Energy 360 – Energy Investing: From Energy Research to the Next Tesla [VIDEO]
This quarter’s Energy 360 featured a panel of venture capitalists from several prominent investment firms. The panelists represented firms that specialize in different stages of investment, from early-stage capital to growth equity, and each provided a unique perspective on the state of energy technology.
For those of you who missed the event, the full video of the discussion will be made available soon.
During the discussion, the overall theme was that of optimism in clean tech investment opportunities. Despite the large footprint of current energy incumbents, including coal and oil, there are several companies that have emerged as promising contenders in fields from generation to storage. The panelists urged an ideological shift in investor expectations for energy technology, encouraging a more hands-on approach where the investors play an active role in establishing the reputation of the company and securing inputs and outputs, so as to de-risk the capital intensity of the investments. The idea that energy investments require more patience and time than software investments can be discouraging for some investors, but those that play a positive role in steering the direction of the company can certainly find success.
While the panelists acknowledged the intrigue of international investment, there was some disagreement regarding the efficacy of globalization. International governments that are more prone to support clean tech development provide incentive for foreign investment, but the risk of intellectual property theft and the increased complexity of international markets present a challenge for investors.
Today, there are many fields of energy technology that have much room for improvement, and several investors are looking for companies with ideas and teams to earn their support. Though the “Solyndra Effect”, as dubbed by Khosla’s Pierre Lamond, has discouraged investors lately in financing solar research, the opportunity for technological developments still exist if a balance is found between high efficiency and low cost. The panelists, however, generally agreed that the current field of solar energy faces more of a balance-sheet problem than a technology one. The greatest potential today lies in business-model innovations, as pursued by Solar City and others in the field, where effort is made to bring the existing technology to the consumer in an affordable and reliable manner.
Moderator:
Dr. Ryan Orr – Professor at Stanford University in the department of Civil and Environmental Engineering, and the founder of Zanbato, a platform for investment in infrastructure assets.
Panelists:
Tiffany Clay – Vice President at TPG Capital
- New renewable energy fund invests from early stage through first commercialization
Pierre Lamond – Partner at Khosla Ventures
- Early stage investment firm
Josh Raffaelli – Partner at Silver Lake Kraftwerk
- Growth capital firm, fund during scaling up of operations
Key Points:
- Pierre: A seed fund is like a “science experiment”. It is a high risk high reward investment, and there is a lower amount of money invested
- Pierre: Four hot areas for investment:
- Storage: Batteries, compressed air, etc.
- Efficiency: Seems like low hanging fruit, but so far there haven’t been many companies that stand out in this field
- Agriculture
- Water: “The oil of the 21st century”
- Pierre: “People don’t buy technology, they buy products”
- Tiffany: “You cannot have successful businesses dependent on long term government support”
- Josh: There is currently a stigma with the word “solar”. Honestly, Solar City would have had a much easier time getting funding if their name was “Energy City” or anything else without the word “solar”
- Tiffany: Joint ventures and local partners present a mechanism for investment overseas by derisking capital. Other foreign entities that can play a role in investment include sovereign wealth funds, which can have a significant influence in countries with a lot of wealth
- Josh: There are inherent risks to operate internationally, and there need to be businesses of a certain size and scale to compensate for these risks and encourage international investment
- Pierre: The grid as it exists today is antiquated. A 1% improvement in the operating efficiency of 800,000 transformers would reduce the need for 1 GW of production. There is a lot of room for improvement in this area.
The full panel discussion can be viewed below:
