Ethan Carlson passed up Wall Street to help a New Haven company develop a “magic black box” that purifies wastewater while generating electricity—and to be the first of a fleet of idealistic young people headed here to work with start-ups.
Carlson (pictured) is a first-year fellow with Venture For America (VFA), a new national not-for-profit that places recent college grads into jobs with start-up companies in Detroit, Providence, Baltimore, Las Vegas, New Orleans, and—for one lucky fellow so far—New Haven.
More are on their way next year.
The organization is designed to train a new generation of entrepreneurs while helping to “revitalize” local industry with an injection of brainy young adults in the chosen cities. Like Teach For America (TFA)—the program that places idealistic, energetic young teachers into needy schools—VFA fellows spend two years working to build their host companies. In the process, they learn to be “job creators” and help create a new culture of risk-taking entrepreneurship, according to VFA’s Mike Tarullo.
After completing a five-week training course this summer at Brown University, the first batch of 40 VFA fellows is now installed with selected start-ups in six cities. New Haven is the only city to have only one fellow, Carlson. He’s the vanguard of what will be a group of about 10 VFA fellows coming to the city next year.
Carlson is working for a new company called Red Ox, which is looking to commercialize a Yale invention called an Electrochemical Desalination Cell (EDC). Red Ox aims to make its fortune by getting the mining industry to use the technology to purify wastewater.
By joining VFA and Red Ox, Carlson, who graduated this year from Yale with a degree in mechanical engineering, passed up a chance to make a bundle by going into finance or consulting. Companies participating in VFA agree to pay the fellows around $35,000 per year. “It’s half as much money for 10 times as much fun,” Carlson explained.
That’s the kind of calculus that VFA is hoping more and more talented college grads make—skip the lucrative Wall Street gig and be a part of building a new company from the ground up.
Tarullo, VFA’s director of corporate development, explained the concept. “Too often, people from places like Yale flow into banking or consulting or law,” he said. Very few graduates are joining “growth companies,” the small businesses that are responsible for most of the economy’s job creation.
VFA aims to change that dynamic, to create a “brightly lit path to entrepreneurship” so that businesses can grow and add jobs, and so that a new army of trained entrepreneurs can go on to start more businesses, Tarullo said.
The organization was created by Andrew Yang, an Ivy-League-trained lawyer who became disillusioned with the practice of law and enamored with the excitement of entrepreneurialism. He made it as the CEO of a New York test prep company that was bought by Kaplan. Then he started looking around and saw that “too many smart people who are not sure what they want to do” are going into consulting and finance, rather than starting their own projects, Tarullo said. Yang started VFA to try to change that. The White House named Yang a “Champion of Change” in 2011 for creating VFA.
The organization is a non-profit funded by donations from foundations, individuals, and corporations, Tarullo said.
Fellows are recruited in their senior year of college, receive five weeks of training over the summer, and then are paired with start-ups that match their interests.
“We’re looking for cities that have emerging entrepreneurial ecosystems,” he said. The chosen cities also have low costs of living and “interesting industries,” he said.
With the exception of Carlson, the fellows are clustered together in their cities in groups of 5 to 15; they generally live together, Tarullo said.
“We see Ethan as a beachhead,” Tarullo said. “Provided we can get together the resources,” VFA will be in New Haven full force in 2013.
“It Could Be Huge”
As Carlson, VFA’s 22-year-old “beachhead,” was finishing up his time at Yale last year, he was looking at going into consulting and finance, “all the normal Yale things to do.” Then he saw a presentation on VFA, and changed his mind. The mission of building jobs and helping communities through entrepreneurship appealed to him.
He realized he wanted the opportunity to really build something, rather than go into consulting and be “making paper all day.”
Carlson, who’s from the tiny town of Plainview, Minn., applied and was accepted as a VFA fellow, but then had trouble finding a start-up to match his interests. “My space is energy,” he said. But the economy has been tough on energy companies; a lot of start-ups have gone under, Carlson said.
As other fellows found their assignments—Josh Levine, a New Havener and Wesleyan grad, ended up as a fellow in Las Vegas—Carlson’s matching process dragged on. Then two other recent Yale grads asked him to join their energy start-up, Red Ox. Carlson took the opportunity and got it approved as a VFA fellowship.
Carlson is now the third Red Ox employee, working out of a business incubator space run by the Yale Entrepreneurial Institute (YEI) on Whitney Avenue. He’s working on a variety of things for the company: helping to develop its first prototype, doing some accounting, building the website.
Red Ox (the name is a chemistry pun) is still in its early stages, trying to raise money to get a lab space and work the kinks out of its proprietary cell technology. At a white board in a YEI meeting room, Carlson sketched out the details of Red Ox’s newly patented breakthrough.
The company is developing an “electrochemical cell,” sort of like a fuel cell. The inputs are hydrogen, oxygen, carbon dioxide, and salt water. Through a series of chemical reactions, the water is desalinated and electricity is produced, along with two chemicals, hydrochloric acid and sodium bicarbonate, both of which are “valuable on the commodities market,” Carlson said.
The technology can be used by anyone who needs to desalinate water, Carlson said. Red Ox initially looked at applying the process to municipal drinking water, but the permitting process for that kind of work can be 10 years long—eons in start-up time.
Red Ox is now aiming to make its mark on the mining industry. The Earth’s crust is “saturated with salt water” below a certain depth, Carlson said. That water comes up during drilling for oil and gas and needs to be disposed of.
“They would pay us to take their water,” Carlson said. Red Ox would desalinate the water and sell the electricity and chemicals generated.
“It could be huge,” he said. “Especially as the technology matures and we get an economy of scale.”
Carlson said Red Ox has encountered some skepticism. “It sounds like a magic black box,” he said. “But the science is there. The chemistry works. The thermodynamics work.”
The company’s next step is to get into the lab and work the last kinks out of the process, to win the confidence of investors. Carlson said the company has a line on a lab space on Willow Street, where they’ll move to soon.
“An Easy On-Ramp”
“I hope to start my own energy company someday. That’s the long-term goal. This is a chance to learn all of what it takes to do so without leveraging any of my own risk or capital,” Carlson said. “And it’s a lot of fun. There’s no one looking over our shoulder.”
For the sake of his future career, Carlson said he hopes “VFA becomes a credential like TFA”—a recognized resume line with certain cachet. “I hope VFA gets to that point.”
All it would take to put VFA on the map is for one fellow to get a multimillion-dollar idea and start a hot new company post-fellowship, Carlson said.
He said he’s also excited about VFA’s potential to be a positive economic—and even cultural—force for the country. “The way to really create jobs is to support start-ups,” Carlson said. “The public sector is mediocre at doing it.”
VFA is working to create a “culture of creating jobs,” Carlson said.
“I really hope New Haven can embrace VFA when they land on the ground,” Carlson said. An influx of VFA fellows will only “deepen” New Haven’s “community of entrepreneurs.”
Miles Lasater (at right in photo), the New Haven entrepreneur behind Higher One, the most successful of recent local start-ups, said he agrees that VFA fellows could add more “momentum” to the city’s burgeoning entrepreneur scene. He wrote a blog post about it last November.
Lasater said he contacted VFA months ago after hearing about the organization’s mission. “When I first heard about it I was pretty excited, and as I learned more and met the team I got even more excited.”
“I invited them to consider New Haven as a town where they send fellows,” Lasater said. “I like the idea of providing an easy on-ramp for people people who want to be involved in a start-up.”
VFA can lend talented college grads some “program legitimacy” and provide “a little bit of social cover for their parents and friends who wonder why they’re moving somewhere and joining a company no one has ever heard about,” Lasater said.