From: Issue 38
The Fab 5: Corporate Knights sits down with leading Cleantech venture capitalists
We asked them: In the current political and economic landscape, what can our government or corporate leaders do to support both investment in and smart deployment of emerging clean technologies?
Company: Khosla Ventures, established in 2004.
Location: Menlo Park, California
Funds under management: $1 billion plus
Select investments: Calera, a maker of CO2 absorbing "green" cement; enhanced geothermal developer AltaRock Energy; and Nordic Windpower, a maker of two-bladed wind turbines.
Khosla: Innovation is critical for the smart investment and deployment of clean technologies, and I am a firm believer that disruptive innovation almost exclusively occurs in risk- and experimentation-friendly environments. Fast and frugal iteration in small, nimble startups--not big companies--results in the thousands of "shots on goal" required to reinvent the infrastructure of society. Because failsure in a big company often spells anything from ostracism to demotion, high-risk innovation predominantly occurs on a large scale with entrepreneurs. Corporations can support, and hugely benefit from, this innovation by helping startups scale. The government should leverage small companies as hotbeds of rapid evolution. A great example is ARPA-E, which facilitates shots on goal by broadly supporting what I call "black swan" energy technologies. Using smart support mechanisms like small grants as well as subsidies that sunset 5-7 years after a technology begins to scale, without trying to pick winners, the government can empower innovators to take risks that produce game-changing technologies. The world's innovators are ready and willing. With the right policy framework and environment for wide-scale experimentation, these innovators will help create a low-carbon world that is vastly more prosperous within just a few decades.
Company: NGEN Partners, established in 2002.
Location: Palo Alto, California
Funds under management: $500 million +
Select Investments: Concentrated PV pioneer SolFocus; REGEN energy, a developer of energy management devices based on "swarm logic."; and Powerspan, a developer of emission-control technologies for power plants.
McLarty: Corporations are holding onto their cash these days because of unprecedented economic uncertainty. But as any Apple investor will know, too much cash on the balance sheet can be perceived as counter to the best interests of shareholders. Investing in corporate energy efficiency projects offers a smart alternative, in our view. Proven, low-risk technologies such as lighting retrofits, lighting controls and HVAC controls typically offer five-year internal rates of return of 20 to 40 per cent. That's 20 to 40 times better than the yield on five-year U.S. Treasuries! Yet these insanely great returns are often rejected by corporate buyers because they're viewed as capital projects that "don't hit a two -or three-year payback." Encourage your people to break free of the shackles of simply payback, and start thinking of energy efficiency projects as low-risk, high-return bonds.
Company: Tsing Capital, established in 2001.
Location: Beijing, China.
Funds under management: $350 million
Select investments: Solar cell manufacturer China Sunergy; Net Power, a developer of zinc-bromide flow batteries; and TGBC, a maker of biodegradable polymers.
Ye: Cleantech is a part of a generational change and will no doubt be the core theme in the venture and investment landscape for decades to come. As our environment deteriorates and natural resources drain out, cleantech has become a necessity and will inevitably be the major driver for global economic recovery and growth.