As you've probably read, there are a lot of differences between greentech and the Internet.
One of the big differences is capital intensity. It takes hundreds of millions to build a PV plant or a biodiesel refinery. A Web 2.0 company takes a few cases of Red Bull, word-of-mouth recommendations and an established corporate buyer to snap you up before the cash runs out.
On the other hand, the percentage of self-absorbed crazy people in greentech is waaaaay lower. The Web world is packed with individuals obsessed with comments to their review of the food at International Mart Food Liquor Deli Copies on Yelp or their "constitutional" right to steal music. Case in point: An ex-Googler wants to build communities on the high seas. He isn't doing this to escape overcrowding or environmental degradation (see Green Light post). It's so people "dissatisfied with our current civilization can go to build a different (and hopefully better) one."
A great idea, until you realize that you have 70 people, 26 guns, three La-Z-Boy chairs and no one in charge.
By contrast, the average greentech success story is someone who has spent the last 17 years locked in community land planning use meetings trying to get permits for a 230-mile transmission cable. Tolerance for tedium is a highly prized skill.
But lately a new, and ominous difference has emerged. You could call it the Milo Cavic phenomenon and it's this –
Increasingly, success in green technology will revolve around landing large, multi-year contracts with established entities. For smart grid companies and solar power producers, that will invariably mean a contract with a utility. For a biofuels company, it will mean a development and deployment deal with a BP-type corporation.
Those that get these large contracts stand to reap billions in revenue. Those that don't will have to radically adjust their business model and/or accept a new way of life. Survival won't be easy. (Milo Cavic is the Serbian swimmer who lost to Michael Phelps by 1/1,000th of a second. How soon we forget.)
The latest events in the solar thermal world show how it works. BrightSource Energy landed a contract to build a 1.3-gigawatt power plant for Southern California Edison. With that deal, BrightSource now has contracts to sell up to 2.2 gigwatts of power in California. The company may not get there – solar thermal providers in California boomed and then went bust in the early '90s – but a path to the future has been laid.
Compare that to Ausra and eSolar. In January, Ausra announced it would no longer try to become a power provider (see Inside Ausra's Big Change). Instead, it will sell its solar thermal equipment to people who can afford to build power plants and to industrial customers. eSolar wasn't as candid as Ausra but the effect is the same: It sold the development rights to three projects, along with equity in the company, to power provider NRG for $10 million (see With NRG Deal, eSolar Shifts From Power Provider to Equipment Maker). (Approximately $130 million has already been invested in eSolar.)
This doesn't mean Ausra and eSolar are doomed. Instead, it means they are now hardware manufacturers, and will have to endure intense competition, continual renegotiation over terms and eroding prices. If you compared this to the IT world, BrightSource would be in the position of an enterprise software vendor like Oracle: ensconced until it screws up. Ausra and eSolar would be selling PCs: You're only as good as your last quarter. Wave companies face a similar choice.
The same thing is happening in smart grid. Silver Spring Networks has signed deals to sell five million meters to PG&E in Northern California. That's five million meters someone else will not sell. Consumers may install their own meters someday (funded by rebates from the utility) but for the next several years, consumers will be content to wait and have the utility select one for them.
And it trickles down from there. Silver Spring has selected Exegin for its ZigBee stack in its meters, effectively giving the company an invitation to the cool table in the cafeteria. If you think about all of the money in the stimulus plan going to energy, it's not an exaggeration to say that some of the most important people in the world work in the biz dev departments of utilities. Bet you didn't see that coming four years go.
Web companies have far greater autonomy. Consumers didn't switch from Yahoo to Google because Microsoft selected it as a standard on PCs. They switched because search was better. Success or failure ultimately revolves around gradual migration with no centralized decision-making authority.
Put another way, greentech companies won't need the support of millions of customers. They just need to be remembered by the 22 that matter.