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cleantech insights

Gnest: $3.2 Billion!

Sheeraz Haji

Woa!!! Monday’s announcement of Google’s acquisition of Nest represents not only a key inflection point for cleantech, but also speaks volumes on the increasing importance of customers. The $3.2 billion deal marks a significant milestone for the home automation company; one that many believed the cleantech market couldn’t produce.

Here at Cleantech Group, we believe that the cleantech market is essential, massive, vibrant, and desired. Based on data tracked in i3 (such as investment round amounts and participating investors), insider-sourced information reported publicly about various investor returns, and standard venture-round ownership stakes, it looks like Google’s acquisition of Nest represents a 24x multiple on paid-in capital. Our i3 business is about collecting the best data possible and helping corporate teams and venture investors connect with innovation: the fact that a member of the highest level of management at Nest owns and contributes content to Nest’s i3 profile has been truly motivating to my team working day and night on the i3 platform.

Nest_i3_Profile

So what can we learn from Nest? Our upcoming Cleantech Forum San Francisco 2014 will discuss just that. Last year, Nest keynoted at the Forum (and went on to win North American Company of the Year at …

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60 Minutes Reply: Cleantech Rocks

Sheeraz Haji

Exactly one week ago, on Sunday, January 5, 60 Minutes aired a piece on the cleantech space. In the days that followed, I have had interesting conversations with clients about what was broadcast to 7.4 million viewers.[1] Those discussions reinforced my belief that 60 minutes missed the mark and inspired me to write this blog on why cleantech is essential, massive, vibrant, and desired.

Cleantech is essential.

We recently took fifteen clients to China on our annual tour, and the Beijing Air Quality index (AQI) of PM2.5 read above 200 on multiple days. The average AQI in Los Angeles, California, through 2009 was 19[2]. As CBS News has reported, the health and economic implications of severe pollution are significant. Kids with asthma flood hospitals. Flights are canceled. Schools are closed. Concerts are postponed. People wear masks and stay indoors.

Cleantech rocks - 1

Photo: CBS Article/Kyodo News/AP[3]

 

The cause for China’s dirty air is not a mystery. The country’s coal-fired power generation, rapid industrial growth, and significant increase in vehicles all contribute to poor air quality. The costs are not trivial: The Beijing Municipal Bureau of Environmental Protection has estimated it will cost China $817 billion …

Data Center Innovation = Clean + Cost-Effective + Reliable

Sheeraz Haji

We are currently seeing a wave of new ideas in data centers, throwing the traditional model of data center management in the air. The ever accelerating demand for processing and data storage capacity globally, is coming together with environmental demands to create an area ripe for innovation.

This led to lively discussion last week at our Data Centers Power Breakfast, in partnership with Silicon Valley Bank and Wilson Sonsini Goodrich & Rosati. Participants – including tech companies, start-ups and investors – proved data centers can reposition themselves as sustainability leaders and pointed to opportunities for even greater innovation through energy efficiency and greening the energy supply.

We were particularly interested in what was driving innovation in the data center sector. There was a simple mantra from the panelists throughout the conversation: solutions needed to be clean, cost-effective and reliable to gain market traction.

We know that over the last decade or so, environmental stewardship has become a C-Suite goal, leading companies to set challenging but attainable clean goals. Even for companies for whom sustainability is not a central characteristic of the product or service, customers, particularly Millennials, are holding them more accountable on environmental metrics.

To attain these goals, …

A decentralized manifesto

Sheeraz Haji

Cleantech startups are disrupting global industries. Not in ten years. Not in five years. Today. We are observing fundamental shifts in many key segments of the economy. New technologies and business models are turning things upside down. Right now. These significant system changes have inspired the theme for Cleantech Forum San Francisco 2014: Accelerating system change; towards a decentralized future. Let me elaborate.

The economy is experiencing a fundamental shift from centralized to distributed systems. Consumers are gaining power and are decentralizing decisions and processes. This is causing a massive change in customer experiences, and placing incumbent business models at risk. This change is remarkable, and the pace of this change is accelerating.

Examples are all around us.

Let’s start with energy. Consumers all over the world are increasingly opting to buy energy from Solar City or Solairedirect instead of their local utility. Big companies like Walmart are getting off the grid in order to improve business reliability, increase flexibility, and hedge energy prices: the retail giant is partnering with Solar City and Tesla for a combined solar panel + energy storage deployment. Data centers have joined the trend. Microsoft (who will be speaking at Cleantech Forum

Advanced Materials: A Dark Horse to Watch

Sheeraz Haji

On May 10, 2013, Cleantech Group, Silicon Valley Bank, and Wilson Sonsini Goodrich & Rosati hosted a Power Breakfast focused on Advanced Materials, featuring participants from BASF Venture Capital, Kleiner Perkins Caufield & Byers, Dow Chemical, Applied Materials, and a number of promising startups in the space.

From graphene’s astounding material properties to cleaner polymer feedstocks, advanced materials innovations are quietly transforming cleantech behind the scenes. In our 1Q13 Quarterly Investment Monitor, we asked if Advanced Materials could be the dark horse of the cleantech sector. After a dynamic discussion during our quarterly Power Breakfast, the answer looks to be a resounding yes.

The conversation opened with investors’ interest areas in this space. While the VCs favored disruptive technologies that could upend entire industries, corporates leaned toward incremental innovations to augment their core materials capabilities. All parties agreed on the difficulty of adapting entire supply chains to new materials, as well as the application discovery process to determine target markets in the first place.

