As the climate change and energy policy bills meander their waythrough the U.S. Congress, interest in when, where and how to build arenewable energy future is still up for debate—and funding.
And, a lively debate it is. In an event organized by Applied Ventures,Cooley and the Silicon Valley Association of Startup Entrepreneurs(SVASE), I moderated some Silicon Valley venture investors,entrepreneurs and advisors as they chimed in on “What is the future ofCleantech?”
(L to R) Chris Moran, vice president, general manager, AppliedVentures, Wayne Hedden, co-leader Cleantech Practice,PricewaterhouseCoopers, Gordon K. Ho, partner, Cooley Godward KronishLLP, Alex Kinnier, partner, Khosla Ventures, Dan Rubin, generalpartner, Alloy Ventures, Dylan Steeg, director, Intel Capital.
Panelists began by addressing the question, are all the BIGcleantech ideas already funded? Most of the participants agreed thatopportunities still abound. According to Alex Kinnier, “The pace ofinnovation and ideas has not changed, but companies need to be morethoughtful to de-risk and partner early for results.” Dylan Steegagreed, pointing out that there are lots of start-ups now targetingcapital efficient plays using software for smart grid, automation,analytics and enabled services—all aimed at making processes and energyuse more efficient. And as Gordon Ho observed, “Someone will figure outthe technology—and lots of companies will benefit from downstreamactivities.” Dan Rubin added that there are supporting plays as some ofthese companies get off the ground and scale. Component and materialscompanies will be the beneficiaries.
What about the influence of government policies? Wayne Heddenadvised, “Don’t depend only on government money or stimulus—we’reseeing a lot more partnerships between start-ups and big companies,like the recent BrightSource partnership with Bechtel. We’re alsoseeing start-ups more plugged into policies of various states andgovernments.” And, warned Alex Kinnier, “We recently lost a deal to thegovernment—an entrepreneur chose to take money from the governmentinstead,” he also cautioned that the government process could addsignificant delay and that no checks have been issued yet from theAdvanced Research Projects Agency—Energy (ARPA-E).”The panel said that the best plays are those where the government moneyisn’t necessary to the venture’s success, but could accelerate acompany’s efforts if government monies became available.
Another topic that sparked a lively debate was the tough financingenvironment the cleantech industry and the world is facing. Currentinvestor’s roles can’t be underestimated according to Alex Kinnier,“Banks are looking at which investors are involved in a company as oneof their decision points for future funding.” Dan Rubin advised, “Wewant to see companies get to breakeven without depending on stimulusmoney or expecting oil to be higher than $50 per barrel. All-in-all,cleantech start-ups face market, technology and policy risks, and thekey is to identify the right time to invest.” Dylan Steeg added, “Thebar has been raised significantly for companies to raise capital—andwe’re seeing a lot of innovation all over the world, which also must beacknowledged.”
Cleantech start-ups face many hurdles, and exit strategies should beconsidered early on. The panel was hopeful that the A123 Systems IPO(initial public offering) would open doors for more IPOs (A123 hassince IPO’d with a 50% boost on its first day of trading), butcautioned that IPO should no longer be the ‘holy grail’ or only exitfor start-ups — primarily due to the financial reporting compliancerequirements that make the IPO track extremely costly—companies shouldconsider merger and acquisition instead, looking for opportunities topartner with the right strategic partners early on.
Overall the discussion was unanimously optimistic on the future ofcleantech and cleantech investing as panelists expect more companies tolook at the issue of carbon, oil and energy independence.