When Sarah Kearney finished her graduate degree from the MIT Engineering Systems Division in August 2012, she had a difficult decision to make: take the safe, stable job she had been offered or branch out on her own to follow her passion, confront an important challenge for energy innovation, and put her MIT research into practice. Kearney chose the latter. Her passion led her to found a new charitable organization, PRIME, which stands for Program-Related Investment Makers of Energy. PRIME officially incorporated in January 2014.
Kearney attributes the confidence to make this risky decision and start her own organization to the financial and moral support she received while presenting at the inaugural Women in Clean Energy symposium on September 28, 2012. At the symposium – a pillar of the U.S. Clean Energy Education and Empowerment (C3E) program organized by the U.S. Department of Energy (DOE) and the MIT Energy Initiative (MITEI) – Kearney received $1,000 in prize money for winning the poster competition. That $1,000 helped to pay one more month of Kearney’s groceries, bought her some time to start PRIME, and has since translated into $165,000 raised to date to support the formation of PRIME.
But Kearney gained a lot more than a $1,000 check from C3E. She gained the empowerment she needed to make that initial courageous choice to start PRIME.
“C3E for me is like a warm house on a cold day,” Kearney says. “Even though I don’t see the women who attend the symposiums frequently, it’s wonderful to know that they’re out there. They inspire me.”
Discovering the challenge
Kearney’s passion for confronting energy challenges began long before the first C3E symposium, and even long before she went to MIT to receive her graduate degree. Fresh out of her undergraduate program at the University of Virginia, she was hired by MIT alum and self-made entrepreneur Arunas Chesonis to help form his family foundation.
“[Arunas and Pam Chesonis] care very deeply about energy and the environment and about empowering young people to go out and change the world,” Kearney says.
Before becoming one of those young people herself, Kearney was devoted to helping the Chesonis family help others who, with a little boost, could make a big difference in the energy arena. She moved to the Boston area to help the Chesonis Foundation make grants to PhD students and postdoctoral fellows doing energy research – grants that also spun into Chesonis’s angel investments in startups based on his passion for translating basic science into real-world impact.
Kearney served as Executive Director and Trustee of the Chesonis Foundation from 2007 to 2010. During that time, the public and private funding pools for energy research were changing dramatically – and they still are. Public funding started appearing in new packages, such as DOE’s Advanced Research Projects Agency-Energy (ARPA-E) program. But just as ARPA-E’s grantees launched forward, private venture capital funding shifted away from capital-intensive, long-term enterprises in energy.
“I love Facebook, Instagram, Twitter, and Pinterest just as much as any iPhone-toting American female. I also love that America is built on the backbone of entrepreneurship of all types,” says Kearney. “But I believe it’s a serious problem that our technology startups that hold the most promise for social benefit, such as transformational energy innovation, are the most difficult to fit into the standard venture capital structure.”
To learn how to address this issue with thoughtful financial engineering, Kearney applied to become a student in the Technology & Policy Program at MIT. There, she worked with Fiona Murray, Alvin J. Siteman (1948) Professor of Entrepreneurship at the Sloan School of Management and Faculty Director of the Trust Center for MIT Entrepreneurship. Through her research efforts with Murray, Kearney discovered that there is a financial vehicle that exists for private and corporate foundations to fund capital-intensive startups that hold promise for solving social problems – Program Related Investments (PRIs).
Every year foundations have to give away a portion of their assets to charitable causes. Most of that money flows into public charities. But foundations can make PRIs into for-profit companies as long as the primary purpose of the investment is charitable and would not have been made otherwise because of the long time horizon, low returns, or high risk. Unfortunately, Kearney’s research into PRIs unveiled that they are poorly understood and vastly underused. Kearney sought to change that.
“In the 20th century, the forefathers of venture capital repackaged money into a new asset class to support new, high-growth businesses,” Kearney says. “My MIT thesis suggested that it’s time to do the same thing for a different type of company that may not return capital in seven years, but whose product or service is critical to our society’s long-term future.”
Venturing on her own
After finishing her degree, Kearney – with the help of Chesonis and four other family foundations – sought to learn what was preventing the foundation community from making PRIs to energy-related causes. By meeting with many individuals from different types of foundations, she discovered major barriers: primarliy cultural and educational. Kearney formed PRIME to eliminate those barriers so that PRI-making to energy innovation and deployment will be easier for philanthropists and more effective in the context of other public and private stakeholders. PRIME’s 2014 goals are three-fold: 1) lower the barriers to climate-related PRI-making for all philanthropists, 2) convene and educate the philanthropic community about the need for PRI capital in the energy sector, and 3) demonstrate the concept by funding at least one game-changing energy company with PRIs.
“By working with PRIME, foundations can fund the world-changing companies of tomorrow, enjoy best-in-class investment expertise without footing the bill alone, address climate change directly, and get their grants back to redeploy,” Kearney says.
PRIME’s first area of focus is energy innovation – from grid-capacity energy storage and carbon-free baseload power to conflict-free transportation fuels and ultra-high-efficiency energy harvesting from renewable sources. But Kearney hopes that energy is just the beginning. Because the organization has a broad charitable mandate to further science, it could help develop funding to bridge market failures in water, agriculture, health, or other areas of science and engineering innovation that are associated with charitable pursuits, but are a poor fit with existing risk capital structures.
“A large number of mentors, advisors, experts, and personal supporters has come together to not only give me courage, but also convince me that this idea is worthy of the risks I’ve taken,” Kearney says. “The gap that we’re addressing is not going anywhere. It’s only going to get worse if we don’t confront it with fact-based analysis and thoughtful action. The people I’ve met along the way, facilitated in part by MITEI and C3E, have taught me this. For that, I’m very grateful.”