A “shark tank” panel of private equity investors at the American Society of Civil Engineers innovation awards celebration in June shed light on how they evaluate prospects, what red flags they look for and how innovation is likely to advance in an industry whose customers are dominated by public sector owners predisposed to “say no.”
“We are an engineering community whose customers don’t want to innovate,” said Matthew Garver, CEO of Liberty Street Capital. “How do you overcome your customer? You don’t want to trade off customer service for a little bit of innovation that may or may not pay off. It’s a very tricky conundrum and gets at the heart of how we, as an industry, attempt to innovate.”
Garver suggested that civil engineers need to dialogue with public-sector owners about creating exceptions to some rules to make opportunities for trying new systems and technologies.
Mark Riser, from Morningside Private Investors, began his career as an engineer before going into finance. He suggested that the inertia to innovation actually starts right at home. “I went to the mission statement of the ASCE and it is to deliver value to members, advance the civil engineering profession and protect the health, safety and welfare of the public. Nowhere in that is innovation or entrepreneurialism or risk-taking,” he noted.
Riser acknowledged that the ASCE approach supports a good structured way of thinking, operating and executing “but if you are trying to launch a business into a public sector where you have more stakeholders than you know, its a very tough thing. You need to go in knowing that those industries are designed to say ‘no,’ they are designed to say ‘why take the risk?’ ”
Riser and the other panelists suggest the strategy for entrepreneurs seeking to gain backing for launching innovative companies should include a focus on finding the right investment partner—someone with experience and connections in the target industry, and someone who has a broad set of experiences to share—with lots of scars to show how not to do it. “Those are pretty darn valuable, because if you have never been down this road of taking capital and building a business, it’s easy to stumble,” said Riser.
The investors agreed that one of the biggest red flags was an investment suitor approaching a financier and declaring how much his idea is worth. “I think that really turns off investors,” Garver said.