Friday, July 29, 2005
Wednesday, July 27, 2005
XsunX gets a $10.85M commitment
Wednesday tidbits: Prism Solar, NCSRT, Mid-Atlantic Biodiesel, etc.
- Prism Solar has taken in $400K in seed stage funding from investors including Counter Point Ventures. More details on Prism Solar's founding and plans are available here. The company plans to start production in 2006, for their solar concentrator technology.
- Inverness Capital has invested $4M into filtration vendor NCSRT. Interesting details on valuation in the story as well... NCSRT has membrane technology for use in the pharma and dairy industries.
- Vantage Point Venture Partners' New Energy Capital has led a $10M investment into Mid-Atlantic Biodiesel, as mentioned in today's PE Week Wire. Interesting blurb in the PEWW about cleantech interest in general, worth checking out. Greater Atlantic Bank is providing debt financing for the deal (more details available here for those interested). There is a lot of project finance activity in biodiesel these days, but (with some notable exceptions) less so in VC.
Tuesday, July 26, 2005
"How do I get a job in cleantech?"
"It's clear that the energy sector is ramping up. Do you have any advice for me as I look to transition into the industry?"This question and its many variants are posed quite often... People recognize the momentum that clean technologies, and in particular energy technologies, appear to be gaining, and they want to figure out how to get in.
So I wanted to take the opportunity to pass on the answers I usually give to such job-seekers, in case it's helpful. This advice is pretty basic; there are no one-size-fits-all solutions for job seekers, and luck always plays a huge factor in any job search. But below are my thoughts, limited insights, and good links for those looking for a new job in cleantech:
- Understand that it is not going to be easy to find a job in clean technologies right now. While the industry is growing quickly, interest among job seekers seems to be growing even faster. So plan your strategy accordingly: Cast your net wide, be patient, chase all leads that have potential, and hone your pitch well. You should also make sure that this is really the direction you want to go...
- Know what role you want to play. I often ask people, "are you a strong sales professional, an engineer with specifically relevant training, or a financial professional with a proven track record of driving transactions?" Right now in the industry, most of the available jobs seem to fall pretty clearly into one of these three categories. And yet often the response I get is unsure, vaguely defined, and often described as something along the lines of strategy, high-level marketing or business development. There aren't a lot of these kind of jobs out there. Aside from the initial senior management team, startups need to do three things: designing products, making products, and selling product. Investment shops need one thing: deal-makers. And larger firms are often not any less silo'd. In the future, you will probably see more jobs open up in manufacturing/ operations leadership, but again that requires specific training and experience.
- If you have the means, be willing to work on a contract basis, for little or no compensation, in order to get your foot in the door. Many people I know who have succeeded in breaking into the cleantech industry did so by consulting part-time, or doing projects on spec, and thus proving their capabilities and worth. Also consider: What does this point tell you about likely compensation even for full-time employees in the industry?
- Broaden your horizons beyond energy generation technologies. Many people want to get a job in solar, or fuel cells, or other high-profile industry segments. But many of the best jobs will actually be found in energy efficiency, in clean water technologies, in clean manufacturing, etc.
- If you can, be willing to relocate. Some may disagree, but there isn't strong clustering in clean technologies, at least as compared to other technology industries such as software, and at least not yet. Some areas are better than others (the Bay Area, the Boston area, the Pacific Northwest, to name a few), but if you want to maximize your chances, look wide and far. Some of the best opportunities are in Michigan, Wisconsin, Florida, Arizona, Kansas, etc.
- Network, network, network. Find a local cleantech-related professional networking organization (for example, here in the Bay Area there is the Renewable Energy Business Network - REBN), attend cleantech-related events, and make contact with people that you know who are already involved in the industry and can keep an eye out for opportunities that may fit you. Most jobs and consulting opportunities will come to you through someone else, who happened to know you were looking, and knew your general background and preferred role.
- Watch this space and other sources (some links are provided on the right) to see what companies have recently gotten funding -- they're the ones most likely to be hiring soon.
