setting up the next Facebook—more money, more time, and more headaches. Basically, a good branding plan will only go so far.
The other thing that is going to bite the VC community on their chino-clad behinds with cleantech is the regulatory environment. VCs just don’t get Washington at all. The culture in DC is so foreign to the tech community that it may never be bridged. That town isn’t built on best of breed, but on real relationships—and not just with a Senator or two, but on committees, at the agency level, in the White House, and with non-profits and other key stakeholders, the whole ecosystem.
Building off the regulatory/public policy space, the reason government is key is because a simple change in regulation or interpretation of a regulation can change the landscape drastically for what wins in cleantech. Forget a carbon tax—never going to happen. Instead, think of a tiny tweak in one biofuel formulation that is mandated and helps only a few companies while wiping out others.
It’s as easy as pie to make happen if you know how. Also consider that taking a cleantech technology from lab to pilot plant to full scale production costs BIG MONEY—and the government can be a key partner or sit back and watch an industry that doesn’t play ball drown.
I can say unequivocally that no VC has “it” on Capitol Hill. I spent six years as an appointee in DC, and I can also tell you that nothing makes a political fundraiser smile more than when someone with a Sand Hill Road address breezes into town—sans tie—writing checks and being too stupid to know what to ask for when it comes to a political favor. They let them shake hands and beg an officeholder for an oblique favor, and feel superior about themselves over a rubber chicken dinner. What they get is a photo for the office wall and a $2,300 (the maximum campaign contribution allowed) debit on their checking account.
And don’t go thinking Kleiner “has it” because they hired Al Gore. Anyone who knows the realities of Capitol Hill can tell you that—you are either “in” or you are “out.” Nobels and Oscars don’t make you “in” in Washington.
And lastly, lets cut to the chase on why the VCs are not going to really make a splash in the cleantech space—money. M-O-N-E-Y. A huge VC firm is sitting on maybe $1billion in funds. A tiny hedge fund is sitting on a $1.5 billion fund. And don’t think they and the greater private equity world don’t know it. And don’t think for a second they won’t slam down VCs so badly in the later stages of deals that they won’t erase them the way venture capitalists have erased angel investors. VCs aren’t even in the same ballgame as the boys in Greenwich. And the only way for them to get a semblance of a pimp hand to negotiate is via IPOs—and I dare you to find me all those cleantech IPOs.
So where does that leave VCs in the cleantech game? Likely nabbing a lot of headlines, drinking organic Merlot at sustainability conferences, and sitting in the middle of a very dangerous and expensive minefield that they have little chance of successfully negotiating.
Next time, folks, we’ll look at the areas in cleantech that are being over-invested or wrongly invested in.
