So I set out thirty two days ago, took ten days to make the transit from Iowa to Massachusetts, and I’ve been here the last three weeks, chasing goats, feeding sheep, cutting wood, and generally getting acquainted with hilltown country.
One of the things I have not talked about is the fact that I’m representing a small group of investors, primarily Kossacks, and that we’ve just finished a first round private placement for farmerchuck’s boiler business ...
Oh, god, no! My secret is out! I’m an itinerant ... investment banker? That might be going a little far, but I have used my writing skills, my background in starting and operating companies, and a whole lot of accumulated positive karma, with the end result being a flow of wire transfers and checks arriving over the last seven days for farmerchuck’s company. It isn’t an amazing amount of money; the last one I worked on was ten times this size. It is, however, just enough to stand the outdoor boiler and wood gasifier business up, and send it off chasing after a red hot renewable energy market in New England. Soon the flow of these old fashion wood fired boilers will end and gasifiers so clean they can be sold in Vermont will take their place.
When you run a business you have to have something to offer – with goods to be sold at a profit or skills that a customer would be willing to pay for being the easily understood pair of the trio, with the third being something of a swear word these days: risk management. This encompasses estimating a business against the market and determining where and how much to pay for the money you need for inventory and operating expenses.
Farmerchuck can look at a house, a farm, or a greenhouse operation, and determine what size of boiler would allow them to heat with wood. This sounds simple enough, but it turns out to be a mélange of woodlot management, gas and liquid thermodynamics, and a thousand other things that go with interfacing renewable energy into an existing boiler system, or in a case like his farm, in to multiple buildings. So this is farmerchuck’s intellectual property – his abilities in this area, his relationship with his boiler vendor, his reputation in the community, and so forth. I checked these things out a bit when I got here and what I saw was this: a business that would never get funded from a traditional bank due to a variety of circumstances, but one that a couple of lucky investors (theory, check back with me next month for the proof) could get behind and get paid nicely for in the process.
Chuck didn’t want to sell a portion of the business and the due diligence on such a transaction would have taken far too long; the market for heating systems is right now in this area. We set up a simple credit facility; a few pieces of inventory and some much needed repairs to Brunhilde, the giant Ford delivery truck. The investors in the first round will be in and out by summer, and then there will be another, larger opportunity of a different nature. Right now it looks like having the inventory coupled with a spa day for Brunhilde is going to totally rearrange Chuck’s position, allowing him access to more traditional financing methods. Of course, having done something once with the first round investors they’ll get another "bite at the apple" if they’re so inclined.
Brunhilde in repose
If you’ve been following my writings at all you know that I’m a big fan of Ilargi and Stoneleigh’s work over at The Automatic Earth. This is hands down the best financial news site out there – all the high level news in one place with a bit of commentary to help one digest it all. Oh, and the digestion is going poorly – I do believe we’re going to tumble into another Great Depression like economic mess and that peak oil will keep us there in perpetuity.
I did set out to change the world last December with the registration of the domain for the Stranded Wind Initiative and the attendant organization building, but somewhere in all of this I have to eat, pay my car payment, send money for my children, and so forth; I needed retraining and, that being completed, I’d need somewhere to exercise my new skills.
I helped get Freedom Fertilizer moving in Iowa, but this one is going to take some time – it must have a finished solid state ammonia synthesis system. There is a red hot fertilizer market in Iowa, just like the energy market here, but you need a minimum of ten million to get started in that arena and I don’t have that kind of money to play with ... yet. I did take the time to file for a $952,000 grant to work on the commercialization of SSAS and we’ll do that again here in Massachusetts, but I don’t want to be dependent on grant reception for my livelihood and the progress on the things I believe to be vital to maintaining our civilization.
I’m a bit surprised that biomass is starting to move first, but in retrospect this was obvious – it happens on a human scale, with one person making the decision. I think this is going to be a fine first increment; demonstrable success, stabilizing funds for some of our underemployed contributors should flow out of this with just a little bit of elbow grease, and then we’ll be ready for what comes next.
This is the end of one small adventure and the beginning of a much larger one. Thirty years ago James R. Schlesinger said:
We have only two modes—complacency and panic.
We really need a third mode – mindful focus on the need for change – or this peak oil stuff is going to mow us down.
We’re still applying the management principles of the open source software community to the Stranded Wind Initiative. Anyone can join and everything it does is freely available to all; the approach has yielded a top notch list of contributors ... but energy isn’t software, and we need a vehicle for moving atoms around as well as bits; money is required.
I’ve done and said a lot of things that people characterized as crazy in the process of getting this whole thing moving and I think what we’re talking about here is the final bit of craziness – in the face of the banking meltdown we’re starting a private investment company with a focus on renewable energy. This already exists in larval form – marketing, finance, and legal folks are working on various aspects of this as yet unnamed entity, but that isn’t going to take too much longer. I expect we’ll have some sort of formal declaration before the month is out, complete with a spiffy name, a web site, and all that other startup jazz.
So, there you have it – this is us hanging the shingle out. Not only do we need volunteers with skills in various areas, not only are we gathering their knowledge and making it accessible to others, we’re now quite actively interested in hearing about things people are doing that need financing. There is going to be a scramble for renewable energy sources as people realize what is happening and we’re delighted to be right near the front of it all.