Macrotrends, pt 1:  The rise of cleantech P.R. wars

This ain’t my day job, people.

The reason (or at least ONE reason) these posts come so infrequently and at odd hours is because I try to squeeze in some quick news-reading and typing whenever I get a spare moment from being a full-time venture capital investor.

It can be fun when worlds collide—I’m often on the list to receive press releases, for example, and have even had a conference or two where I was granted “media room” status when I was really there to scout for deals and network.  So I get to see the ongoing cleantech P.R. wars from both sides of it.

Some funny interactions can ensue.  Like the time I was called up by an investor at another firm who wanted to chat, so I’m thinking about what deals I’m working on that he might be interested in co-investing on, and expecting an update on a deal he’s working on, or a market question he wants input on.  Instead, he passed the phone to one of his partners (and the only GP there I hadn’t known well already) who proceeded to lecture me about one of my blog posts where I’d passed along some bad info about their firm.  Hey, no worries.  So anyway…  how’s that deal going that we discussed a couple of weeks ago?

Or this email I got from a P.R. firm recently:

Subject:  Who’s Afraid of a Green Bubble?

Hi Rob,

While the current enthusiasm for clean tech is sure to yield some amazing new technologies, it’s also equally sure to lead to big losses for investors who are in over their heads. As you know, evaluating clean technology isn’t as simple as loving its mission. Venture Capitalists [Name omitted] and [Name omitted] of [Venture Capital Firm X] believe we are in the midst of a green bubble. They reviewed 1700 clean deals in the past 12 months and only invested in 7. The opportunity is great, but so is the risk. The companies that will succeed are those that can truly compete with petroleum and the grid in terms of price and availability. This requires more than a great technology-it takes an understanding of how to scale a company and how to partner with Big energy (the incumbent companies that control the industry today). Please let me know if I can introduce you to [Name omitted] or [Name omitted] to discuss the green bubble.

• What entrepreneurs and investors need to know to be successful
• Why most companies won’t make it past the test phase and into the marketplace
• The keys to partnering with energy incumbents
• Next generation fuels: why ethanol is better for martinis than cars
• Which clean tech fields are over saturated and which show real opportunity
• Why government subsidies can inflate the bubble

The partners have strong views on which technologies will make it and which won’t survive the bubble. ... Most [Venture Capital Firm X] partners have a background in science, whether its emergency medicine or engineering.

Please let me know if I can introduce you [to Name Omitted] or if you’d be interested in an introductory phone call or face-to-face meeting…

One of these days I’m going to take up one of those flacks’ offers, just to enjoy the awkwardness of having my investor colleagues have to show up and answer some journalist-type questions from the amateurish likes of yours truly…  Such as: “How the heck does anyone really review 1,700 investment opportunities in one year???  Wouldn’t that mean ‘reviewing’ one new startup every hour or so every single workday?”  Ah, the P.R. game.

The rapid rise in P.R. activity is what I’m pointing to as the first “Macrotrend” among several I hope to write about over the coming weeks. Because it might be interesting to think about what’s driving it, and what it hopes to accomplish.

Besides the general upsurge in cleantech activity overall, what’s driving the rise in P.R. activity is the entry of VC firms with a long history of playing the publicity game for the benefit of themselves and their startups. Because P.R. can be useful at times.  Creating “buzz” around a company can help it get traction with early customers and business partners, and can also be helpful in raising that next round of financing.

Some bigger firms are especially good at playing the “stealth company” game:  They tell the CEO at their portfolio company, “You’re now a stealth company—take all useful info off your website, and refuse to talk to reporters.”  Then the VC firm’s GPs go out and do speaking events around the country where they happen to mention (“oops!”) that they have a stealth company in that sector, one that they’re super-excited about.  If reporters had gotten a P.R. firm’s email about the startup, there’s a good chance they wouldn’t care or at least would bury the story, given the volume of such emails every day.  But a “so-and-so backed stealth startup”??  Now THERE’S a scoop to go find!  And so when the reporters do track down the company in question (which isn’t hard), they write it up as a feature story and with all sorts of glowing conjecture about what might make the startup so exciting.

Such efforts to use P.R. on behalf of portfolio companies can go a bit overboard, in my humble opinion…  If a company was really intended to be stealth, the investor wouldn’t be dropping breadcrumbs like that, right?  Here’s another example:  I was speaking with one investor about one really big deal announcement they did, a massive round of financing, when it wasn’t clear to me why they needed so much capital at that time.  After some good-natured badgering he finally admitted to me that the P.R. value of announcing such a large deal was seen as having some important strategic value for the company, lending some instant credibility to the effort.  In other words, they were putting in tens of millions of dollars before it was actually needed, partly for the marketing benefit.  To which I jokingly replied, “Huh.  So how many sock puppets do you get for all that money?”  I kid, I kid…

As more and more firms jump into the cleantech market, it’s generally good things for the sector—attracting strong interest from entrepreneurs and managers, and attention from large corporations (customers and future acquirers), not to mention the depth of venture capital expertise these generalists can often bring to the table.  But as we’ve discussed here before, the new entrants also understandably tend to gravitate into a few narrow sub-sectors (at least at first), which is one reason why portions of the market (like thin-film solar and ethanol and electric cars and late-stage in general) have gotten so much of the venture capital.  Which of course means those sub-sectors get crowded with lots of well-financed startups trying to get noticed.  Which leads to P.R. wars.  Which leads to silliness like large financing rounds for marketing reasons.  And those generalist investors also need to try to communicate to LPs, entrepreneurs, etc. that they’re not really new to the sector, they’re smart on cleantech already.  Which leads to even more P.R. wars.

All of which overwhelms the journalists covering the sector.

I now receive about 10 such P.R. emails a day, up from, say, zero a couple of years ago (of course, many of the emails have to do with a product launch announcement or conference or something non-VC related, not deals).  Not being a journalist, it’s kind of fun to see them, and I’ve even used a couple of them in a column or two.  But I imagine those intrepid reporters at GTM, VentureWire, etc. must get even more than I do, and so I have huge respect for the challenges they must face in having to deal with deadlines and digging for scoops and not being “late to report the news,” what with that constant drumbeat of P.R. activity every day.

What inevitably happens is that the news coverage of the cleantech sector gets dominated by the various P.R. wars, and not by what’s really going on.  There are deals you don’t hear about.  There are great companies you don’t hear much about.  There are entire subsectors within the cleantech market that you don’t hear much about.  There are super-smart investors either already established or getting into this sector who don’t get written up and profiled in glossy magazines, but who are building strong companies and helping to build a robust cleantech ecosystem that will drive years of future sector growth.

The growing hype wars could easily create the idea that there’s a bubble going on in cleantech.  Perhaps they are indeed a symptom of that, although I would disagree with any such overly broad generalizations.  But readers should bear in mind that the P.R. wars, and thus the media coverage, only marginally reflect what’s going on throughout this sector right now.