Academic journal article Journal of the International Academy for Case Studies

Startup Production Planning under Funding Constraints

Academic journal article Journal of the International Academy for Case Studies

Startup Production Planning under Funding Constraints

Article excerpt

THE NEW VENTURE

In 1915, the British scientist Frederick W. Lanchester provided scientific evidence that the maximum kinetic energy in wind that can be extracted in open flow, independent of the design of the turbine extracting the energy, is 59.3%. Published scientific papers indicate that the German physicist Albert Betz came to the exact same conclusion four years later in 1919. A year after Betz's publication, research published by Nikolay Yegorovich Zhukovsky, a Russian scientist and the founding father of modern aero- and hydro-dynamics, reported exactly the same results. The 59.3% turbine maximum kinetic wind energy extraction conclusion came to be known as Betz's Law, and the percent limit became known as the Betz coefficient.

In his capacity as an aeronautical engineer and Vice President of the Energy Management Division at a major U.S. wind turbine manufacturer, Sal Turner knew of and understood the implications of Betz's Law. The maximum wind power extraction efficiency of his company's turbines is around 35% which is at the high end of the efficiency scale for current commercially available wind turbines.

Sal position provided him with a rewarding platform to learn about the renewable energy industry and with the opportunity to travel the world observing innovations in sustainable energy products and practices. In his travels he spoke with entrepreneurial scientists who were passionate about their innovations and who had built businesses to provide their products and services to the world. Over time, he discovered that he wanted to be one of those entrepreneurs.

THE OPPORTUNITY

Sal had just attended a conference on wind power held in Beijing and sponsored by Greenpeace International and the Global Wind Energy Council. At the conference he learned that economic experts in the industry are forecasting that wind power could supply up to 12% of global electricity by 2020, creating 1.4 million new jobs and reducing CO2 emissions by more than 1.5 billion tons per year, more than five times today's level. By 2030, wind power could provide more than 20% of global electricity supply.

Based on those forecasts he concluded that the success of a new venture in the wind energy industry sector would be based on three key elements: (1) a compelling, innovative product idea, (2) a team with highly-skilled and diverse talents to build a business model around that idea, and (3) significant funding. He had neither of the first two. As for the third, he knew that venture capitalists are reluctant to invest in a venture at its inception, especially in the very speculative sustainable energy industry. So his venture could get off the ground only if a founding team could be organized and he funds the venture himself.

His professional career has been lucrative for him, with escalating salaries and generous bonuses. With his savings and an inheritance from his grandfather, also an entrepreneur, Sal had $8 million in the bank and was willing to invest half of it in his new venture.

Further thinking had him realize that he would not be able to attract to his venture highly-talented people who had secure and lucrative positions elsewhere unless he demonstrated that he was willing to take the risk of forgoing his own position. He also did not want to struggle with the ethical issues of pursuing a new venture while still working at his current company, although many entrepreneurs have successfully and ethically navigated through those issues. So he gave his four-week notice. A month later, at the age of thirty-eight, he was unemployed ... but he was also about to become an entrepreneur.

He wanted his new venture to be special, with a product that was able to harness the force of wind and capture its inherent energy. He began planning for his new venture. His first decision was to name it WindForce.

Sal's preliminary business idea for WindForce was to design, manufacture, and market a new and innovative wind turbine. …

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