So it's been a couple of weeks now since the NextWave Greentech Investing conference, and I thought I would share three of my takeaways from an interesting day of speakers and panels. And again, my thanks to Greentech Media for organizing the event and once again inviting me to take part.
At the beginning of the day, during my opening talk, I mentioned that I wanted the attendees to gain three things: enthusiasm, some interesting lessons learned, and some new connections. And I think all three were achieved in what was once again a packed-house event. Which leads to the first takeaway:
There are a lot of good stories out there to be told
We had a day full of success stories and momentum stories (i.e., not yet a success, but in strong growth mode) -- Nest, Next Step Living, Hannon Armstrong, SolarCity, Clean Energy Collective, RideScout, and others. Last year's inaugural event was a bit more of a revival meeting of sorts, where everyone (including me) was excited just to be in a room full of other people excited about being in this sector. This year, it was more focused on pragmatic trendspotting and how-tos, but there was still a lot of that same positive energy with stories of next-wave entrepreneurs making good progress. It was great to see amidst a still-generally-negative backdrop of how people talk about our sector.
But of course, this is all highly predictable. As prices fall for upstream technologies in subsectors like solar, LEDs, batteries -- and especially when they are increasingly married to IT-based capabilities around networked intelligence -- the value propositions are made very attractive to end consumers. Lots of these next-wave entrepreneurs are taking advantage of these falling costs (yes, in no small part thanks to the "last wave" of cleantech!) and capabilities to build exciting, fast-growing businesses solving real market needs.
The action has moved beyond the VCs
Yes, venture capitalists' interest in "cleantech" is way down. But meanwhile, there are still significant dollars being put to work. First of all, family offices and corporate investors spoke at various points in the day about how their interest in these technologies and markets has never been higher. And meanwhile, as I mentioned at the beginning of the day in my opening talk, my firm has tracked well over $4 billion in capital commitments to distributed-asset (i.e., rooftop solar, energy efficiency) implementations over the past twelve months just in the U.S. alone. That more than makes up for the shortfall in VC dollars, but you really don't hear about that much, do you?
And that in fact is where some of the most exciting progress is happening these days: financial innovation and business model innovation. Nothing against technological innovation, but we're catching up to the fact that it is "necessary, but not sufficient" for us to be able to make the kinds of disruptive impacts that are overdue in these often-antiquated markets. Financial and service-model innovations are also needed. So the fact that all this capital is now flooding into actual implementation along these lines? A huge milestone, even if one that's largely under-recognized.
Entrepreneurs have shifted toward models that are more in keeping with where VCs are today
There are a couple of clear trends in early-stage venture capital right now, toward favoring plays that will be able to get into the market quickly and cheaply. With "lean startup" methodology as one force behind this thinking, the idea is to get out there into the marketplace and start demonstrating momentum rapidly (and then, to be clear, there will be plenty of venture dollars available for such companies at the growth stage).
We talked about how many of the aforementioned success/momentum stories in the market right now reflect a similar philosophy, how these and other next-wave entrepreneurs have (often just out of necessity) embraced the idea of staying capital-light and getting out into the market with available solutions -- as opposed to the last wave of cleantech innovations, which were marked by long technology development periods, massive capital needs, etc.
So one could extrapolate that VCs will be increasingly interested in such next-wave entrepreneurs -- as soon as they can get over the "cleantech" label. And in fact, this is happening, at least in some ways. Areas like agriculture, food, and transportation are all seeing a big resurgence in terms of venture capital activity. But they would never call it "cleantech" (and, to be fair, a lot of it isn't really driven by concerns of natural resource constraints, at least not directly). It's a small overlap so far, but a meaningful one in my mind, and it tells me that the very beginnings of the pendulum swing of generalist VCs investing in next-wave cleantech entrepreneurs has started. However, it is a small beginning, and it might well happen without ever again embracing the "cleantech" label.
There are some key lessons here for entrepreneurs seeking venture funding, of course.
So as you can tell, I saw in the day's conversations that we are at an interesting crossroads for the sector.
The only bummer of the day is that some kind of internet upload issue meant that the video recordings weren't of great quality, but if you'd like to see any of the sessions, here they are (at least for the time being):
My welcome and market overview talk (after Shayle's intro)
Henrik Holland's overview of how Shell is viewing cleantech these days
Josh Green's take on how Sand Hill Road views the sector, and what entrepreneurs should do about it
A debate on the relative value/importance of the "cleanweb"
Greentech Media's analysis of downstream solar innovation
A fireside chat with Mike Allman, former chairman, president and CEO of the Southern California Gas Company
Family Offices: Charging Ahead (panel)
A fireside chat with Scott McGaraghan of Nest Labs
Paths to Exit (panel)
Siemens' perspective on resource efficiency and advanced manufacturing
The Future of the Utility (panel)
A fun panel with crowdsourced questions
Hannon Armstrong's take on distributed asset finance
Beyond Venture Capital (panel)