Today, in this mostly urbanized society, over 1
billion people live without clean drinking water. As grain prices continue
to rise, hundreds of millions of others barely have enough money to pay for
food. Meanwhile, global oil production may have peaked, atmospheric
greenhouse gas emissions are reaching alarming levels and there are billions
of emerging middle-class workers in developing nations who are getting
turned on to American-style consumerism.
Do these trends signify a looming global crisis or an enormous economic
opportunity? The 500 investors and analysts at this week's
Cleantech Forum in Washington D.C. say both.
As the saying goes: A crisis is a terrible thing to waste.
According to presenters at the forum, by 2050, US $41 trillion will be
needed to rebuild water infrastructure around the world, US $40 trillion
will be needed for sustainable urban planning, and another US $40 trillion
will be needed to reduce global carbon emissions by 50%. This rethinking,
redesigning and rebuilding of the inefficient global infrastructure
represents an economic opportunity of staggering proportions.
"The green
economy is the mother of all economic opportunities," says Lois Quam, Head
of Clean Technlogy and Renewable Energy Investments at
Piper Jaffray. "This transition presents such a broad and diverse set
of challenges for business, it's really remarkable to think about what
needs to be done."
Quam, who will be the keynote speaker at the New Jersey
Clean Energy Conference in October, says that investors seem ready for
the challenge.
So far this year, US $1.6 billion in venture capital has been invested
in the cleantech space in the U.S., according to
figures released in August by Ernst and Young. Investments in the
second quarter of 2008 represented an 83% increase over the second quarter
of 2007. Most of that venture capital went toward thin-film solar,
concentrating solar power, energy efficiency technologies and
next-generation biofuels.
The impressive growth in cleantech venture capital is partly being driven
by the entrance of mainstream investors into the space. Back around 2002
when the term cleantech was first coined, the investments were made by
funds dedicated to the space. Now, says Brian Fan, Senior Director of
Research at the
Cleantech Network, the game is being changed by new players.
Back in the early days, says Fan, you weren't anyone in the cleantech
space unless you had a $100 million dollar fund. Now you aren't anybody
unless you have a $500 million fund. Now there are even billion dollar
funds coming in. We're seeing this trend of mainstream investors coming
in...because the big gains are going to be made in cleantech.
The wave of investment in renewables, energy storage, advanced materials
and many other clean technologies is transforming a once-niche industry
into an economic powerhouse. Cleantech venture capital has increased 1,000
percent since 2001. But with increased interest comes increased caution.
The immense rush of capital moving into the sector has some worried about
the formation of a bubble.
We've seen waves before. They can create a constant cycle of excitement,
bust, excitement, bust, says Michael Goguen, a venture capitalist at
Sequoia Capital.
The important question is how do we create our companies and make
investments so they survive and have an enduring impact on the world?
Many analysts say that talk about a dotcom-like bubble may be overblown.
There will certainly be many losers among the winners, but the cleantech
market as a whole looks healthy, says Fan. The problems from the internet
bubble when companies were assigned asset values without any real
revenue generation are not nearly as common in the cleantech space, he
says.
These are not companies...trying to assign some mythical valuation to
eyeballs. These are actual manufacturing companies or service companies
that have real world products to offer. And even though some spaces are
are a bit frothy, I don't think overall that we're seeing that great
separation from reality that we saw in the tech space around 10 years
ago, says Fan.
That's mostly what the Cleantech Forum is all about identifying the best
investment opportunities for early-stage investors while educating
entrepreneurs about how to develop their business models in a sustainable
way. Like any market, the businesses that win out will be the ones that
use less capital with less people, assemble a knowledgeable executive
team, and quickly get their product to market.
It's not always the best technology that wins you have to have the
whole package. It is definitely about creating a sustainable company,
says Scott MacDonald, a Partner with
Emerald Technology Ventures.
Indeed, the future of the world depends on creating a sustainable industry
based on sustainable companies. Many investors recognize the need to make
smart decisions not just to maximize economic returns, but also societal
and environmental returns.
According to the
Global
Footprint Network, September 23rd will be Ecological Overshoot Day
the day that humans start using resources faster than the planet can
regenerate them. Industry leaders hope that the continued growth in
cleantech investment can help reverse humanity's ecological deficit
spending.