Monday, September 25, 2006

Cleantech Venture Forum recap

My colleague at Expansion Capital, Kjartan Jansen, kindly offered to write down his thoughts from the recent Cleantech Venture Forum in NYC. Thanks, KJ!
I had the pleasure of spending the second half of last week at the 14th Cleantech Venture Forum in New York. The group continues to do a terrific job and there was notable excitement among the participants (disclosure: Expansion Capital Partners is an investor in the Cleantech Venture Network).

If I were to summarize the conference in a few sentences, they would be:
  • Cleantech as an investment thesis and asset allocation is now mainstream. Some institutions are still skeptical, but they're becoming rare.
  • More money is coming into the space, but the quality of dealflow being tracked still exceeds this nicely.
When I think hard about it, I could have said the same thing after the previous CTVF in San Francisco. But since the east coast events tend to focus more on the capital markets (i.e. Wall Street) and policy, vs. venture capital on the west coast, we heard from more folks outside the investment community this time. So the change felt more apparent.

Notable appearances included (in no particular order):
  • Andy Rueben (Vice President of Corporate Strategy and Sustainability, Wal-Mart)
  • Vinod Khosla (Khosla Ventures)
  • Andy Karsner (Assistant Secretary for Energy Efficiency and Renewable Energy)
  • Vijay Vaitheeswaran (the Economist)
  • Kevin Walsh (MD, Renewable Energy, GE Energy Financial Services)
  • Joseph Boren and Win Neuger, both from AIG (Joseph from AIG environmental and Win is the CIO of the parent company)
  • Several journalists from major publications and news sources were either covering the conference or on the panel (see agenda)

Most panels seemed well received by the participants, and while I did not have a chance to participate in many of them (as I, like most participants, was in and out of meetings -- networking is always a key benefit of these events), I did sit in on the Vinod, Andy, Vijay fireside chat as well as parts of the bio-fuels panel, to note two.

And conveniently, both sessions covered the same topic: Biofuels (ethanol).
Not too many new thoughts for regular readers of this blog came out of this, but here’s a quick summary of what was discussed in the sessions:

- Ethanol is currently replacing MTBE as a fuel additive; this alone will likely put demand above 7.5B gallons by 2012.

- There is some debate around the energy and environmental balance in ethanol produced using current technologies; there is really no debate around the energy or environmental balance of cellulosic ethanol. Hence interest in earlier stage cellulosic ethanol technologies.

- Still early days for cellulosic ethanol; the cost still needs to come down significantly.

The gamble appears to be whether or not ethanol is adopted more widely than as simply an additive (i.e. E85 – 85% ethanol, 15% gasoline). This is what Khosla believes should happen and is pushing very hard for. He argues for three things:

  • Mandate that 70% of all new cars be “flex-fuel” by 2014
  • Mandate that 10% of gas stations owned by major oil co’s offer E85 in the same time frame
  • Reduce current subsidy of ethanol to $0.25/gallon, but increase it to $0.75/gallon if oil drops to $25/barrel

He also noted that we should have a good indication of where policies regarding this are headed, since all candidates for the ’08 election have to go through the Iowa primaries. And Iowans care a lot about ethanol.

Andy Karsner was expectedly non-committal beyond what we already know through the recent energy bill.

But it should also be noted that if one takes current projections, some argue that there is already enough capacity in place and under construction to meet the projected demand. So not everyone is excited about jumping on new investment opportunities with Biofuels or Ethanol noted in the company name…

Noteworthy was also Andy Rueben’s presentation during the gala dinner, where he practically pleaded with the audience to share our knowledge about products that can help Wal-Mart save money (I.e. better/cheaper/more durable lighting; better/cheaper/more effective indoor control; smaller/more economical packaging etc). Considering the audience generally views Wal-Mart as a strong potential customer for their portfolio companies, my guess is someone will give him a ring…

I also found the quality of presenting companies to be significantly higher than in previous years, another sign of the maturing investment sector. And in keeping with the above commentary, the winner of the most promising presenter award was Targeted Growth – a Biofuels company.

Hope to see everyone at the next CTVF in San Francisco, at the end of February.


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