Solar Eclipse: What Happens when Your Startup Fails?

Ryan Marschang is a junior at the University of Pennsylvania pursuing dual degrees in economics and chemical engineering. Last year, Marschang and some of his classmates launched Invisergy, a developer of solar technology building materials. While the technology showed great potential, building owners weren’t quite ready for Invisergy, and its founders dissolved the business in December 2012. Marschang talked with KWHS about his passion for renewable energy, technology and business, and why understanding your market is so critical to start-up success.

An edited version of the interview appears below.

Knowledge@Wharton High School: Dual degrees in economics and chemical engineering — that sounds ambitious. How did you start down that path? Why did you decide to pursue both?

Ryan Marschang: One of the difficulties I had in high school was that I was interested in a lot of different things. Two of my major passions were energy and finance. So, I got really lucky in finding the management & technology (M&T) program here at Penn, a dual-degree program, which allows you to study two things in four years and get two degrees. While it is ambitious, I think the two concepts of business and technology go really well together. And it fell right in line with what I was passionate about, so it was a natural fit for what I wanted to do.

KWHS: Does it ever get overwhelming, two degrees in four years?

Marschang: Yes, it does. I would say it’s nice, in some respects, though, when you can bounce around [doing] different things. For example, if I were taking a lot of classes and just studying finance day after day, I think I might get a bit sick of it. But it’s nice being able to bounce back from a fluid mechanics course in engineering, and when I’m sick of working on a problem set there, going into finance or management and studying something else. There are so many different concepts flying around.

KWHS: What kind of career path might you pursue with those specialties?

Marschang: There are a lot of things you can accomplish. Say you just have a business degree from Wharton. It’s a very general degree and leads to a lot of different [careers] in consulting, finance and business development. But when you add in a technical component – for example, with me, chemical engineering, [you have different options]. I see myself leveraging my technical expertise on that side and using my business knowledge to actually drive technology forward.

The M&T program was founded on this idea that there’s usually a disconnect in some respect between engineers and business development. The technical guys are very involved in the details of a problem. And the business developers are looking at how to drive something forward. The communication gap [between the two] isn’t always filled. I see myself filling that gap in an entrepreneurial setting, or even in a company where you want to commercialize [transform a useful idea into an actual product that is sold on the market] a technology. You need to understand the technical components of it, but understand how to actually commercialize it.

KWHS: Interesting. When did you decide to launch Invisergy? What was your business model?

Marschang: Invisergy is a solar technology company focusing on green or [environmentally] clean building materials. The company was actually founded with three dual-degree Penn students who are in the M&T program. I was very involved in entrepreneurialism as a freshman at Penn. [I worked] on a couple ventures, nothing too serious, but just getting [involved in that] community of entrepreneurs, which is very strong at Penn. As I mentioned earlier, I was very passionate about energy. I actually fell into meeting Rishabh Jain, our CEO, who’s an alumnus of the M&T program. He reached out to Penn to look to build a team. Rishabh is now pursuing his PhD at MIT [Massachusetts Institute of Technology]. He had been working on the technical side of a technology called luminescent solar concentrators, which was a technology developed in the 1970s. He wrote his master’s thesis on this, was doing some research up at MIT and thought, ‘Hey, there might be some potential here.’ So, he [reached] out to Penn, knowing that there are M&T students who understand the business side of things and also the technical side of the equation. [We] started talking with him about the technology, then came upon the idea of forming a company and doing something with this.

So, it started out as a technology up [at MIT]. Then we connected with some alumni from the M&T program, which is a very strong network. And from there, we drove the business.

KWHS: What is the business? Help me understand it.

Marschang: I mentioned luminescent solar concentrators. Basically, that’s a novel way to trap solar energy [generated from the sun]. You can envision our technology as a transparent solar window. We use a transparent surface, like glass or even Mylar, or something like that, where the light hits that surface, and we redirect it to capture that energy. The problem we’re trying to engage is that in the United States, buildings in general consume 70% of the electricity. They’re energy hogs. If you can reduce their energy consumption, then that goes a long way to improving energy efficiency for the United States and for the world. Our goal was to increase energy efficiency for buildings.

One of the major problems with solar [energy] is that when you deploy large solar farms [large-scale installations that use sunlight to produce electric power], it takes up a lot of land. You can generate energy offsite and then transport that to buildings so that they can use clean energy. Alternatively — and what we were thinking much more radically — was that there is a lot of surface area on buildings, on skyscrapers. Why not just try and generate energy onsite? That’s where you see the idea of rooftop solar panels and things such as that. But even more radically, we were thinking, ‘Look at all the windows on these buildings. Why don’t we make these windows smarter? Why don’t we generate electricity from the windows themselves?’