- Green Dream Jobs
- Renewable Energy Access
- There is a fairly comprehensive list of bay area clean energy firms and organizations at the end of this report (note, opens a pdf)
- There is a list of renewable energy events here.
- Renewable Energy Trust's links to renewable energy jobs.
- AWEA's wind energy employment links.
- Job Reservoir, for jobs in the water industry.
Some recent moves in solar
- Cypress announced that they have firmed up plans for their IPO of SunPower, their high-efficiency silicon-based PV module manufacturing subsidiary. The IPO will now come in the fourth quarter this year. It's an interesting counterpoint to all of the recent thin-film fundings.
- Speaking of thin film solar (here, here, here and here), CleanEdge has passed on a recent announcement that Sharp is opening up a new thin-film solar manufacturing plant. The plant will have capacity to produce 15MW of solar cells. This kind of activity by the big players can be both good and bad for the smaller companies in the space, depending upon their go-to-market and exit strategy...
- Solar concentrator technology appears to be reasserting itself, with the recent news announced at an NREL and Arizona Public Service conference that costs below $3 per peak watt are "imminent". To put that in perspective, with some basic assumptions about solar exposure, etc. in place, $3 per peak watt would equate to power at a cost of around 5 cents per kWh, which would be (very) roughly competitive with wind, coal and natural gas power. However, it's unclear from the press release whether the $3 per peak watt estimate includes installation, balance of plant, storage, etc., or if it's just an estimate of the cost of the concentrator module itself -- in which case the additional costs can make a big difference.
Thursday, July 21, 2005
The biodiesel/ ethanol debate is heating up: What should investors conclude?
A couple of weeks ago, researchers at Cornell and UC-Berkeley released a report in which they concluded that "there is just no energy benefit to using plant biomass for liquid fuel... These strategies are not sustainable." The researchers examined ethanol production from corn, switchgrass and wood biomass, and biodiesel from soybeans and sunflower, and concluded that in every case it requires more fossil fuel-based energy to make the fuel than the fuel itself then carries -- a net negative energy benefit. Thus, the researchers conclude, agriculture-based ethanol doesn't make sense.
Coming as it did in the midst of a legislative battle over an energy bill, in which significant subsidies are at stake, the response (particularly in corn-growing regions) has been predictably swift and forceful. Newspaper and journal editors have attacked the study (reg. req'd for link), ethanol producers have cited other studies that reached different conclusions, and lobbyists and politicians have also had their say.
This study and the ensuing public debate has been confusing for cleantech investors. The cleantech investing strategy is about backing efficient technologies ahead of looming resource trends, and for many this study throws into doubt that ethanol and biodiesel are just such efficient technologies. But the counterarguments are also equally compelling, and it is hard for observers to gain clarity on the issue. Especially as investors have recently backed biodiesel and related technologies, I've heard a lot of questions about the report being asked by both investors already involved in cleantech and those still taking a look at the industry.
This site is not a venue for weighing in on such a debate on either the science or political issues. But there are several things that cleantech investors should keep in mind as they watch the action unfold:
- First and foremost, this is a political debate. While science is being used, both the pro-ethanol and anti-ethanol scientists and pundits who wrote the controversial report and the above linked columns are clearly motivated in some not-insignificant way by a desire to influence the current energy bill efforts. As one of the report's authors (Pimentel) says, "The government spends more than $3 billion a year to subsidize ethanol production when it does not provide a net energy balance or gain, is not a renewable energy source or an economical fuel." Subsidies are clearly uppermost in this researcher's mind. Investors need to view both sides' arguments with a grain of salt given this dynamic.
- While this report was released recently, it is just the latest in a long-running set of similar reports and studies. Here's an example of a 1995 study with some of the same factors and calculations, and these same types of studies have been coming for years before this one, on both sides of the debate. (Here's another link to the same study that purports to juxtapose some of Pimentel's results, for those curious, but I cannot vouch for the trustworthiness of this site, or the source of their figures and comments, so take it as you will). Investors shouldn't think that the recent uproar is a result of significantly new information.
