Monday, May 09, 2005

"Ecomagination": What does it mean for venture investors?

Jeffrey Immelt's "Ecomagination" announcement this morning is getting a lot of attention in the clean technology world, for good reason. Given GE's stature, track record and resources, the news that they will be more than doubling their R&D commitment to clean technologies is a big deal, and should lead to new breakthroughs.

So that's encouraging simply from a technology perspective. But what does this specifically mean for venture investors interested in clean technologies, since GE isn't exactly at a venture stage of development? Fortunately, it's also good news here too.
  1. This is a big legitimizer for clean technology markets. It will draw the attention of potential customers, GE's competitors and other large companies, and the overall investment community. The buzz gets louder.
  2. GE is well-known to be highly acquisitive. This could mean more successful exits via trade sale for cleantech venture investments.
  3. GE is also known for spinning out technologies that look promising but don't have a home within GE. This could come out of their increased R&D effort, opening up new businesses and thus new investment opportunities for VCs.
  4. To the extent that innovations coming out of GE enable other innovations from outside of GE to take hold (for example, how improved battery performance could enable other clean technologies, as previously discussed), this could launch a bit of a virtuous circle in clean technology innovation.
GE had already been charging into clean technology (particularly in energy and water) before this announcement, so that's not new news. But the doubling of R&D spending is a big deal, and is great news today for cleantech venture investors.

[Update: Looking back at the recently released clean technology exit study (note: opens a pdf), it reminded me that total VC cleantech investing has been about $1-1.5B annually recently -- about as much as GE alone is now going to be spending each year on cleantech R&D. An indicator both of how big a deal the GE announcement is... but also of how underinvested the space is from a VC perspective.]

[Further update: Joel Makower's got a great post on his perspective on GE's announcement, worth checking out.]


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