Human capital: A primary barrier to scale for Indian cleantech startups
With government support and huge market potential, cleantech is in a position to grow by leaps and bounds in the years to come. Ventures in the space, however, face some serious challenges, perhaps the most significant being drawing in the necessary human capital.
“I would rate ourselves 5 or 6 out of 10 for almost every variable around our operations: product, market fit, value proposition, unit economics. But ‘team’ has been at a 1 since the day we started – and it keeps slipping back to 1 no matter how hard we try.” – an Indian cleantech entrepreneur
There is an enormous market opportunity in India for “cleantech” startups – early-stage companies seeking to solve India’s energy problems. But Indian cleantech companies also face a unique challenge: it is hard to find the right talent to build an effective team.
At least 300 million people in India live without electricity, with another 250 million limited to three to four hours of it a day. The energy that India does produce is largely dirty, with 70 percent coming from coal-fired power plants. There is deep social, cultural, and international pressure for India to build its renewable energy sector.
Indeed, the Government of India has committed to supplying electricity to all villages by May 2018, and providing 24/7 power to all households by 2019, while boosting the renewable energy component to 32 percent, up considerably from the current 10 percent.
Startups have already begun to play a key role in the transition. And it’s not just solar panel companies. Promethean Power Systems has created an energy-efficient refrigeration system that works wonders for milk farmers in off-grid communities. Ecolibrium Energy provides utilities as well as commercial and industrial users with advanced analytics on energy consumption and billing. Simpa Networks uses a pay-as-you-go model to sell solar power systems on financing to households and shops in rural India.
The human capital challenge
Yet, despite government support and huge market potential, most cleantech ventures struggle with a fundamental operational issue as they scale: finding the right people to join their teams. As we’ve learned through our work supporting early-stage cleantech entrepreneurs, India’s large geography and relatively new cleantech sector make human capital a persistent challenge.
Feet on the street
The first problem is the huge dependence on community buy-in for new products, particularly in small towns and rural areas. While many cleantech companies start in big cities, startups like Promethean Power Systems or Simpa Networks see their largest markets in small towns, rural areas, and often, hard-to-reach geographies. This creates the need for a “feet on the street” frontline force: outreach teams that speak the local language, understand consumer preferences, and are able to earn community trust.
These outreach teams need to be more than just good salesmen; they need to understand complex systems. Across both urban and rural areas, “push sales” are more common than “pull sales” because there’s a massive behavioural change required on the part of the customer. This requires the frontline force to have a deep technical knowledge of the product as well as the ability to articulate the benefits in terms of improvement in quality of life. Ongoing last-mile support is crucial for customer retention, and is often bundled with payment collections, making customer interaction even more complicated.
Managing this field staff is particularly challenging when a company is expanding geographically and hiring large on-the-ground teams to cover large, remote areas. In addition to operational training, there is significant risk mitigation required in order to manage motivation levels, attrition, relationships between staff and community leaders, and theft.
Another challenge for middle managers is the need to build strong external partnerships as the company grows. Cleantech ventures often begin with government or non-profit partnerships, but rely more on strong local partnerships as they grow, often into rural areas. Middle managers need expertise in business development, an understanding of key win-win partnerships, a deep sense of operations, and strong training and people management skills.
Startup founders like to think they can do everyone’s job, but that only works for so long. As cleantech startups grow, founders need to hire leadership teams that have both entrepreneurial experience and deep domain expertise. The cleantech space is still relatively new in India, so this can be difficult; members of a leadership team need to have not only a deep knowledge of the energy sector, but also a sense of the complex set of public and private stakeholders across the value chain, and, in the case of companies with a sophisticated IP, a deep technical sense of the company’s product offering. It can be difficult to scout people with these attributes.
As we continue our work with cleantech companies across India, from those developing affordable solar products and cold storage technology to those improving waste management and energy efficiency processes, we are eager to learn from these entrepreneurs about what has been working, where outside organisations can help, and how cleantech ventures in India can get past the human capital trap.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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