- Regardless of the ultimate truth about the net energy benefit of liquid fuels as derived by those crops and processes covered by the recent report, there are a lot of other potential sources of biomass for biofuels that are very different. The Pimentel report appears to study only a few selected fuels for which crops were specifically raised. However, in recent years investors have backed biodiesel-related startups that use waste food grease, agricultural waste, and even emissions-fed algae as biomass. Biofuels sourced from such wastes may very well be more efficient than fuels from crops grown solely for the purpose. Investors shouldn't draw too many far-reaching conclusions about the use of biofuels in general from these specific studies.
Wednesday, July 20, 2005
- As a follow up on the Seattle Biodiesel post of a couple of days ago, note Dan Primack's interesting column on the subject in his PE Week Wire today.
- Another "introduction to cleantech investing" article, this time by SNL Interactive. Some good quotes by Keith Raab at the Cleantech Venture Network, and an interesting investment criteria checklist from GE Energy Financial Services. A decent overview, although it would have been nice if they had also listed Expansion Capital Partners among those active in the space, of course... A strong list and good article nonetheless.
- Here's an interesting blurb on recent advancements in small-scale wind turbines. As the electricity grid gets more decentralized and distributed generation becomes more prevalent, there will be a lot of technology options at play for small-scale generation. Solar is currently taking off, some are betting heavily on solid oxide fuel cells and similar technologies, microturbines have gotten some attention, and it's always interesting to hear about more such potential technologies such as micro-wind. Put this one in the "on the distant horizon" file...
Timing adoption of the "smart grid"
This often means that promising technologies aimed at utility customers may have a hard time getting initial market traction. No utility wants to be first to try out a new technology. And even when they do move, they are going to test the technology in a series of limited trials and beta tests over a long period of time before they actually start buying the products at any significant scale. Thus, technologies such as "smart grid" systems (automation of the electricity transmission and distribution network, including fault detection, efficiency optimization, etc.), which may get a lot of positive press and investor attention because of their innovativeness and potentially compelling value propositions, can still often take too long to develop for venture investors to make their expected returns. It can be very tough to time the market in such situations.
So it was interesting to see this take on likely adoption paths for the smart grid, by the Center for Smart Energy. They note that the technology adoption cycle for utilities is often 20-25 years, but argue that the smart grid is primed for a rapid adoption phase in the next 5-10 years. They've broken down the systems into several useful categories, and -- to an extent -- provided some thoughts about the timing and pace of adoption for each. One could quibble with some of their timing thoughts (for example, knowing how conservative utilities necessarily are, you might expect information security to be a critical issue earlier in the adoption cycle than CSE indicates), but it's an intriguing summary. And a good introduction to the smart grid for those getting up to speed on the topic in general.
Solicore raises $15M Series C
With $40M raised to date, investors such as Rho and DFJ, Braemar, Firelake Capital, OPG Ventures, Air Products & Chemicals and others are making a big early bet on the company, which could be poised for strong growth if smart cards, RFID and similar applications see rapid adoption.
Monday, July 18, 2005
Power Efficiency Corp. raises $2.4M PIPE
Seattle Biodiesel raises $2M
Friday, July 15, 2005
CMR Fuel Cells raises Series B
Peter Fusaro's thoughts, and potential oil price spikes
In terms of drivers of cleantech investing, Tyler Hamilton's Clean Break page today points out this very interesting press release, describing a recent scenario analysis of oil prices under a moderate disruption of oil supply -- a removal of 3.5M barrels out of the world market of 83M barrels per day, which is not that inconceivable (see this Department of Energy list of historic oil disruptions for examples). As the study concluded, such a scenario could realistically drive gas prices up to $5.74 per gallon, and oil prices up above $150 per barrel. Were that to happen, the impacts for clean technology investments, particularly those targeting energy generation or efficiency, would be tremendous. For anyone looking to make a case for cleantech investing, this is more ammunition: The cleantech investment thesis isn't just a long-horizon assumption of increasing energy prices, it's also the near-term very real possibility of significant energy price spikes.
