Nothing Ventured, Nothing Gained
Well, while government funds may be slow to swing around to so-called “cleantech,” venture capitalists are suddenly sniffing the air. We recently had the chance to take the pulse of the VC crowd, and it seems they’re ready for action in what is shaping up as a multibillion-dollar market.
In San Francisco last March, the latest Cleantech Venture Forum – number IX for those keeping count – gathered 500 delegates from around the world, its biggest crowd yet. With issues like abrupt climate change now climbing up the agenda even inside U.S. energy companies, the buzz around cleantech can only grow. Meanwhile, with a growing pool of capital now chasing a precariously small number of cleantech companies, we think we detect the sound of frothing in the air – as during the headiest days of biotech, IT, and search-engine investing.
On the heels of our own cleantech session on “green chemistry” came a surprising pitch from VC mavens Kleiner Perkins Caufield & Byers. As early investors in little companies like Amazon, Google, and Intuit, the firm is widely seen as having a highly sensitive collective nose for the Next Big Thing. This, though, was a very different spiel from the ones that KPCBers John Doerr and John Denniston would normally make to investors – or hear from entrepreneurs.
To break the ice, they tried to request the audience’s best “green” jokes. While they fished for jokes, the only thing that came to mind was a cartoon from way, way back. It featured a small group of bacteria huddled together in a lead-lined puddle in the wake of the long-expected nuclear apocalypse. “Next time,” said one reflectively, “no brains!”
Well, exactly wrong. To combat the unnervingly apocalyptic crises Denniston and Doerr moved on to discuss – from looming energy-security issues to the growing dominance of megacities to the risk of abrupt climate change – the world needs more and better brains. We also desperately need the inspiration and the impossible-takes-a-little-longer thinking of the entrepreneurs who will drive the huge waves of innovation and creative disruption needed to steer the global economy onto a more sustainable trajectory. And to ensure the cleantech rocket reaches escape velocity, we need to fire up the appetites of the venture capitalists, investment bankers, and financial institutions that will invest in, underwrite, and hedge the next wave of innovation, whatever it may be called.
But will these necessary brains be best motivated by money or ideology? That was the essence of one of the dynamic duo’s key points, which touched on a distinction we have long wrestled with and believe will define the future of cleantech: missionary versus mercenary.
Hot for the Deal
So what are the differences between mercenaries and missionaries? Well, from our scribbled notes, mercenaries are opportunistic; focus on financial statements, the short run, and “The Deal”; are driven by paranoia; and are “hot for making money.” Donald Trump came to mind, with his sundry towers. Missionaries, by contrast, are strategic; focus on mission and value statements, the long run, and “The Big Idea”; are driven by passion, and are “hot for making meaning.” Here, think of folk like Paul MacCready with his Solar Challenger or Dean Kamen with his Segway.
As they spoke, Denniston and Doerr insisted that “green is the new red, white, and blue.” They came across as mercenary-missionaries, passionate about the potential for making a difference with – but in the process making insane amounts of money from – everything from solar photovoltaics to biomimicry to nanotubes. (But not hydrogen, they said, which they labeled a “dud.”)
It’s that combination of approaches that may well make this industry work. Touchingly, Nicholas Parker, cofounder of the Cleantech Venture Network, announced to the world that SustainAbility’s first book, The Green Capitalists, published way back in 1987, “saved my soul” – by showing him that it was possible to occupy the missionary and mercenary positions simultaneously.
Parker and his cofounder, Keith Raab, estimate that since 1999 more than $8.3 billion has been invested in cleantech deals in North America alone, with the continent’s demand for such capital estimated to average $3.9 billion a year between 2006 and 2009. The current pace of deal-making, says Parker, puts cleantech ahead of the semiconductor sector – and just about level with telecoms. (In terms of who “counts” as cleantech, Parker and Raab offer a definition, of sorts, but it’s a fairly broad-mouthed trawl through the emerging ecosystem of sustainable-minded industries.)
It will be interesting to see what Bill Joy – who cofounded Sun Microsystems, wrote UNIX, and joined KPCB as a partner last year – will make of all of this. In the April 2000 issue of Wired, he wrote a long and impassioned warning that some of the technologies now linked with cleantech – including genetic engineering and nanotechnology – could make the human species redundant. Will he be, perhaps, an IT-missionary-turned-Sun-mercenary- turned-Nano-missionary, now returning to the mercenary world?
While the $100 million of KPCB’s funds earmarked for cleantech to date – part of a $600 million fund dedicated to IT, life sciences, and medical devices – won’t save the world anytime soon, it’s a signal of the importance they attach to this emerging area. Their voice is an important one – and their lobbying could make a real difference among politicians hot to attract the entrepreneurs of the future.
In keeping with the sector’s accelerating timescales, Cleantech X is slated for early June, in our hometown of London, where the congestion charge imposed by Mayor Ken Livingstone was designed to spur the development and use of cleaner vehicles and transportation systems. Interestingly, in this context, Denniston and Doerr noted that one of today’s biggest challenges is that we don’t have enough of the kind of political leaders the future deserves, “who have the courage not to invade Iraq but to impose a [U.S.] gas tax.” Can we expect Kleiner Perkins to lobby for the necessary political changes to get cleantech fully up and running? “We have been politically active,” Denniston noted, “and we’ll see a lot more of that.”