As a younger man in the salad days of my career in clean-tech financing, I frowned slightly on investors that were looking to back ICT-enabled resource and energy efficient technology companies. I thought that they weren’t really getting their hands dirty in the gruelling but noble art of long-term capital-intensive clean technology. They were sprinters, not ‘iron man’ multi-marathon runners.
What rubbish. I feel embarrassed by these views today. My admiration for the few long term investors prepared to stick with capital intensive clean-tech has not waned, but it is now matched by enthusiasm for the convergence of ICT and clean tech, which is producing exciting business models that promise returns within more VC-friendly timeframes and that also enable environmental improvement.
Re-commerce or ‘reverse commerce’ – which refers to the recovery, reselling and reuse of products, usually through the internet – is a good case in point. Its growth, which is a factor of ICT innovation, has led to the emergence of new players in B2C, which are variations on the eBay model, and others in B2B which are specialising in the recovery and reuse of particular product groups. It is attracting new investors to clean-tech and producing some very promising results.
eRecycling Group Inc. is a Texas-based re-commerce company whose business model is, in its own words, “based on capturing, restoring and monetizing the value of used mobile devices”. In plainer language, it collects, refurbishes and resells phones and tablets. In October last year it completed a $105 million Series C financing from its current shareholders, which include Kleiner Perkins, and a new investor, Silver Lake Kraftwerk, a technology investor focused on energy and resource innovation.
The environmental benefit here is that precious metals contained in mobile devices get re-used and kept out of landfills. The ICT innovation comes in the ‘harvesting’ and collection of devices (‘reverse logistics’) and in the identification of the premium buyer; bridging the gap between the tech-savvy consumer who’s desperate to upgrade and the consumer who’s happy with a reliable product at a lower price.
The German company ReBuy has a similar business model to eRecycling Group. Earlier last year it secured follow-on funding from its existing investor, the Ikea-backed Swiss-based Mountain Cleantech Fund II, and new investors including Hasso Plattner Ventures, the VC company established by the founder and chairman of SAP. The investment followed 100% compound annual growth in the preceding two years.
Such growth is being driven and supported by several broad factors – the rising costs of energy and raw materials and a wider acceptance of second-hand products.
Re-commerce is part of the much broader closed loop economy. Its closest sister industry is remanufacturing, which is best defined by the UK Centre of Remanufacturing & Reuse as “a series of manufacturing steps acting on an end of life product or component in order to return it to like-new or better performance, with a warranty to match.”
Remanufacturing has been common in the automotive and heavy duty industries for decades, with successful such as Caterpillar and Rolls Royce leading the way. Yes, the Rolls Royce engine on the plane that flies you to meetings and holidays is second hand. In fact, it’s likely to have been re-manufactured so many times that it’s far beyond second hand. But it seems to do the job.
What’ stopping other industries re-manufacture? One of the obstacles is that it is only viable when there are enough products available to be re-manufactured. This requires manufacturers (or their outsourced remanufacturing specialists) to exert greater control over the lifespan of their products so that they can collect them for re-manufacturing when required. This challenge will be met mostly through the application of software. It’s an investment opportunity waiting to be seized by ICT-competent clean-tech investors.
Disclaimer: Mountain Cleantech and organisers of the Centre for Remanufacturing and Reuse are both former clients of mine.