25-04-04 Martin Roscheisen, CEO of Nanosolar, holds up a plastic vial filled
with dark, purple liquid -- the secret ingredient behind a new kind of
technology start-up that's turning heads in Silicon Valley. In a private
laboratory here, Nanosolar scientists are designing low-cost solar electricity
cells that Roscheisen submits will make solar power competitive with
conventional energy sources. The purple liquid is a nano-engineered material
that "self-assembles" into tiny solar cells that convert sunlight into
electricity.
"We're at the threshold of making solar electricity profitable," says
Roscheisen, whose firm raised $ 6.5 mm last year from US Venture Partners,
Benchmark Capital and other investors. "We're seeing a lot of interest.
We're being contacted all the time by investors."
Across the country, venture capitalists are opening their wallets to upstarts
that, like Nanosolar, develop "clean" technologies in anticipation of
a growing market for products that generate revenue without harming the
environment. In 2003, investment in clean technology ventures rose 8 % to $ 1.2
bn while overall venture capital investment fell 14 % to $ 18.2 bn, according to
the Cleantech Investor Network.
The Howell, Michigan-based group defines clean technologies as technologies that
allow for more efficient use of natural resources and greatly reduce ecological
impact. Venture capital firms are pouring money into clean technologies related
to water purification, agriculture, transportation, manufacturing, recycling,
air quality and alternative energy such as solar, wind and hydrogen.
"We're getting a bigger and bigger piece of the pie year after year,"
said Keith Raab, Cleantech's president and CEO.
Among the start-ups that pulled in the most money last year were Evergreen
Solar, a Marlboro, Massachusetts-based developer solar electricity systems that
raised $ 29.5 mm, and Powerspan, a New Durham, New Hampshire-based maker of
pollution-control technology for the energy industry that secured $ 20 mm.
Still, some venture capitalists remain wary about investing in environmentally
friendly companies after getting burned in the 1980s, when solar and wind energy
start-ups raked in venture dollars, and in the 1990s, when hydrogen fuel cells
were hot.
Nanosolar was the first green venture investment for Menlo Park-based
Benchmark Capital, but general partner Bill Gurley said the decision was
motivated more by its belief in the start-up’s management team than the sector
itself.
"There haven't been a lot of success stories in the cleantech space,"
Gurley said. "There's no Microsoft, E-Bay or Cisco that says this is a
fertile ground for venture investment."
Others believe the latest funding boom is different -- that a variety of
technological, political and economic forces have converged to make clean
technologies ripe for investment.
"The fundamental economics suggest there's a good payout for a whole fleet
of alternative, renewable technologies," said Kyle Datta, managing director
of the Rocky Mountain Institute, a Snowmass, Colorado-based non-profit that
promotes eco-friendly capitalism.
The sector has gotten a boost from a new California plan to invest $ 1.5 bn
of the state's pension funds in environmental technologies. State Treasurer Phil
Angelides said the "Green Wave" initiative is aimed at helping the
state improve financial returns, generate jobs and clean up the environment.
"I want to see California in the best position to reap the benefits of this
growing sector of the global economy," Angelides said.
The California Public Employees' Retirement System, the nation's largest
pension fund, voted in March to invest $ 200 mm in clean technology start-ups,
and agreed to pump $ 500 mm into environmentally responsible stocks and mutual
funds.
"This is just the tip of the iceberg," said the Cleantech Venture
Network's Raab. "I think you'll see other pension funds following
suit."
The market for alternative energy is sure to grow as global oil prices rise,
fossil fuels become morescarce, states look for more reliable energy supplies
and the United States reduces its dependence on foreign oil, investors say.
"There are other people at the table that are changing the supply and
demand curve on a global scale," said Erik Straser, general partner at Mohr
Davidow Ventures in Menlo Park. "The Chinese and Indian governments are
seeking a better way of life for their citizens. To do that they need access to
energy."
The market for clean technologies also is being driven by increasingly
stringent regulations on air, water and energy. And as the Internet,
telecommunications and computer sectors mature, venture capital firms with
plenty of money to spend are hunting for new markets.
On top of that, many corporations are now keen to promote "green"
business practices, if only to show they're good corporate citizens. "If
you can cut costs and reduce pollution, it's attractive to your investors,
employees and customers," said Bob Epstein, co-founder of the non-profit
group Environmental Entrepreneurs.
It helps that the sector is attracting more seasoned entrepreneurs such as
Nanosolar co-founder Roscheisen, who previously started the Internet firm
eGroups and sold it to Yahoo for $ 720 mm in 2001. Nevertheless, many venture
capitalists urge caution in investing in "clean tech", given that the
sector has many unproven technologies, a complex marketplace and a history of
poor returns.
"People sell so much on the promise and don't spend enough time on the
execution," said Benchmark's Gurley. "You set yourself up for a bubble
that can pop."
Source: The Associated Press