The Los Angeles Clean Tech Corridor has been a centerpiece of Mayor Villaraigosa’s economic strategy for years—but so far the plans for the corridor have been defined by aborted business plans and disappointments. Last month, however, the CRA/LA announced the hiring of Fred Walti to the position of executive director of the Los Angeles Clean Tech Incubator—the first physical manifestation of the city’s clean tech strategy. To detail the vision of the Incubator, TPR is pleased to present the following exclusive interview with Fred Walti, who brings years of successful start up experiences to bear in helping bring nascent companies to market.
"The vision over the next several years is to build the 'center' the city has for clean tech innovation and commercialization..."
The Community Redevelopment Agency of Los Angeles (CRA/LA) put out a press release last month announcing that you had been hired as the executive director of the Los Angeles Clean Tech Incubator at the La Kretz Innovation Campus. Why were you interested in assuming that responsibility?
For the past 15 years, I’ve been an entrepreneur or I’ve helped entrepreneurs build companies. I built an Internet company from scratch to 250 employees in seven offices across the West Coast, with 14 consecutive quarters of profitability. We then sold and merged that company. I then went to work with perhaps the most successful private incubator in the country, IdeaLab, first as an advisor and executive entrepreneur-in-residence. I eventually helped them run one of their Internet companies. About four years ago, four C-level executives and I formed a management consulting company called The Propellant Group. The Propellant Group focuses on early-stage technology companies.
During our work with start-ups, We often found that founders of technology-oriented companies, whether they are focused on Internet or clean tech, are pretty well versed in technology and the product, but sometimes they are not as well versed (and certainly not as experienced) in building companies and experiencing all the thrills and spills that involves. One part of the Incubator is all about building companies. We’ve done that, and we’re very comfortable that we’re above average in doing that.
The reason that the Clean Tech Incubator really makes sense for me personally is that about three years ago, I drank the Kool-Aid regarding sustainability. I came to the conclusion that our country needs to get off its dependence on fossil fuel if we are going to control our destiny and not have problems with highly volatile parts of the world. I also came to the conclusion that maybe it’s not a good idea to punch a hole in the atmosphere. This whole thing—the sustainable use of our resources—became important to me personally.
About two or three years ago I began working with the various agencies within the city involved in developing the city’s clean tech strategy. I worked with them on an informal, pro-bono basis. Around this time, Clean Tech Los Angeles was formed by the CRA/LA, the Mayor’s Office, and DWP. I helped them reach out to the business community to ask the question: What do we need to do to build a clean economy in Los Angeles?
About a year ago, the CRA/LA decided that it was time to develop an incubator. They hired a very good consultant to write the business plan. The business plan called for the hiring of a full-time executive director. They did a search for that person, and because I had known the folks at these various agencies I was asked to participate in that review. I was selected because I am above average in helping companies get from here to there. I focus on practical advice. I focus on helping companies get into the marketplace, and I’m committed and passionate about helping the city build a green economy.
Our newsletters have often shared the many challenges facing implementation of the L.A. City Clean Tech Corridor “idea.” What once seemed a promising opportunity to bring industry and create manufacturing jobs has gone unfulfilled. Your hiring this summer is an opportunity to update the public on current clean tech incubator planning and progress.
All good things take time. The Los Angeles Clean Tech Incubator today represents the first physical manifestation of the city’s strategy for the Clean Tech Corridor. The Clean Tech Corridor is a part of the city bordered roughly on the north by Union Station, on the south by Washington Street, on the west by Alameda, and on the east by the Los Angeles River. It’s about a four-mile strip of land on the eastern part of Downtown that represents a significant redevelopment opportunity. It needed some economic incentives. It was part of the city’s strategy, the mayor’s vision, and the CRA/LA’s vision to channel economic development relative to clean tech into that area. It makes a lot of sense geographically. It’s central to the city and equidistant from Pasadena and Santa Monica. But it takes time to develop these projects. The first realization of the Clean Tech Corridor strategy is not only a temporary campus here on Hewitt Street in the Arts District, but also the permanent campus that we’re going to build and that we’re in the process of designing.
What is the vision of the Clean Tech Incubator, and what do you hope to have happen by year’s end?
The role of LACI is the business equivalent of baseball’s farm system. We’re trying to find young talent, grow it, and get it to “the show.” As an incubator, we find young entrepreneurs with technology or ideas, we bring them into our incubator, we nurture them by giving them space at an incredibly low rate, we give them mentorship and coaching, and we provide them with access to our network. By doing that, we build companies and get them into the marketplace and start generating jobs. Jobs are the reason why we were formed in the first place. We are going to be the farm system for the city’s green technology sector. Other organizations, such as the LAEDC and the Mayor’s Office, are going to focus more on bringing established companies to Los Angeles. That’s the equivalent of the free agent market. We’re the farm system. We’re going to build our own here in L.A.
The vision over the next several years is to build the “center” the city has needed for clean tech innovation and commercialization activities. We want to become the proof point of the city’s strategy. There is a significant amount of clean tech activity in Los Angeles every single day and night—yet few of us know what each other is doing and thus, we can’t always collaborate or brainstorm together. Why? The difficulty is that we are so geographically diverse and separated it is very hard to coordinate and to take advantage of each other’s ideas. That’s the purpose of the La Kretz Clean Tech Innovation campus. It will be a physical center where people can gather, communicate, and collaborate—in terms of innovation and technology but also in terms of acceleration and commercialization and getting that technology to market.
Yet in spite of this, there are a lot of good things taking place in the clean tech sector in Los Angeles. That’s why it’s the largest clean tech market in the country. We have more clean tech jobs in Los Angeles than in any other region.
