Nth Power founder Nancy Floyd says green building appears to be one sector that will do better than most during the recession.

Nancy Floyd spoke about the investor's perspective on green building technologies, at the Greenbuild conference and expo in Boston.

Index to Greenbuild 2008 Day-by-Day at Energy Priorities

Nth Power collaborated with MIT and Fraunhofer, a German research organization, to conduct a study and publish a white paper about green building. Floyd presented highlights from the paper, which she says combines perspectives of researchers and investors in green building technologies.

MIT and Fraunhofer started a center in Cambridge MA last April with $5 million in funding from the Massachusetts Technology Collaborative.

Nth Power was investing in lighting and other building technologies ten years ago. She explains that customers at that time didn't care about energy savings, and there was no measure of the productivity gains or sales increases from green building. The only available indirect sales route, ESCOs, were a "schizophrenic channel" back then.

"Green building is the bright spot in this recession"
--Nancy Floyd, founder of cleantech venture capital firm Nth Power.

Much has changed in ten years. According to the not-yet-released white paper, the building industry is at a tipping point.

Floyd explains that "the building industry is ripe for disruption... It's at the tipping point because of rising energy prices, rising material costs, and demand for bigger buildings in the United States."

She said the market is growing at 30 percent per year, and "that's akin to the PC, internet and wireless industries in their heyday."

Nancy Floyd spoke at the 2008 Greenbuild International Conference and Expo in Boston.

"The economic downturn will actually be good for this sector," Floyd says, because the market meltdown is accelerating innovation. There are opportunities now, because builders and decision makers have more time to consider new ideas.

There also is more competition among builders, so some will differentiate by adopting green building products and practices. She cited a McGraw-Hill Construction study finding that the majority of builders are using those products to some degree today.

"The future of this industry will belong not to incumbents, but to the small tech companies who are shaping the landscape," Floyd predicts. But she says there are challenges ahead. There is "noise in the marketplace" (and in expo hall downstairs) with rapid introductions of green products. Competing standards are emerging to validate green claims.

Another challenge for cleantech entrepreneurs will be understanding customers and their pain points. "Understanding customers is very complex in this market, and it makes it a difficult sale," Floyd says.

She offered general advice to entrepreneurs on their go-to-market strategies, identifying the best market segments, geographies, technology sectors, and channels. She said entrepreneurs seeking venture capital right now "might have to bite the bullet on valuations."

David Gottfried, founder of the U.S. Green Building Council, introduced Nancy Floyd at Greenbuild.

Venture capitalists like large markets, upward of $1 billion per year, Floyd says. "Nth Power's portfolio companies must show that they can double their revenue year after year. Only half of those survive. Even fewer of them return the 5X to 10X we're looking for in four to seven years."

"Quantify the full customer value proposition," Floyd advises. "Develop your channel strategy. Develop your pricing strategy to reflect the value proposition."

Floyd reiterated that green building appears to be one sector that will do better than most during the recession. Not only are market factors boosting the sector, it's also a good idea.

"It's not green building. It's better building."