Can Clean Tech Beget Greenbacks?
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HALF MOON BAY, Calif. -- To investment banker Paul Deninger, the opportunity for so-called "clean tech" to become the next mega-industry is easy to see. He puts the logic this way:
"When PCs became more powerful we didn't need fewer of them, we wanted more," he said. "We found new ways to use personal computers and solve things." Now, he adds, the demand for energy is more, not less. Deninger, speaking at the AlwaysOn Venture Summit this week, said he foresees an "energy tsunami" of innovative products and companies focused on clean tech or green energy solutions.
Deninger and other speakers discussed the financial challenges and other issues blocking energy innovations getting to market faster. "Fear has to go out of the market and confidence [has to] return. That takes time," said Deninger, vice chairman, at Jefferies & Co".
He also complained that government regulations are often a moving target that make it tough for companies to know if their innovations will pass legal muster. "Even if we had crappy regulations, we need consistency to know what we can invest in," he said.
The emerging clean tech industry encompasses many sectors that would span solar, wind, geothermal and more approaches to energy production. And that means there will be a lot of successful players as well as failures. "We saw in tech, markets in the billions of dollars," said Mark Zanoli, a managing director at JP Morgan. "With energy, we're talking about a trillion dollar opportunity."
And in some ways, clean tech reminded the speakers here of an earlier tech industry.
"It's like the tech market used to be, focused on mission," said Deninger. "I think this is very healthy. Folks focused on mission can be capital efficient, it doesn't cost as much to hire them. They really want to make a difference."
Steve Jurvetson, a partner in Draper Fisher Jurvetson, agreed. His company has invested in 62 clean tech companies since 2001. "We've seen some companies get really scrappy with equipment," he said. "One company found it could do all it's R&D with leftover aquarium supplies and shaved $20 million from their R&D budget."
In the short term, financing in the current recession is an issue. "There is a bridge to cross for many clean tech companies today, especially if they need hundreds of millions of dollars to support their business," said Erik Straser a general partner with Mohr Davidow Ventures. Beyond the current financial crisis, Straser said there are larger structural issues in the venture capital and investment banking industry that need to be fixed. "The market needs to be restructured for VCs to invest," he said.
But Jurvetson called the economic downturn "a hiccup on the financing side. The long term vectors are all positive and gets us excited about the next five to ten years."
The third big industry?
Deninger said there's already been a total of $4 billion in clean tech venture capital investment this year. "It's about ten to 12 percent global capital deployment," he said. "There's no question the third leg, after information technology and medical technology, is inevitably clean tech."
Moderator Eric Wesoff, chief analyst at Greentech Media, ticked off a number of potentially significant clean tech developments in his introductory remarks, but also added a few notes of skepticism.
For example, he showed two slides titled:
List of Profitable Fuel Cell Companies and VC-Funded Automobile Success Stories.
Both were blank underneath.