You have a transparent window, and you’re trying to capture energy that goes through that. That’s where our technology comes in. We thought we had a way — and we did to some extent — to efficiently capture that energy, to maintain the transparency of that window and then also generate electricity onsite for buildings.

KWHS: What is your role in the business?

Marschang: I was focused mainly on business development. My major role was understanding the technology, which our CEO and our CTO [Chief Technology Officer] were working very hard on, and then looking at how to commercialize it. We had a very strong scientific foundational technology, and we were trying to decide how to integrate that into a window. [That involved] talking to customers, trying to understand what the market wants, and trying to find a product-market fit for our technology.

One of the difficult things in starting a business in the building space, for example, is that you need to understand who the decision maker is in that process. Once we build our [solar] window, who do we have to sell to? What is our sales cycle like? How are we going to market this? I focused on trying to push our product into market in an effective way.

KWHS: That meant a lot of meetings with people?

Marschang: Yes, meeting with customers, architects, designers.

KWHS: Did you learn a lot through that process?

Marschang:  Absolutely. I didn’t know anything about buildings going into this. I knew a lot of the technical side of the equation. But there is so much more to running a business. It was a great learning experience.

KWHS: [This technology] sounds very new. Are you on a new frontier, or are others already doing it?

Marschang: There are competitors in the space. But it’s so new that everyone works together. The market we were entering was called building-integrated photovoltaics [a method of generating electrical power by converting solar radiation into direct current electricity]. I would say – BIPV is what it’s called – is on the frontier of solar. [It involves] finding new ways to implement solar into buildings [and] roof tiles — being smarter about how we deploy existing technologies. We were focusing on this [question of], ‘Can you make a transparent solar solution?’ We weren’t creating transparent solar cells, but there are people doing that. There are also people working on flexible solar cells. I would say that area of solar is on the frontier of the general industry. We found out the hard way that it can be very difficult to [convince] people to take on a bit of risk to try something radical and new.

KWHS: [Let’s] talk about that. All of this was going on last year, correct?

Marschang: Yes.

KWHS: You were doing a lot of business development. How much progress was made with Invisergy? Where does [the business] stand right now?

Marschang: We spent a bit over a year to date on the project. We spun our wheels a bit starting out. The company had four founders, and this was our first real shot at driving a company forward — spending a lot of money and putting a lot of effort into it. It was slow-starting because we had to acquire mentors, figure out what direction we wanted to take the company, and the vision wasn’t entirely clear. The first four to five months [involved] getting a business plan together, talking to people at Wharton in the Venture Initiation Program, entering a lot of business plan competitions and trying to find that vision and understanding of what we wanted to actually do, which was really important.

Heading into last summer, we started to push a bit more. We had won a couple tens of thousands of dollars to develop a prototype [a model built to test a technology]. We got into an incubator/accelerator called Mass Challenge up in Boston, which was where our lab was located. And I spent the summer out in San Francisco.

KWHS: Can you explain what an incubator does?

Marschang: There are incubators and accelerators. [An incubator] incubates your business. [An accelerator accelerates your business]. [They might] provide you with capital. So, some incubators might have you apply and if you get in, you get, say, $10,000 for a couple months to support yourself. [They also provide] resources, in terms of mentors and being around entrepreneurs who can help you solve similar problems. The idea sometimes is to connect you with potential investors. [Incubators] provide you with all those nutrients that you need to grow and launch your business.

We were in Mass Challenge, the largest accelerator in the United States right now, which was cool. And then I spent some time out in San Francisco, starting to talk to angels [high-net-worth individuals who invest money in promising startups], and starting to talk to people who had been in the [building-integrated photovoltaics] space. And that’s when we really started to learn about the industry; meeting with Kevin Surace of Serious Materials, which is a great company in the space, and just learning. Instead of making the mistakes ourselves, [we found out] what they had learned through their mistakes. [It] was really enlightening in terms of our business.

We learned that renewables [sources of renewable energy like solar and wind] are having a difficult time right now in general, and in the building space in particular. We had a lot of wrong assumptions. We started to find this out [after] about six months, in June or July. [For example, we assumed that people would embrace our radical idea] to produce energy from windows. But building owners are very conservative and not necessarily willing to make an investment in a radical technology like that.

If you think about it, it makes sense. Buildings are erected and might stand for 50 or 100 years. Then you start thinking, ‘Do I want to put a technology like this, which might become obsolete or might not work, [on my building]? Once I put that building up, how am I going to take that technology down?’ Those are things we hadn’t necessarily thought of, but were really important. We found that yes, building owners are trying to increase the efficiency of their buildings, because it makes sense; it costs a lot to heat them and to cool them. But they’re looking to do it through different technologies, like energy software. [This includes] startups, for example, that help you track what appliances are using that energy. It is very capital-efficient to implement those technologies. And they have a shorter payback period [the period required for a return on the initial investment].

