Thursday, September 21, 2006

"It's been a very interesting few days"

There has been a lot of cleantech investing news over the last couple of days:

The ongoing Cleantech Venture Forum (I couldn't be there, but my colleague Kjartan will kindly be "guest blogging" on it; for disclosure, my firm is a sponsor) has prompted a lot of attention and announcements in the industry. First off, the revised announcement by the Cleantech Venture Network that they are forecasting cleantech VC investment totals will be $10B from 2006-2009 in North America (compared with $6.4B from 2003-2006). This at the same time that major institutional investors are saying they've upped their allocations for such technologies, and Kleiner Perkins are saying they're upping their allocation to "greentech" to $200mm.

Along with these announcements, the Chief Investment Officer at AIG told the CTVF audience that investment decisions at the firm are being made with the strong likelihood of a carbon tax in mind. And there's also been Richard Branson's little $3B announcement today, following up on the earlier mention of $400m being devoted to Virgin Fuels.

Of course, with all of this activity comes the inevitable "is it a bubble yet?" question. We've discussed this before. Suffice to say that a) yes, cleantech is now a venture capital darling, and everyone is looking to play; b) this means that certain sectors are starting to feel "bought up", with some deals being done at eyebrow-raising valuations (often really pre-revenue mezz rounds, and not true venture deals); but c) other sectors remain surprisingly unexamined.

As a judge on several categories in the California Clean Tech Open (big winners to be announced on Tuesday, and as disclosure, my firm is a sponsor), I can attest to this. The "Renewables" category was flooded with applicants... the "Energy Efficiency" category also had a fair amount of activity, but much less... and the "Water Management" category was surprisingly light in terms of both applicants and VCs volunteering to be judges. Granted, clean water technology remains an investment sector that is less-developed than solar and biofuels, or even energy efficiency. But it remains a huge, fast-growing sector with lots of big unmet needs that many innovative startups are targeting with scalable technology solutions. So to point out that the investment climate for solar technologies is "not a sustainable model" (not to pick on Joel, but they used his quote) misses the bigger point that there remain big technology sectors under the "Cleantech" investment thesis umbrella that are relatively untapped.

One of the theses of Cleantech Investing is that the investor interest being focused on solar and biofuels right now will eventually dig deeper into the other intriguing areas of technology-enabled energy efficiency (which will really get interest once carbon credits become more fungible), energy storage, water treatment, water management, advanced manufacturing, materials efficiency, etc.

Plus, even in the solar sector, good investment opportunities remain to be found. The amount of technological discovery being done in the sector is impressive, and there are big pain points throughout the value chain (not just in the PV cells themselves). It's a very big, fast-growing market. But these are all topics for another day.

Other announcements and news:
  • Marrone Organic Innovations announced a seed round of $550k. The company is developing weed control solutions for organic agriculture applications; the CEO, Pam Marrone, had previously founded AgraQuest. Seed round financers were not disclosed.


Blogger Patrick Stanton said...

Nice post, Rob.

At the GCEP symposium at Stanford this week, John Ziagos of LLNL unveiled an excellent slide showing global energy production to global energy consumption today and predicted for 2050.

He broke out source flows from renewables, petroleum, natural gas, and coal going to residential, commercial, industrial, and transportation uses.

Coal is dominant today (except for powering transportation) and it's going to be dominant in 45 years.

Doug Ogden, based in China at Energy Foundation, followed John to show us satellite images of air borne pollutants (primarily from coal fired power plants) drifting over the Pacific to our fair Penninsula. He made the statement that 1/3 of the air pollutants in the Bay Area already come from China.

Put these trends together, and I think innovation in cleaner coal power generation is perhaps the biggest opportunity for the clean tech sector. And I bet that the innovaters in this technology are going to come first from China because they won't be able to breathe, otherwise.

Necessity is the mother of invention.

11:44 PM  

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