MDV's Josh Green at NextWave: Cleantech Done Right Is a Great Investment Opportunity

MDV’s Josh Green at NextWave: Cleantech Done Right Is a Great Investment Opportunity

Despite a severe drought in cleantech VC, “the pendulum will swing back and we must be prepared.”

Eric Wesoff August 11, 2014

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

Veteran venture capitalists like Josh Green, General Partner at Mohr Davidow Ventures, have had their usually optimistic views tempered by painful lessons of the cleantech past. Green presented on "The View From Sand Hill Road" at Greentech Media's NextWave Greentech Investing event in Menlo Park last week.

How can a "multifaceted" venture capital firm find its way back to the cleantech sector?

Green likened the following data "as the opening scene of Saving Private Ryan." He assured the crowd that "it gets better" and that cleantech is a great investment opportunity when it's done right.

Cleantech investment is barely perceptible on VC radar

2014 Q2 national VC investments	2014 Q2 national VC cleantech investments
1,114 deals	42 deals
$13 billion invested	$600 million invested

Cleantech accounted for 3.7 percent of all VC deals and 4.6 percent of all VC money.

Green introduced the follow-on funding vs. new funding slide "as the most important slide."

Initial investment actually hit zero in Q1 of 2014 and a paltry 5 percent in Q2 when only $30 million went into "a small handful of deals." In other words, no investors are investing in early-stage cleantech.

Cleantech was first purpose-driven investment category

Green contended that this was the first time in venture that a "category had a purpose." He suggested that no previous category in VC focused on purpose rather than technology, saying it was "a simple, innocent mistake with large implications." It created tremendous category risk, political risk, unrelated technology risk and capital intensity risk

No other category had grouped unrelated technologies that made them dependent on each other. Biofuels and solar don't have a lot in common, but if one of the sectors starts to fail, "it stigmatizes the other sectors," according to Green.

Green suggested that capital intensity "was a bit of a ruse." He pointed out capital-intensive cleantech successes like Tesla, as well as IT startups like Twitter that require $400 million.

The pendulum will swing again

Green acknowledged that most mainstream VC firms have dismantled their cleantech groups. And despite "the lean startup" having become part of the Sand Hill Road lexicon, "the pendulum will swing again," according to Green, "but not for the next few years." He added, "When the pendulum swings, it will be at shocking velocity," and the "large majority of winners come from being early in a pendulum swing."

He suggested that "cleantech as a VC investment category is being reinvented with different labeling."

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