Wednesday, July 13, 2005
GreenFuel and HydroGen announce raises
- GreenFuel Technologies, which uses algae and industrial emissions to create biofuels, announced a $2.4M bridge financing, as the company works to complete a Series B round. The company also recently brought on a chief executive. New investors provided at least some of the funding; the company had previously been backed by Access Industries and private investors.
- HydroGen, which produces phosphoric acid fuel cell products, announced that they have gone public via the acquisition of a shell company, in the process raising $13.5M from a group of investors including at least one institutional investor. The firm is now trading publicly as OTCBB: CSTC (at least before a likely ticker change). This kind of process for becoming publicly-traded appears to be increasingly popular, but becoming a publicly-traded company so early has its pros and cons.
Monday, July 11, 2005
Monday morning updates
- ZipCar announced they have raised $10M to expand their operations out to the West Coast. The car-share company is projecting $15M in revenues this year, and raised this most recent round from Benchmark Capital (prior funding came largely from angels).
- Speaking of Benchmark, their early investment in Nanosolar is cited in this interesting article on nanotech and solar (something we've written about before). Today's amazing stat: The photovoltaic industry grew 54% last year, according to Strategies Unlimited.
- Cool Clean announced that they raised $3.5M in equity funding from strategic partner Air Water (will provide a link to the announcement when available). The raise reportedly happened a while back, but the announcement came today.
Friday, July 08, 2005
Current Communications raises $100M
Why is this of interest to cleantech investors? Because of the applications it enables. As the "smart grid" and demand-side energy management technologies develop and mature, one consistent obstacle to mass adoption is the lack of a consistent communications media to serve as the backbone of such smart networks. It's difficult for an electric utility to roll out remotely-controlled energy efficiency technologies across an entire neighborhood, for example, when the utility has to access and control those technologies across a hodgepodge of DSL, cable, dial-up, wireless, etc. technologies which the different residents may each be using. Instead, if every home were connected to the internet via BPL (often in addition to their existing broadband connection), it would make the utility's job a lot easier and cheaper.
Many telecom investors, perhaps including Current's new backers, are expecting that BPL will be a "third pipe" into the home that will successfully compete with cable and DSL to provide entertainment and information services. The utility would build the pipe, and then lease the access out to someone like Earthlink, a satellite TV provider, or competitive local exchange carriers (CLECs) for IP telephony. By itself, that is not necessarily a cleantech play.
But if a utility does roll out a BPL network, it enables a lot of cleantech applications: smart metering to help residential and commercial energy efficiency decision-making, remote control of lighting and HVAC, power grid monitoring, power grid automation, indoor air quality monitoring, water usage monitoring and control, etc. (Take a look at how Current describes some of these applications from their perspective) And indeed, many utilities are counting upon that as part of the justification for rolling out BPL networks, for both internal business cases, and justifications to their public utility commissions.
Current Communications' funding may not be a "cleantech" investment per se. But it's an indicator that BPL may finally be getting ready for prime time (there are a surprisingly large amount of utility roll-outs and pilot programs out there already -- note: opens a PDF), and that has implications for other cleantech investment opportunities.
Wednesday, July 06, 2005
Red Herring Q&A with Ira Ehrenpreis
SAM to manage OPG's direct venture portfolio
This follows on October's announcement (note: opens a pdf) that SAM would be taking over the energy venture portfolio of the Caisse de Depot et Placement du Quebec.
Together, these announcements show SAM is increasing their role in cleantech investing in Canada.
Tuesday, July 05, 2005
What's an order of magnitude difference among friends?
- WinterGreen Research released a study which concludes that the market for "fuel cell components" will reach $100B by 2013. Up from an estimated $171M in 2004.
- Freedonia released a study which concludes that "world fuel cell demand" will reach $2.6B by 2009, and $13.6B by 2014.
ReVolt raises $8.5M, Hy-Drive raises C$2.6M
- ReVolt, manufacturer of a rechargeable zinc-air battery that aims to replace lithium-ion batteries, raised 7M euros in VC funding last week. The company, based in Norway, raised the capital from Northzone Ventures, Sofinnova Partners, Techno Venture Management and Viking Ventures.