Our payback period was on the order of five years. And some of these software efficiency companies could pay back in under a year. We found that the adoption for those technologies would probably happen before ours. With those realizations and a lot more, we decided in December [2012] to dissolve the corporation. We were a bit naïve in thinking that we could move forward a lot quicker than we could. I think the technology still has potential, for sure. But it would definitely be a five- to 10-year commitment to make this succeed. That’s a tough choice when you are [also] in school.

KWHS:  So how does that feel, when you invest so much time and energy into something, and you have to give it up?

Marschang: It’s tough. We could have made the decision [to dissolve the company] earlier. I think it took us a [long time] because we didn’t want to give it up. But it’s much easier to make that decision when you’re in school and you have a lot to fall back on. You’re still studying. You could still get a job out of school. You could still start another company. I think the decision gets a whole lot tougher when you’re working on this full-time. [This] is one of the reasons I think you should definitely start a company when you’re in school. It’s the safest time you will ever have to run a company. If you fail, nothing’s gone wrong. You can learn a lot through your mistakes, and so failing is probably a good thing.

It was tough to make that decision. But there are a lot of cool things still to do. I’m excited about working on new projects, new businesses.

KWHS: Before we talk about that – energy is a passion of yours. We hear so much about the energy economy [the supply and use of energy], the green economy. Is it really holding promise for jobs and economic development in the future? What’s your take on the energy economy?

Marschang: I think we’ve seen a lot of progress over the past decade in terms of energy. I come from an oil family, actually. My dad’s a petroleum engineer. I’ve been around that conventional side of energy my whole life. And now, I’m very passionate about renewables. I think there’s a lot of promise there, but the problem with a lot of renewable technologies is energy density, in comparison to coal and oil. The infrastructure is not in place.

KWHS: We’re talking about [the infrastructure for renewable energy like] solar and wind technology.

Marschang: Yes, exactly. Costs are very high. Over the next 50 years or so, I think we’ll see the different alternative energies working together. That’s what is really needed. There’s a lot of work being done right now to upgrade our [electrical] grid [a network of power plants and transmission lines that deliver electricity from suppliers to consumers]. So, instead of the old model, where at a power generation plant, you would generate all your electricity and then distribute it. Now, you might be able to generate your own electricity at your house, through solar. The grid isn’t really set up to handle generation from all those different points. Once the grid is updated, we can start deploying more solar. And everything, through smart grid technology, can start to work together.

The shale boom [where natural gas is now extracted from shale formations] over the past five [to 10] years [also] changed the [energy] landscape a lot, decreasing prices in natural gas. [This has] made renewables not as competitive, because [we can get] cheap energy from natural gas. Natural gas is going to play a huge part in the energy economy moving forward. I think things look well. But there’s just a lot of stuff happening, and it’s tough to say.

KWHS: You said you were excited about the future. Do you think you’ll resurrect Invisergy at some point? What’s happening next for you?

Marschang: [Invisergy] is definitely a possibility. I’m very interested in energy. To be an entrepreneur in the energy space, in terms of technological development, I think I might need to pursue a PhD. I’m looking at MIT or Stanford to pursue a PhD in chemical engineering. When I’m there, [I hope to work] on some technology with the hope of commercializing it. The time frame for developing energy technologies is much longer than the typical tech start-up scene. That is one of the things I was a bit naïve of heading into Invisergy. When people think, ‘Oh, startups, entrepreneurialism,’ they are drawn to TechCrunch [a publication that covers Internet and tech startups], Y Combinator [an accelerator for aspiring digital entrepreneurs], and things like that. I found out that the landscape of the entrepreneur, or of startups, is very different. Energy is a capital-intensive startup versus just launching a website. It is tough for me [to decide] what type of startup I want to work on. But because I like energy and I think energy is more suited toward that capital-intensive side of the equation, I think I need to develop my technical skills a bit more. That’s my plan now. We’ll see.

KWHS: Good luck!

Marschang: Yes, thank you.

 

Questions

What two degrees does Ryan Marschang hope to earn, and why are these specialties important to his future in the alternative energy business?

Why were buildings and skyscrapers so important to the success – and failure – of Invisergy?

Based on Marschang’s experience with Invisergy, why is it so important to know the market in which your company operates?

 

Related Links

• M&T Program at U of Pennsylvania
• CNBC: Competitions Help Entrepreneurs Gain Funds, Attention
• Wharton Magazine: Institutionalizing Entrepreneurial Urges
• Wharton Venture Initiation Program
• Invisergy
• New York Times: Energy and the Environment Blog
• Mass Challenge