Tuesday, January 15, 2008

The Brother-in-law Test

Brad was very interested in hearing about my progress with homebrewing, and we discussed the possible reasons why biodiesel and biofuels generally weren't widely available here in the Valley. Lyle has an entire chapter in his book about the 'lure of the producer', how there is a predictable arc of discovery, enthusiasm, development and then the desire to commercialize. Some of our initial discussions were centered on a traditional start-up model, the idea of raising money to make and sell biodiesel and subsequently get rich. Why not?

So I made an appointment to talk to my brother-in-law, Luke, who founded a technology company here in Scottsdale, My Computer Works. One morning in December I made my way over to his offices, and once we settled into our chairs he asked me a question: how do you plan to make money? It's a legitimate question. He grabbed his laptop and we started putting together a pro forma profit/loss spreadsheet. It quickly became clear, based on our number WAGs, that feedstock costs were the key component in any discussion about biodiesel profitability. WVO is certainly the most attractive feedstock from that perspective.

But crunching some numbers and doing some hard thinking made me realize something else. There are tangible benefits from fostering and encouraging a local biofuels infrastructure, even if the immediate commercial opportunities are unclear. Brad's initial interest in my 'biodiesel project' was from a policy and legal perspective. Perhaps that was where the most immediate impact could be generated.

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