types of those projects over the past five years.”
The glut of money in that boom period created unsustainable conditions and created a new kind of crisis for an industry that had previously suffered from a lack of funding, Woodward said. Bad deals burned investors, prematurely killed companies, and undermined public confidence.
The exit-focused venture capital strategy that has been successful in IT and biotech investing hasn’t translated to cleantech, said MJ Maloof, investment director for Saudi Aramco Energy Ventures, the corporate VC arm of the world’s largest oil company.
“There was this thesis that was operating in the venture space for many years that all you had to do was get these companies to a certain point and capital would rain down from the sky and someone would take it off your hands,” Maloof said. “That has not been proven, so we’re in a situation where valuations are rationalizing, but it’s still a situation where the conversation is a tough one to have.”
While the pendulum has clearly swung from boom back to bust, it might be returning to the center, according to John McKenna, managing director of Hamilton Clark Sustainable Capital.
“The difficulty we may be having now is only temporary,” McKenna said. “Frankly, I see it changing because the valuations of companies are coming down and investors are looking at the sector and saying there are some great values, whereas two or three years ago it was tough to get there.”
Ultimately, the consolidations, bankruptcies, more plausible valuations, and reductions in investment levels and hype are signs cleantech is rationalizing and rightsizing, Woodward said.
Who Left, and Who is Left?
The mixed feelings people expressed about venture capital’s role in cleantech’s boom/bust cycle called attention to who was not at the conference—major VC firms with funds in the hundred millions or even billions of dollars, who turned out in force to the 2008 and 2009 conferences.
The list of no-shows included New Enterprise Associates, Battelle Ventures, Vantage Point, Kholsa Ventures, Braemar Energy Ventures, Flywheel Ventures, Battery Ventures, Altira Group, and Kleiner Perkins. In years past they were major sponsors and sent prominent speakers, but this year they were conspicuously absent from the agenda and the list of investors seeking to talk with startups and researchers.
There are lots of reasons a particular firm would skip a conference, but the sparse overall attendance by large national venture capital funds seemed to paint a picture of a shifting industry. “Presumably this is due to the fact that many of them have pulled back from investing in cleantech companies,” said David Gold, managing director of Access Venture Partners, a regional VC firm based outside Denver.
Seed and early stage investors along with corporate VC firms dominated the roster of investors this year. They included Germany-based BASF, the largest producer of chemicals in the world, Germany-based electronics and engineering conglomerate Siemens, South Korean electronics company LG, and Saudi Aramco, the state oil company of Saudi Arabia.
Utilities like DTE Energy, which is based in Detroit, and Paris-based EDF sent representatives, as did carmakers such as Honda and battery makers like Johnson Controls.
They’re from the government, and they might actually help.
While politicians might treat renewable energy and cleantech as a political football, the industries have unabashed supporters in key places in government. The Departments of Energy, Defense, and even Agriculture have established special programs for cleantech.
The DOE has a $10 billion portfolio for research, which is spread between its labs and programs for cleantech, renewable and traditional sources of energy, technology transfer, and more, said Michael Knoteck, the deputy undersecretary for science and energy. The department is trying to make more support available for startups.
“We’re really trying to get this engine working better and trying to make this entire enterprise more
