On August 21, 2008 at Orrick’s Menlo Park campus, SDForum hosted “Green and Clean Dinner Three: Where’s The Money?” focusing on the role of technology and business in finding solutions. Text from DJCline.com.
Mitchell Zuklie of Orrick moderated panelists Adam Boucher of Adam Capital, Mike Hess of Mariah Power, Oleg Kaganovich of DFJ Frontier, Peter Liu of New Resource Bank and Thomas Schulz of Cleantech Circle. Text from DJCline.com.
Why invest in clean tech now? Text from DJCline.com.
Mike Hess of Mariah Power did not want to retire. He wanted to do something for his grandchildren and society at large. You commit your own money in a startup. He wrote the first check at Mariah for a third of their common stock. He rounded up investors and filed twelve patents for over a little over two million dollars. They need three. He thinks VCs have become financiers rather than bettors on technology. It is hard to get their heads around industrial products and invest in this country rather than China. Europe is fifteen years ahead of the United States in clean tech. We need to catch up. Attracting talent with stock is not a problem when building a diverse and experienced team. The key risk is the market. Text from DJCline.com.
Peter Liu of New Resource Bank was asked by retirement funds to look into green investments in 2004. He thought it was better to create a bank that put money into sustainable resource businesses rather than sub-prime mortgages. Semiconductor and biotech skills from universities or national labs transfer well to clean tech. Foundations as investors are torn between return on investment and whatever their mission might be. They might invest in a company that makes mosquito nets to fight malaria rather than a local clean tech company that might get funding anyway. The home runs in software technology are usually tweaking code or marketing versus fiddling with physics and chemistry. The key risk is finance. They look for screened referrals from experienced serial entrepreneurs. Text from DJCline.com.
Thomas Schulz of Cleantech Circle focuses on biology and chemistry while his other partners deal with other categories. Deals come from people they know from their own network. He thinks American universities could learn from Germany about patents. If a company fails to use a patent it falls back to the university. The key risk is finance. He sees a huge gap between angel investing and VCs. What attracts attention? Credibility. There are a lot of perpetual motion schemes being pitched. He thinks water business is hard to sell. Text from DJCline.com.
Oleg Kaganovich of DFJ Frontier says there is more competition for deals through institutional investors or the Sand Hill crowd. Clean tech is more than solar, it is industrial engineering and material substitution. Companies can be in Michigan or Alabama far from traditional Silicon Valley investors. He thinks there is a lot of useful research from universities and national labs. The key risk is execution. He thinks water issues are overlooked. They can get 2500 business plans but invest in only 21. What attracts attention? A referral from Orrick or someone you trust that has a company that is ready to go. Text from DJCline.com.
Adam Boucher of Adam Capital makes loans based on pledged collateral assets of 160 percent of the loan. Green energy is their growth niche. It is spread across the country and scaled on the source like methane or wind. There is potential in using old technology in new ways. Phase change technology like turning water into steam energy can be applied to new materials like butane or freon because they change states at a lower temperature to take better advantage of geothermal or solar. Low tech solutions can be deployed in third world countries with great effect. The key risk is finance. They look for exit strategies. Text from DJCline.com.
What was learned? Investing clean technology is more difficult than software. It forces us to deal with the limits of physics, chemistry and finance in a way not seen since the industrial revolution. Text from DJCline.com.
Here are some pictures from the event.