The Innovation Cycle and the Commercialization Cycle

Looking forward to seeing everyone at our REBN-East networking event at Boston University on Tuesday night.  As a topic for discussion, I’ll throw this thought out there:

Had the pleasure of visiting NREL last week as part of a productive trip organized by the New England Clean Energy Council.  There, I and around a dozen other VCs from the Boston area were presented to by several of the Lab’s researchers in areas like solar PV, biofuels, energy storage, etc.  It was a good opportunity to once again peak “under the hood” at a DOE energy lab, to get a quick overview of some of the world-class research being done there.

It was necessarily a brief overview, but one thing that came through for me loud and clear (yet again) was how short the Innovation Cycle is in many of these sectors.  Yes, each innovation in an area like solar is often the result of years of difficult research.  But with so many efforts underway in parallel (at NREL and elsewhere), the results mean that every year there’s a new bright idea for how to eke out more electricity from available solar resources (for example).  New materials, improved manufacturing techniques, more effective components…

In many cleantech sectors there’s a backlog of these kinds of innovations, as the ideas languish uncommercialized in the labs and the literature, awaiting visionary entrepreneurs and investors.  But in some of the more investigated sectors, investors are quick to jump on the latest innovation out of the various centers of research.  Breakthrough innovations funded last year are trumped (on paper, at least) by this year’s funded innovations, and they’ll all be trumped by next year’s funded innovations.

Meanwhile, we’re all still waiting on many of the innovations from several years back to be fully commercialized.  Continuing to pick on the solar sector as illustrative example, we’re all still waiting for many of the promised thin-film manufacturers to fully hit the market.  That’s not to cast doubt on those players, it’s just a lesson in how long the Commercialization Cycle is for these technologies.

So the questions for Tuesday’s REBN-East event are these:

1.  Put on your “green cluster-builder” hat—what could this disparity between the Innovation Cycle and the Commercialization Cycle mean in terms of key roles for public policy?

2.  Put on your VC hat—what could the disparity mean for investors?

Speaking of cleantech clusters:  The NECEC has launched a new Fellowship Program to help experienced entrepreneurs from outside the industry to gain familiarity with clean technologies and launch the Next Big Things.  Check it out!

Deals from the past week (-ish):

• Grid-scale solar energy developer eSolar has raised $130mm from Idealab, Oak Investment Partners, and Google.org.  They plan on building a demonstration plant later this year.  Back in January we passed along word of Google’s $10mm investment—no word on whether this new investment figure includes that or not.

• Kleiner and RockPort have teamed up to help launch Th!nk North America (no, that’s not Al Gore’s latest public awareness campaign, it’s a car company), in partnership with Norway-based Think Global.  Think Global was already a portfolio company of RockPort’s.  Fortunately for the company, it would appear that Th!nk is not “very cute”.

• Ireland-based NTR has put $100mm into Stirling Energy Systems in what has been called an “investment,” but did result in a 52% ownership for NTR, so is really a bit of an acquisition.

• River- and tidal-energy system developer Hydro Green Energy has raised a $2.6mm Series A led by The Quercus Trust.

• Sensicore has apparently been acquired by GE.

Cleantech investors in the news:

• British Columbia has launched a new $90mm venture capital fund, managed by several institutional investors, with cleantech as part of its mandate.

• Bill Weihl in a good interview about Google’s renewable energy activity (but he won’t dish on which technology he thinks is overhyped).

• Piper Jaffray looks to ramp up their activities in cleantech.

Other news and notes:  Interesting article on something we’ve talked about before—the project financing challenge in cleantech…  Seattle-area VC firms “chided” over their relatively low cleantech investment amounts…  A good article illustrating how “green collar jobs” are being targeted for economic growth...  But on the other hand, some argue that the lack of strong technical talent in the sector is a continuing challenge...  Dallas points us to an update on the peak oil argument…  GTM puts out their updated Top 10 startups list—apparently the unstated 7th criterion is how much effort the company puts into PR (full disclosure: @Ventures portfolio company Powerit is mentioned)...  Finally, some tips on green choices consumers can make, from the recent NYT “Green Issue” (full disclosure: @Ventures portfolio company M2E Power is mentioned).