WegoWise testifies to the US Senate: Government's unique role in fostering entrepreneurial success
A day before we were due to hit the debt ceiling, I got a chance to testify to the US Senate Committee on Small Business and Entrepreneurship about the economic effect of the prolonged government shutdown, and potential default. We have fortunately avoided the catastrophe that would follow a full government default, and we're relieved that government has been reopened. In just a few months, though, we may find ourselves back in the same position. To that end, I'd like to share our perspective on why shutting down the government is so detrimental to the economy, and to entrepreneurs and small businesses specifically.
Government plays a critical role in our nation's entrepreneurial ecosystem. We are often presented with a false dichotomy between public vs. private, when in fact our most successful startups likely wouldn't exist without a stable, proactive federal government. For example:
- Almost all research into the fundamental sciences is government funded. With few exceptions, the private sector only becomes engaged after the potential for commercialization is clear. The internet itself only exists because of government funding, and the most revolutionary changes in our lifetimes, from gene therapy to quantum computation, will depend on government.
- Startups routinely rely on government small business grants. Angel investors and VCs rarely invest in companies without traction, and many of our most intelligent entrepreneurs can't build prototypes of their innovations on their own.
- Government is often the first customer for technology companies. We have been able to demonstrate the value of WegoWise much more clearly to the private sector because of our success with Massachusetts' affordable housing sector.
- The government often allows entire markets to exist by providing consumers with better information. The efficiency sector is a great example of how this can work. Consider energy star certification for appliances or MPG ratings for cars: government action resulted in consumers demanding more efficient products, leading to increased market activity. We believe the local benchmarking ordinances being passed across the country are another example of government's role as a market enabler through information.
- Even those companies that don't rely at all on the public sector for incubating and growing their ideas often do depend on other companies whose existence is predicated on a supportive public sector. Thus, an effect on one company in the chain affects many more who depend upon it.
Shutting down the government is a spectacularly poor idea, no matter what your political affiliations may be. Our 16-day shutdown has been estimated to have cost the United States economy up to $24 billion. The prospect of defaulting on our debt, however, would make even this loss seem paltry. The effect on capital markets and consumers has been very well documented elsewhere. I would, however, like to add to the discussion this bit of perspective:
As an entrepreneur, risk is the bread and butter of the world we live in. You have to be willing to accept a lot of personal and professional risk to start a company, and your investors have to risk that their money may disappear if you've misunderstood the market, if the competitive landscape changes, or if you aren't able to execute. But no entrepreneur or investor should ever have to consider it a risk to rely upon the full faith and credit of the United States of America. Indeed, no American citizen should ever need to question whether our federal government will keep its word and pay its debts.
Video of my initial testimony, along with the longer written statement, is included below. A full video of the 90-minute hearing includes some interesting Q&A.
United States Senate
Committee on Small Business and Entrepreneurship
Testimony of Barun Singh
Founder/ CTO of WegoWise, Inc.
October 15, 2013
Thank you Chairwoman Landrieu, Ranking Member Risch, and members of the committee, for the opportunity to speak with you today.
I am testifying today in my capacity as a Founder and Chief Technology Officer of WegoWise, a Boston-based web startup that is helping to solve one of our nation’s most pressing challenges by improving the efficiency of the buildings in which we live and work. The gains from our work are economic, environmental, and social.
In just over three years, WegoWise has grown from an idea in the minds of the three founders to an industry leader with 22 full-time employees and 10 contractors. Our web-based platform provides utility tracking, analytics and benchmarking services at a very low cost to individuals and organizations across the country. We help property owners and managers identify inefficient buildings and uncover high-return savings opportunities. In doing so, we create new jobs for auditors and contractors, reduce expenses for building owners, and increase tenant comfort. By catalyzing investments that drastically reduce building energy consumption, we are also supporting our nation’s energy independence goals.
We work across a diverse cross-section of the economy. Many of our customers manage market-rate buildings in the private sector. At the same time, we are proud of our contributions toward a more resilient affordable housing sector. For example, in our home state of Massachusetts, we have helped identify over $300M in potential lifetime energy savings within the affordable housing community as part of a statewide efficiency program.
We also help local governments better understand their utility expenses. The City of New Orleans is using WegoWise to track its municipal portfolio, ranging from City Hall to small libraries and fire stations. We are the designated data platform for the Los Angeles Better Buildings Challenge, where a successful initial pilot has encouraged the city to track hundreds more of its municipal buildings.
We are proud participants in the American system of entrepreneurship. It allows a company like ours—seeded with innovative ideas and cultivated by hard work—to thrive, and to transform markets and societies for the better. WegoWise is a mission-driven for-profit enterprise. We believe that business should provide value in a self-sustaining way, and we also believe in doing work that has true meaning. We hope that our model for growing a business that provides multiple layers of returns to society will represent the future of American entrepreneurship. This model of innovation can only exist, however, with a supportive public sector.
As citizens, we are often presented with a false dichotomy between public and private mechanisms for growth and prosperity. In reality, any entrepreneur or investor knows that the support, stability, and regulation provided by government are critical to a growing economy.
The importance of the public sector has been patently manifest in the efficiency industry. Nearly every American household understands the value of buying appliances with an Energy Star label. By creating a single identifiable standard, the federal government provided manufacturers with a clear way to show consumers the impact of their research and development efforts. The government essentially assisted the market in working the way it is meant to work, by presenting consumers with clearer information.
We are seeing the same effect today on a broader scale in the building efficiency market. The EPA’s Portfolio Manager tool provides a mechanism for buildings to receive Energy Star scores. This, in turn, helps developers invest in creating more efficient buildings. Portfolio Manager has also unlocked a mechanism for state and local governments to enact energy benchmarking regulations. We know through experience that benchmarking energy and water use leads to increased investment in building efficiency retrofits. Once again, these government efforts help provide consumers with clearer information so that they can make more informed decisions.
The public sector cannot, and should not, undertake the task of making all of our nation’s buildings energy-efficient. Government can and should, however, help provide capital and consumer markets with better information to catalyze economic activity. This is exactly what the EPA and DOE have been doing within the building efficiency sector.
The current government shutdown has prevented the EPA from offering its Energy Star and Portfolio Manager services. Companies and individuals relying on these tools are being forced to defer decisions regarding building efficiency upgrades. Efficiency upgrades create local jobs that cannot be outsourced. These are the jobs of the new economy, and their potential is enormous. The Rockefeller Foundation and Deutsche Bank estimate that energy retrofits can add $1 trillion to the economy and create 3.3 million job years. The shutdown is directly slowing the growth of this vital sector of our economy.
WegoWise has invested significant resources into creating technology to integrate with Portfolio Manager, and our offerings around this integration represent a limited but growing part of our business. The shutdown has forced us to delay one contract by almost a month, since we are unable to provide the customer with a solution until the EPA tool is active again. We have also been fielding concerned calls from both current and potential customers that may result in further delays.
For companies like ours, the investments we make in product development, marketing, and sales come from a very limited set of resources. We are also especially sensitive to unexpected changes in cash flow. Entrepreneurs and small business owners face tremendous odds, and government has a role to play in fostering success. The current shutdown adds a significant amount of uncertainty to the market, increases our risk, and makes it more difficult for us to grow our businesses.
Thank you for the opportunity to testify in front of you today. I am happy to answer any questions the committee might have.