- Hy-Drive Technologies, an Ontario company which has developed a system for improving internal combustion engine performance (by injecting hydrogen), announced they have raised about C$2.6M via a PIPE transaction.
Business Week: A Bubble in Solar VC?
It seems like the momentum around cleantech investing built visibly even during these past two weeks, with lots of media coverage and new deals.
In the most recent example, Business Week came out July 4th with another article talking about the increased activity in cleantech investing, and clean energy investing in particular. As is becoming the norm, good quotes by familiar faces, and a discussion about rising energy prices as a key driver.
What's interesting and a bit different in this article, however, is the mention at the tail end of the article that -- especially related to solar investments -- "the current rush to invest could create a bubble similar to the one that happened with fuel cells a few years ago."
We're probably a long way from that. A handful of big bets, placed in a very promising and potentially huge market, do not a "bubble" make. But it's a sign that the debate is moving strongly past the "does it even make sense to invest?" question, into the "is it too late to get in?" question. Especially from a broader cleantech perspective, of course, the answer to that latter question is a resounding "no".
Friday, July 01, 2005
Schneider Electric to Buy Juno Lighting
Energy Tech Investor Conference
Yesterday and today I had the pleasure of attending Strategic Research Institutes Energy Tech Investor Conference here in San Francisco along with Expansion Capitals' summer intern Graham Evarts (who is co-contributor to this post). The conference was relatively well attended with around 100 participants yesterday and 75 or so today. The breakdown of investors vs. companies / industry groups / labs / others was pretty even, with investors being slightly better represented.
All in all it was a good conference, with very high quality speakers and presenters. The keynotes and panel topics continue to be timely, and below is a summary of key points.
Bryant Tong of Nth Power gave the introductory remarks to the conference.
- He has seen significant uptick of interest in Enertech since California Treasurer Phil Angelides announced the Green Wave Initiative in February 2004
- Some recent stats:
- $1.2B deployed in the sector in 2000 (high)
- $509M deployed in the sector in 2003
- $520M deployed in the sector in 2004, with average dealsize up 25% to $7.5M
- Now: $1.5-2B are being raised targeted at the sector
- He expects $3-5B to be deployed in the space over the next 2-3 years
- Key drivers (we include some from the panels as well):
- Low cost lasers
- Cheaper, more efficient communications devices
- Improvements in materials sciences
- Desire for energy independence
- An expected dramatic increase in international demand (Chinese GDP grew 9%+ last year)
The “State of the Industry: Challenges, Opportunities and Outlook” panel represented various company stages, including VC (Ira Ehrenpreis of Technology Partners and Tim Woodward of Nth Power), project finance (Ren Plastina of CIT Commercial Finance and Mark Huang of GE Commercial Finance – Technology Lending), equity research (Jarett J. Carson of RBC Capital Markets), and public support (Ken Locklin of Clean Energy Group).
The panelists largely agreed the drivers are in place for continued expansion in the sector. Points noted were a doubling in the price of coal over the last year as well as an upward trend in the cost of natural gas. Generally speaking, there seemed to be consensus among the crowd that the cost of energy and natural resources will continue to increase or flat line, at least for the next 5 years (I heard some participants say privately that they could see scenarios where oil drops down to $20-30 / barrel – what happens if India and/or China experiences a sudden recession for whatever reason?).
Tim noted that the utilities now invest large amounts of cash into their core business (power generation, transmission & distribution), which bodes well for technologies supporting this.
Project finance remains a key challenge. The lenders represented here typically look for $25M+ projects (size matters to lenders too, since underwriting a $500K transaction requires roughly the same amount of work as a $25M transaction), but GE is exploring a template which will allow it to underwrite smaller transactions more readily. Mark Huang also “joked” that GE looks for “no risk, high return” transactions. The takeaway here is the VC’s need to keep lenders in mind during the diligence process and the companies need to be very savvy in presenting their projects.
