Story at a glance
- Many technology startups struggle to prove out their innovations beyond a small lab setting.
- One program helping startups is the Wells Fargo Innovation Incubator, or IN2, which combines funds from the bank's foundation with research help from the National Renewable Energy Laboratory and the Donald Danforth Plant Science Center.
- Since launching in 2014, the $30 million incubator has hosted 40 startups, expanding its focus from clean energy technologies for commercial buildings to include sustainable agriculture and affordable housing.
As doctoral engineering students, Aashay Arora and Matthew Aguayo developed a promising business idea: a coating that effectively transforms walls and rooftops into insulation. Their initial experiments at Arizona State University showed the coating could save energy on heating and cooling — but they faced a big hurdle. What home builder was going to bet on a brand-new material based on the results of some tests at a university lab?
The so-called "valley of death" — that gap between early research and real-world markets — can be the undoing of many tech businesses. Several startups have leaped across that divide in recent years with the help of the Wells Fargo Innovation Incubator, or IN2, which combines funds from the bank's foundation with research help from the National Renewable Energy Laboratory (NREL) and the Donald Danforth Plant Science Center (Danforth Center).
Arora and Aguayo's business, EnKoat, is one of 10 companies recently selected to join the incubator's sixth cohort, which is focused on clean technologies for residential buildings. They say their coatings, which can take the form of paint, plaster or stucco, absorb and release heat to maintain a constant temperature, saving up to 30 percent on heating and cooling costs. EnKoat's own tests have shown the materials can maintain a temperature up to 10 degrees Celsius (18 degrees Fahrenheit) cooler than conventional ones. Now, through IN2, they'll get a chance to check those results with researchers and equipment at NREL.
"If you're a home builder or contractor, the first thing is: Has it been third-party tested?" says Aguayo. "For a new technology to truly get adopted in the industry, you need that sort of validation. That's what is most appealing about being in this incubator."
Since launching in 2014, the $30 million incubator has hosted 40 startups, expanding its focus from clean energy technologies for commercial buildings to include sustainable agriculture and affordable housing. Each startup receives the equivalent of $250,000 in funding, most of it in the form of technical assistance and a portion as cash to support research costs. The funding is non-dilutive, meaning the business doesn't give up any equity in exchange.
For startups, such assistance can be invaluable, says Trish Cozart, program manager at NREL: "This is an incredible opportunity to be able to work with such high caliber researchers and multimillion-dollar equipment that they'd never get to work with otherwise."
Though the funding comes from the Wells Fargo Foundation, it also has a benefit for the bank's core business, which includes investing in clean tech and affordable housing, says Ramsay Huntley, who oversees the incubator for Wells Fargo.
"It's important that this be a program that is philanthropic, but if it were only that, it could not be nearly as successful as it is," Huntley says. "What we're really doing is seeding [an] entire clean tech ecosystem."
So far, the startups emerging from IN2 have generated $202 million in subsequent funding, Huntley says—some from big-name investors such as Softbank and Bill Gates's Breakthrough Energy Ventures. Some companies have been acquired outright; European energy company EDF Renewables picked up EV charging technology company PowerFlex, for example, while energy management startup J2 Innovations became a subsidiary of Siemens.
To find promising candidates, the incubator relies on a network of universities and other partners that make referrals. One of those partners, the Chicago-based nonprofit Clean Energy Trust, nominated crop diagnostics firm Aker, which joined IN2's first agtech cohort this year. Now the Missouri-based firm is working with the Danforth Center to refine a new crop-scouting technology that uses sensors and cameras to detect problems such as pests, disease, and weeds.
Aker co-founder and CEO Orlando Saez likens his company's product to a blood test that can gauge the health of about 75 different crops by using drones and probes. Typically, farms rely on a few human observations to detect problems. As a result, farmers either spray an entire field as a precaution, or skip applying a treatment to save money.
"Neither of these strategies is financially wise or environmentally sustainable," Saez says.
Aker aims to help farms make more targeted, reliable crop assessments. At the Danforth Center, the startup plans to refine a new biometric sensor that can sniff the air for pathogens related to plant diseases. It also wants to generate clearer recommendations based on the data Aker can collect in the field.
"What the Danforth Center brings to the picture is the 'so what,'" Saez says. "A lot of what we can find in the field still needs to be rationalized in the context of, what is the threshold? If I find 50 aphids or Japanese beetles in a field, that could be bad, could be good — or could be, don't do anything quite yet."
The Danforth Center has a greenhouse complex, plant growth chambers, and equipment beyond what many universities could offer. "Danforth has the people and the infrastructure," Saez says. "That has been incredibly helpful for us."
Aguayo of EnKoat echoes the benefit of being able to level up from a university environment. He and Arora worked in a lab day in and day out as grad students, but NREL offers more.
"When we go there, it's just on a whole other level," he says. "And it's the level that is really going to take our technology and get it in the hands of every homeowner."