By: Karthik Meda; Published October 5, 2009
Balduin Hesse is the Co-founder and CEO of Frontier Renewables, which is focused on developing, building and operating utility scale solar PV plants in Germany and the US. Before Frontier, Balduin oversaw coverage of equity markets for Bloomberg News in Europe, the Middle East and Africa. He managed 27 journalists in 17 bureaus covering the latest in the region’s stock markets. Balduin received his MBA from INSEAD in December 2008. During his time at INSEAD, he worked as a summer associate for Merrill Lynch & Co. in London, where he did extensive research on the solar PV and solar thermal industries. Balduin also has an MS in Financial Journalism from Northwestern University and a BA in History from Duke University.
How was Frontier Renewables started?
While the US has immense solar energy potential, it is still a growing market. Many of the government incentives and legal aspects are still being worked out. So, we decided to focus on the German market first, where the government incentives and legal structure for renewable energy are more established. We just secured project financing to construct a 1.1 MW solar plant in Germany and plan to build a total of 2.1 MW in the next 3-4 months. Our goal for the next year is to do at least three times that in Germany and 8 MW in the US, while our long term goal is to do 100 MW over the next 5 years. So it’s definitely an exciting, fun and extremely busy time for us at Frontier Renewables these days!
How does Frontier Renewables differentiate itself from other renewable energy project developers?
Frontier as I see it has three distinct points of differentiation. First, we are a vertically integrated downstream firm in that we design, engineer, build, finance and operate the plants. We are not a classic developer with the aim to build to sell. We aim to be an independent power provider or mid-sized utility. Second, our engineering and architectural background puts us in a unique position to do rooftop installations. In some cases, plants will be placed on buildings that we have built and designed ourselves. Third and probably most important, we have a very experienced and talented team with extensive experience in engineering, project finance, law and business operations. This invaluable experience is the cornerstone of what I believe will help us succeed.
Clean technology and specifically Renewable Energy are areas that are receiving a lot of attention these days. How is starting a company in this area different from doing a start-up in other areas?
Starting a company in the downstream part of the renewable energy value chain is challenging, to say the least. Besides being capital intensive, it necessitates a balancing of many variables that ultimately have to come together for projects to succeed. Additionally, this area depends heavily on government regulations at the moment, so it’s important to have a solid understanding of the regulatory, political and legal framework of the industry. And every country you operate in is different. Finally, the industry is experiencing rapid technological change; for instance in the PV market, it is difficult to tell whether thin film or crystalline-based technologies will ultimately succeed and how price trends will develop.
It is hard enough to raise capital for start-ups and you mentioned that this industry is even more capital intensive. So, what advice do you have for aspiring entrepreneurs who are looking to raise capital?
We have survived so far on a lot of hard work and some personal capital, but we are hoping to get private equity or venture capital backing once we complete our first two German projects and build a track record.
Raising capital is a tough process and I don’t think that there are any formulas for doing this. Fundraising can be a “chicken and egg” problem, because investors want to see that you’ve built plants before committing capital, but you need capital before you can build plants! So, my advice would be to garner as much personal, including friends and family, capital as you can and make it last. The rest will have to come in sweat equity, at least in the beginning.
When and why did you decide that you wanted to be an entrepreneur?
I spent over six years in varying responsibilities at Bloomberg. Toward the end, I felt like I needed a break from the corporate world. So I decided that I wanted a change and also to do something entrepreneurial, because building a new company gives you the added feeling of having created something unique from scratch. So, I decided to go to business school to round out my business skills and expand my network beyond finance and journalism. INSEAD really exposed me to a diverse set of classmates and great professors. Additionally, the current economic crisis made the opportunity cost of starting something new pretty small, which further convinced me that now is as good a time as any to start this venture. So here I am a year later with a great management team and a vast target market for us to take advantage of!
How did you go about building this experienced and accomplished team?
Building a great team is a very important part of entrepreneurship. To think you can do it on your own would be foolhardy. Make sure you know your market and what skill sets you need to have within your team to effectively execute in that market. The renewable energy industry requires a broad range of skill sets from financial modeling to legal expertise to engineering know-how to negotiation experience. So, I would be cautious about having just MBAs on the team; make sure you have deep industry experience or partner with people who have it.
Finally, what are the two most important pieces advice you would give to any entrepreneur?
I cannot sufficiently emphasize the importance of the team – spend a lot of time and energy in finding people who believe in your idea and make sure you can work well with them. Don’t think that you can do everything on your own; MBAs can fall into this trap easily! And most importantly, go for it. Don’t wait for things to happen, make them happen.
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