Bruce Pasternack, a partner at CMEA Ventures, isn't new to energy. He worked at the Federal Energy Administration, before it was renamed the U.S. Department of Energy, back in the 1970s. He also served on the principal staff to the White House Energy Resources Council and the President's Council on Environmental Quality.
He joined CMEA last year after nearly 30 years as managing partner of Booz Allen Hamilton Inc.'s energy, chemicals and pharmaceutical practice. CMEA has often placed more emphasis on science and long-term bets than other firms and its push into green follows the pattern. It has invested in A123 Systems (batteries for cars), Solyndra (a novel CIGS solar cell), Codexis and Luminus Devices (next-generation LEDs).
Q: How has CMEA Ventures chosen its investments in green technology? How has CMEA's emphasis on "mashups" of science from one field into another influenced its strategies in the green space, and how do you feel those investment strategies have worked out?
A: Within the energy and materials space, we've kind of focused in on about five different areas. [In the first area], we've invested a fair amount in advanced power generation. That can range from solar to nuclear, if you want to pick a couple that are somewhat different. [Ed. Note: CMEA has invested in Solyndra, a thin-film solar company with a unique tube-shaped module design, as well as NuScale Power, a company developing small-scale nuclear plant technology.]
A second area is premium power, where we look at those oppo rtunities to supplement what you would normally get off the power grid. It could be something like battery technology for vehicles – we have some investments in one that's particularly interesting [A123 Systems].
A third area that we focus in on is future fuels. There, we've had a real focus in cellulosic ethanol through one of our investments, Codexis, which is, again, a transformative technology in our view, and is probably the wave of the future some years down the road.
A fourth area we look at is energy-efficient products. That could be lighting. It could be in buildings, where there's a staggering number, if you look at the percentage of carbon dioxide or other forms of carbon that are emitted, a lot of it comes from buildings.
Then the fifth area we look at is energy intelligence, which broadly defined means ... a convergence play between IT and energy and materials. It could be anything from smart grid type investments to information gathering, areas like that.
Q: Your investment in Luminus seems to indicate that you see energy-efficient lighting as a field for growth (see Luminus Closes $72M to Light Up New Applications). But how do you think Luminus will compete against giants in the lighting field, such as Philips, General Electric and Sharp? What would you say is Luminus's strategy for competing in this space, and what might its exit strategy be?
A: I would say in general, in any of our portfolio companies, we look at exit strategy all the time. The question is, normally, is it ultimately a strategic partner that becomes a buyer? It's easier for them to buy the company than to be an investor. Or, does the company have a technology that would easily fit [the company that wants to acquire it]? The exit strategy is, historically, you either go public at some point, or you get acquired. Sometimes it's both – you go public, and then get acquired.
The reason that an established player might acquire you is straightforward – you have a technical capability that they don't. They may want to copy you, but sometimes it's much easier to buy you.
Q: Given A123's rumored troubles (as reported by Reuters last month) in securing itself a place at the table to develop the battery technology for General Motors's promised Chevy Volt plug-in hybrid, what do you think of the prospects for the company?
A: I can't answer that. ... Whatever's happening inside a company – it's not our job to give that information out.
Q: What about Solyndra? The company's unique thin-film solar module design has drawn lots of interest (see Solyndra Rolls Out Tube-Shaped Thin Film), but some industry observers suggest that Solyndra's solution may be too complex for project developers who want more tried-and-true designs. What do you make of those arguments, and what do you think will come of Solyndra's effort?
A: I think most customers who would be targets for Solyndra would be very smart to pick Solyndra. It's a brilliant technical solution combined with a lot of other positive factors that would make it something people would want to buy.
Q: Let's talk about the credit crunch. How will this affect green technology venture investing, as well as the short- to mid-term prospects for various companies in the spaces you invest in, and how long will these effects last?
A: Again, it depends a lot on the stage the company is in. For those companies that were very close to exiting through an IPO – and we have a couple of those at least where it was certainly in the plan, that market is essentially dry right now (see Codexis Says No to IPO). The question there is, for how long, and what do you do in the interim? ...
I don't know how long this credit crunch is going to last. In the interim, the things we're advising our portfolio companies to do, is to be very, very frugal, be focused on the most important things. If your key product or key technology is going to drive most of your growth, you should put most of your efforts in that area, and as for things that were interesting forays into a new space, be very careful, because you don't want to spend a lot of money or cash in the short term that may be for an opportunity that may be further down the road.