We started building LACI in June of this year. We just opened up our temporary facility, which is about 4,000 square feet on Hewitt Street in the Arts District, just down the block from the Urth Caffé. We’ve been spending a great deal of our time, of course, getting our operation up and running. We’re 99 percent done now.
We will announce our first company coming into the Incubator within the next week or so. We are in the process of looking for partners and advisors. We’ve had a number of very good meetings with leaders to introduce our initiative. Nancy Sutley came into town two weeks ago. Nancy Sutley is the chair of the President’s Environmental Quality Council, so she is essentially the number one counselor to the president on environmental issues. She came to LACI, and we gave her a presentation. She has been a very important part of the whole green strategy from her days in Los Angeles; it was really great meeting her. It’s fair to say that there has been a lot of planning and a lot of discussion regarding the city’s clean strategy, and people have often said: “where is the meat?” That’s changing now: walk in our door and you see that we’re for real. There is a great deal of commitment being made to this initiative, not only to the physical facility, but to the greater goal of building a center for the green economy in Los Angeles. We’re starting to, I hope, generate some momentum.
The Incubator start-up costs have been largely funded by CRA/LA. How has that funding been allocated? Is the Incubator expected to be a self-sufficient entity going forward?
The LACI is a non-profit organization that has been funded by a partnership between the CRA/LA and the DWP. CRA/LA has given us the operating funds for the first several years of operation, and the DWP, along with the CRA/LA, are in the partnership in building our permanent facility. The business plan calls for us to be a sustainable operation by year three. We’ll be able to do that through a combination of revenues from rent, services, and sponsorships.
The important thing is that the city is making an investment, not in LACI, me, or these specific programs, but in clean jobs. The results of our efforts will be visible in the next two to three years, not only generating jobs, but jobs that generate enough economic activity in the community to pay for this facility five or ten times over, depending on the time frame. The CRA/LA and the DWP are also using their funds to leverage it to the private sector. We are forming partnerships with private investment companies. The community is coming together to help us build the facility. The La Kretz family has been very helpful. They are long-term believers in the environment and in green strategies, and they are helping us build our permanent innovation campus. It’s an example of taking public funds and leveraging it with private money and building jobs that essentially pay back and build a green economy that everybody in Los Angeles is going to benefit from, particularly Downtown. The LACI will be a game-changer for the Arts District and the Clean Tech Corridor.
Pasadena has a world renowned private sector incubator. You have worked professionally with IdeaLab. What would Bill Gross suggest as the essential business and socio-environmental factors that must be present to attract and grow clean and green technology companies in the City of Los Angeles?
That’s a really great question, and Idealab is an excellent example of how that can happen. Idealab is located in Pasadena. Over the probably close to ten years that IdeaLab has been in existence, they have created hundreds of companies. Those companies have, for the most part, been located within the Pasadena area. One reason why Pasadena is a viable city for Internet technology and clean technology is because Bill has built an ecosystem to support the development of companies. What does an ecosystem for companies mean? It means the availability of financing, having the right service providers there that are experienced, and having the right talent and labor pool. It happened in Pasadena because of Bill Gross and Idealab, and it will happen here in the Arts District because of LACI. We will grow companies. People will work with those companies. People who work for those companies will locate here. They will generate retail and housing growth. It’s natural. If we create the right environment, it’s natural that people will want to stay where they’ve grown up in terms of their companies. I intend to build and grow the right environment.
As your incubated companies emerge from the farm system and grow are the ingredients needed for the ecosystem to grow and thrive present in the city of Los Angeles? Note, unlike Los Angeles, there is no gross receipts tax in Pasadena.
I think so. It’s all about what’s a strategic imperative, namely that the private sector and the public sector work together to solve these problems and to make it more attractive. It’s less about government, and it’s more about creating an environment to support the development of a particular kind of company or people. I believe in the city of Los Angeles. We have those resources; they just haven’t been efficiently funneled yet to a specific place or to a specific area. That’s one of the things that we’re going to do.
About two years ago, Mayor Villaraigosa hired a First Deputy Mayor, Austin Beutner, to be the city’s jobs czar. But despite his 18 months of service, there’s an impression that the city continues to be unfriendly to business and job creation. What must Los Angeles do to be more attractive to business start-ups?
The city has to bring together the various opportunities in a more singular strategy. Generally, and in this city, we need to form a new model between the private sector and government on important strategic issues. One of the most important strategic issues is rebuilding the country’s transportation and energy infrastructure and by doing that building a multi-trillion dollar economy. What does that mean within Los Angeles? It means that the city has identified a part of the city where if you’re a clean tech company, there are various kinds of incentives that we can offer. It also means supporting things like the Incubator.
The Incubator is a partnership between the public sector and the private sector. When we get our portfolio companies in here, we are going to work together with government to get them financing, to get them customers, to connect technologies so that if we develop a technology that appears to be useful to the Department of Water and Power, we are going to seek their help in implementing it. The model is working together in strategic areas. Clean technology is a strategic area. We’re trying to eliminate barriers. We’re trying to find ways of helping those companies that we believe have potential from an incubator’s point of view.
When we get together a year from now, what do you think we will discuss?
We will talk about the various companies that are in LACI and how they are doing. We will be close to starting construction on our permanent facility. We will have a stellar list of advisors and members of our leadership council. That will attract other people along those lines. We will have a list of industry partners and companies that will help us. I hope that a year from now we will be talking about a small number of companies that are excellent, that are really trying to innovate and get into the marketplace, and that are helped by people who are truly excellent services providers, coaches, and mentors. I hope we will be talking about partnerships with people and entities that are excellent in their fields, including everybody from UCLA to USC to Caltech to JPL.