Last week’s discussion also turned to the importance and difficulties of forging successful partnerships. Besides capital, corporate partnerships can provide startups with support from business units, access to customers, pilot …

Cleantech Goes Social: Cleantech Group and Facebook challenge you to use social to accelerate cleantech

Sheeraz Haji

Cleantech products and services are inherently social. When my neighbors install solar panels on their roofs or buy an EV, they want to tell all their friends about it. Demonstrating how one is contributing to the broader public good by reducing their impact on the environment has become somewhat of a status symbol (at least in Berkeley!). However, the cleantech industry has not done a great job of using the web in creative ways to amplify the social aspects of cleantech products and services.

With that in mind, Cleantech Group and Facebook are excited to announce “Cleantech Goes Social,” a contest that aims to  harness the power of Facebook’s billion-person network to accelerate cleantech adoption and engage the public on sustainability issues. We are challenging cleantech companies and others to find new ways to use Facebook to accelerate cleantech, whether it’s through an app on the Facebook platform or a new method of integrating Facebook into products and services. We are asking contestants to tell us their story about how they will use Facebook to address energy and resources challenges, accelerate cleantech adoption, and engage the public in dialogue about sustainability issues.

The winner of the contest will …

Looking for Cleantech Angel Investors

Sheeraz Haji

I have been getting more calls from early-stage cleantech entrepreneurs looking for seed funding. Many of these startup CEO’s have already met with a number of the focused VCs and figured out that their venture is too early for them.  A few have tried to pitch the Band of Angels or the Keiretsu Forum unsuccessfully. Yet they appear to be strong entrepreneurs with a great idea. I struggle with where to send them. I know of a few angels investing in the space but they are limited by the number of deals they can do as well as the size of their investments. Where’s the Reid Hoffman for cleantech?

A number of family offices have organized themselves to share dealflow and form investing syndicates. This is terrific news for the sector, and has significantly increased the number of investors who can invest directly into cleantech startups. However, this does not solve the early-stage fundraising challenge. Most family offices prefer not to lead deals and hesitate to participate in deals that are deemed too risky.

Many venture firms claim to invest in seed cleantech deals, but few have done so in the past year or two. Khosla Ventures is the exception. …

Who’s Brave Enough to Start a Solar Fund Today?

Sheeraz Haji

The other day an investor was updating us on his fund’s activities. He said their partnership had decided to focus on – you won’t believe this – capital efficient investment opportunities. Shocking! He was then quick to point out that they had only invested in one solar deal, and they were definitely avoiding solar going-forward. Sound familiar?

This conversation got me thinking – is anyone out there brave (or crazy) enough to start a new solar fund today. I’m not talking about folks willing to invest only in the downstream side. It’s well-understood that companies like SolarCity and SunRun are benefiting from cheap panel prices, government incentives, and financing vehicles. Many investors have noticed (for example, Silver Lake Kraftwork’s first investment was in Solar City); SunRun just raised another $60 million. I’m wondering if you know of any investors willing to focus new investments on solar technology (manufacturing) companies.

Why? My basic rationale is that it feels like the pendulum has swung too far to the negative, and there should be a plethora of solid solar companies to invest in at very reasonable valuations. Our i3 database captures almost 1800 solar companies. Yes, I know it’s tough out there …

Why Water

Sheeraz Haji

It’s not priced appropriately; regulation is fierce; it’s so fragmented (by geography, technology, and industry); channels are difficult; investment is scarce; water utilities and their engineering firms don’t want innovation … I’ve heard it before: All the reasons why it’s so hard to build a successful water startup.

However, I believe something has changed, and water is now poised to become a top cleantech theme and investment sector over the next few years.  Why?

  • Water pricing will (and has already) improved to more realistic levels;
  • Hidden costs (e.g. from energy costs to move water or property damage associated with water) will start to become more visible – especially to corporations;
  • Businesses will sweat the risks to reputation, product quality, up-time, and supply chain. Can a beverage factory operate without access to clean water? Can a mining company move forward with a project without the community’s trust that precious water resources will be protected?
  • Corporates are investing in water. Exhibit A is Ecolab’s recent acquisition of NALCO or ABB’s recent investment in Takadu;
  • Entrepreneurial talent is starting to pay attention to water, and we shall see some outstanding repeat entrepreneurs venture into the space.

Those of you who know the …

Global venture investment declines, but corporates step up and the IPO window cracks open

Sheeraz Haji

Venture capitalists might be running short of cash. This past quarter (Q1 2012), global venture capital investments declined 19% from the prior quarter and 31% year-over-year (see our press release here). On a brighter note, the total number of deals recorded in the quarter was 185, up from 176 in Q4 2011, and the tally will rise again once we round up other investors who have not yet reported all their deals for the quarter.

Despite an investor bias towards later-stage investing, early stage deals increased this quarter. The proportion of early stage deals increased from 37% (Q1 2011) to 44% (Q1 2012). The absolute number of early stage deals increased from 67 in Q4 2011 to 81 this past quarter. Huh? What’s going on? I think investors are creating a “barbell effect” – favoring hot early stage deals with repeat entrepreneurs and capital efficient business models as well as later-stage companies that already have a proven product and business model (e.g. SolarCity). In the middle, life is tougher. These “in the middle” Series B and Series C companies already have institutional investors but often are still working to remove technology and market risk from their business. They …