The panelists were also asked what their evolutionary predictions are for the next decade. Here’s what they said:
- PV at <$1 / Watt
- Large MW Fuel cell projects
- Energy externalities will be priced in
The next panel discussion session attempted to address the question, “Is CleanTech in danger of being overfunded?” While both sides of the coin were represented on this issue, the majority seemed to feel that there will always be promising technology companies that will go hungry for lack of capital. The other interesting point made was that the true constraints facing energy technology investing are a dearth of educated investors interested in CleanTech and a scarcity of qualified entrepreneurs and management teams to lead CleanTech firms. The end result is venture capital firms facing capacity constraints, meaning they don’t have sufficient time to find highly lucrative ground-level opportunities.
In the “Corporations & Cleantech: Pros & Cons” session, everyone agreed there is appetite for new technologies, but that there are still significant hurdles to overcome. According to Marc Aube (or Marubeni) “operational track record is king right now”, which means: don’t expect a shift in the sales cycle anytime soon, it is still a decade (as someone said in a different panel). So make sure to include this in your planning if you strategy is to sell to utilities.
During the panel discussion on “Energy Tech Convergence”, Martin Tobias (of Ignition Partners and Seattle Biodiesel) claimed that there was no software play in Energy Technology that will provide venture-grade returns, and no one challenged him on this. His point was that the degree of customization required for the utility customers prohibits the kind of mass replication needed for success in a software company. But it is not all bad from a VC perspective. Some quick points from the discussion:
- Grid is on average 40 years old, the people maintaining it probably 60
- Parts of the grid perform well, other don’t. The challenge is no one knows which is which until it’s too late – enter remote monitoring and control technologies
- There is a shift happening in the relationship between provider and end user – enter demand response technologies and services
Today started with “Asset Allocation – Rethinking Energy Focused Funds: The Investors’ Perspectives”, and combined public sector (Winston Hickox representing CalPERS) with private sector (Nancy Pfund representing JP Morgan’s Bay Area Equity Fund). Winston was pretty clear that climate change is a significant driver for Cleantech, and in terms of asset allocation, few have made a clearer statement than CalPERS regarding intent to allocate assets to the sectors. While not news, the commitment is significant enough to note here:
$200M of the Private Equity portfolio invested in Cleantech (adding to this, CalSTRS have committed another $250M)
A 20% near term energy efficiency improvement in the buildings that comprise CalPERS’ $20B real estate portfolio
$500M of investments in global public Cleantech equities
Active use of investor governance tools to facilitate change with the portfolio companies
Next came the “Wind, Water & Solar” panel. One question posed was: is solar today where wind was a decade ago? While no one really said so, the answer appears to be yes. Solar is a large opportunity, and continues to grow at double digit rates. And water: with increased prosperity comes a demand for clean water. Population growth in the arid west continues, yet “strangely” the Colorado River has not added capacity to match. Clearly the need for clean water will offer some interesting investment opportunities. John Rockwell (DFJ Alta Terra) offered the following as interesting areas of opportunity: Wastewater treatment, water filtration, and water quality monitoring.
The discussion of “Micro and Portable Power” was fairly straightforward – battery and micro fuel cell technologies have potential, but turning technologies into cost-effective, customer-ready devices takes time. Tom Covington, CEO of Ardica Technologies, believes there will be low levels of consumer adoption of micro fuel cells by 2007-2008, but a major inflection point will not occur until 2010 or beyond. Michelle Rush, VP of Marketing at Medis Technologies, disagreed, saying consumer adoption will proceed more rapidly
“Hydrogen Economy” discussions are always interesting, and seem to fuel the most controversy. This time was no different, yet the topic has been so well covered by Rob in the past (here and here) that there is no need to regurgitate most of it. One interesting point though: when questioned, even those who believe in the future of hydrogen (and have invested to prove it) admitted that hydrogen production will continue to be a source of CO2 emissions (NG is currently the fuel of choice for production) for several decades, until renewable energy sources are efficient enough to fuel the production.
To end, the topic of Biodiesel came up several times, most notably from Martin Tobias (Seattle Biodiesel). Most if not all modern diesel cars can run on biodiesel with no modification. His point: if you can deliver biodiesel to the end user for less than you can deliver conventional diesel, the entire diesel market is open to you.