Clean Tech Investing

Last week I attended a conference on clean technology / energy investing here in Boston.  Like anything with a sustainability angle these days it was packed to the house with standing room only; although this time it seemed to be more an audience of practitioners as opposed to job seekers.

The two-hour session saw two VCs and an Analyst give their views on the past, present and future of the market.  The speaker I found most interesting was Jim Matheson, a partner at Flagship Ventures.  It is worth reading his background.  He's been doing clean tech investing for the past 9 or so years after having graduated from Harvard Business School.  Prior to that he was a Naval Aviator having been an instructor and adversary pilot at Top Gun (cue the sound track for the movie).  After listening to Jim's speech, two things are eminently clear:

       (1) Substantial height is not a requirement to be a Naval Aviator; and

       (2) Jim is a really smart guy who's been around the block on clean tech.

Jim addressed a number of points, including that there are huge opportunities in the clean tech/energy space because much of the existing processes and technologies are decades (if not more) old and are not designed for today's requirements.  But all was not rosy.  Jim pointed out that one of the biggest challenges today is that those with experience in energy and clean tech come out of utilities or other pseudo-government companies that 9 times out of 10 do not transplant well to startups.  He also talked about how the time horizons of VC funds (10 year funds) are not ideally suited to the time frames of clean tech / energy (sometimes 20-40 years).

As Jim was wrapping up he listed off a bunch of problems that he thought were worth solving (translations, things that he is interested in owning if they are successful) and I thought I would share that list:

       (1) How to make, transport and measure H2O

       (2) What to do about all the CO2 we produce

       (3) How to create more distributed electricity

       (4) How to store energy at large scale cost effectively

       (5) How to build and support electric vehicles

       (6) How to design and build sustainable products

       (7) How to use IT to manage energy usage

       (8) How to make the grid smarter, consumers wiser

       (9) How to use land more efficiently

       (10) What to do about all the waste we create

I've always been impressed most with VCs who publicly talk about the things they want to invest in (as opposed to what they have invested in).  And while this list isn't overly specific, it's such a rarity that it's worth publishing here.

I don't know Jim personally, but were I raising money for a clean tech / energy business I'd add him to the short list of folks worth talking to.

Why I am a Pessoptimist

Somehow there has come to be the notion that one's outlook on the world is a permanent fixture, unchangeable. In reality, everyone's (or at least most of our's) outlook is influenced by the conditions around us. And for me, generally speaking, I'm an optimist. I can usually find the white lining in the worst of situations. But I have to confess that I am a short term pessimist on the economy and even the clean tech / corporate sustainability industry, while still remaining a long term optimist.

The global credit crisis is having severe impact on clean tech, for example, in the last month:

1. OptiSolar lays off 190 (or half) of its employees.
2. Day4 Energy lays off 95 (or one-third) of its employees.
3. GreenFuel lays off 20 (or half) of its staff.

The list goes on and there is no reason to think this trend will right itself in a matter of months, perhaps even 3-4 years as Bill Gates has predicted. A lot of people will find themselves in tough situations.

So why am I still a long term optimist? Many folks are comparing this current economic crisis to the Great Depression, but I point out that we even recovered from that one! People are resilient and don't give up dreams and hope easily. And more specific to clean tech / sustainability, I believe this is a 30+ year trend. When I started working in this industry in 1990, it was clear even then that it would be a growth industry.

Today, we can expect fully $100 billion of the stimulus package to be targeting green industries and projects. Don't get me wrong, a lot of that money will be wasted (but it's one of the better areas to waste money if you insist on doing so). Sustainability has become a part of our vocabulary in business as well as with consumers. And as recently as a few months ago, the US Conference of Mayors forecast 4.2 million green collar jobs will be created over the next 30 years (10% of the total during that period). The reasons for growth are compelling because the industry is at the nexus of economic, defense and environmental challenges the solutions to which will truly create lasting value.