a cleaner electricity, a lower carbon footprint, a more resilient home AND savings that beat the return on your stock portfolio. It is not only a huge market, but very possibly the most prime startup opportunity on the planet right now.

If you think more investors should be looking at the opportunity in clean energy it would mean a lot if you would recommend and share this post.
This was originally posted on the SolarList Blog.

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