Revenue Does Not Equal Impact

27 October of 2010 by

An interesting question was posed to us during a recent pitch we gave through the MassChallenge business plan competition.

The judge, looking down at his judging sheet, said, “It says hereyou’re supposed to have a large impact. But you’re only going to bemaking X dollars per year in year 3. That’s not a big impact at all.”Yes, he was amost 90 years old, yes he comes from a high-tech angelbackground, but SERIOUSLY?!  First, this was MassChallenge, where thewhole idea was to get business plans that made a positive impact on theworld. We, as contestants, were supposed to define our impact.

Is it Useful to Define Impact as Revenue?

Sure, you can define impact as revenue. But we’re doing so much morethan that. We’re redefining the way energy is developed. If we’resuccessful (yes, there’s an if, one reason why we were in a businessplan competition) the ramifications will be earth-shaking. Energydevelopment, hell, ANY form of development, from real estate toinfrastructure development, will never be the same. But sorry, thatisn’t what this post is about. If you want to know more about all this“Changing the world” business, check out our website Emergent Energy Group and/or email me.

The real point, the reason my jaw dropped, was that this singularline of thinking still exists in the business and investment community.First, the fact that this guy couldn’t see past our bottom line wasappalling. This was a business plan competition to win 100k to changethe world, not a VC pitch where we were asking for 5MM and promising10x.

Second, we were asking for 100k and showed in our revenue modelpredictions that we expect to need ZERO more dollars from outsideinvestors to make our vision fly.  We’d be operating in almost 40communities by year five, and expect approximately 2MM in local value to be created for each of our communities. This is 2MM in the form of anannuity, over the life of the project. Let’s discount that. Oh right,it’s a community. So 25 year project life, 2MM per year, 50MM percommunity, 40 communities by year 5, hey. That’s impact. That’s 2billion in local value that we’re creating. That’s impact. Sure, ourbalance sheet doesn’t look quite that good, but it looks pretty darngood. We’re doing well by doing good.

And yes, we did spell this out for the angel who asked the question.He just couldn’t see past the Emergent Revenue line on the chart.

I understand that dollars have to make sense in a private company, in an investment, and in business. And trust me, dollars do make a lot ofsense in our model. It just seems that whenever you mention or you showor you even allude to the fact that there’s some positive impact fromwhat you’re doing, people shut down, put their hands up, and mutter tothemselves, “Why can’t you just be an online pet food deliverycompany?!” and “What about the revenue?!”  …we all know how that turnedout…

There’s also the Thunder Lizard argument, which I may write aboutnext, which is a very compelling case to invest in the lean, fast,game-changing idea touting start ups instead of the “here’s the sectionof the market pie I’ll be taking by year 5? start ups.

Oh, and go read about L3C’s.

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