Financiers said Thursday they expect interest insolardeals to remain strong.
There's "a great appetite" for solar investments, said Jonathan Bonanno, chairman of the Keiretsu Forum's cleantech investing committee, during a panel discussion at Solar Power 2007 in Long Beach, Calif. He backed Cool Earth Solar and HelioPower and added that forum members would "almost certainly" be making new investments in the next year.
Venture capitalists have funded 45 new solar companies in the last year, with 25 of the financings being Series-A rounds, said Eric Wesoff, a senior analyst at Greentech Media and moderator of the panel. "It's pretty amazing," he said.
Still, total investment figures are likely to fluctuate, said Peter Nieh, a founding partner at Lightspeed Venture Partners. As in biofuels, some of the bigger solar investments will come as later-stage companies expand production, he said.
Panelists also doled out tips for solar entrepreneurs seeking investment.
In the solar-panel space, Nieh said he's particularly focused on the economics, but many of the entrepreneurs who come to pitch him haven't analyzed their costs.
"You don't need a lot of capital to try to understand the potential economics of what you're doing," he said. "If you're very early stage, you don't know exactly how it's going to turn out, but [I'm looking for] a thoughtful analysis of the economics. It boils down to cost - what can you produce at what cost? A lot of startups aren't prepared to answer that question."
John Denniston, a partner with Kleiner Perkins Caufield & Byers, said he looks for companies that can make solar cost-competitive with conventional electricity. He also said he looks for a balance between knowledge and humility.
"Most of the entrepreneurs coming into this field don't know much about solar," he said, considering it's a new and growing industry. "But it helps if you've done a deep dive."
He added he sees a difference between people who act like experts when they aren't and people who admit, "'I come from the semiconductor industry, but I've worked really hard in the last 12 months [to get up to speed]. There are some things I don't know.'"
Fred Wang, a general partner at Trinity Ventures, said he's looking for scrappy companies that have made progress without resources and that can show they've eliminated as many risk factors as possible. "It's risky enough even when everything looks buttoned down," he said.
At the angel-funding stage, Bonanno said the expectations are somewhat lower. "Be on time, be prepared to answer questions about your business model, dress yourself appropriately," he said. "I'm starting with the very basics."
He added that he looks for credible entrepreneurs who understand the market and who their competitors are. He also makes investment decisions based on whether he likes the entrepreneur, because they tend to spend a lot of time together, he said.
"At the angel level, I see a lot of garbage," Bonanno said, adding that he gets the companies venture capitalists won't back, including a lot of people in garages.
Financiers said they expect inflection points that could grow solar more quickly than it's growing today.
"We will have another inflection point for sure," Denniston said. "Policy action and/or technology - probably both. If we put a price on carbon, it changes all those graphs."
But money for early stage lab research could be an issue, he said. Compared with life sciences, the amount of research money going into greentech is "peanuts," he said.
"The National Institutes of Health will invest $28 billion to help improve human health," he said. "That's a good thing. But the DOE has invested $1.5 billion for all renewables and about $150 million for solar. … I would feel better about this if funding at the federal level [showed] we took this as seriously as human disease."
Public policy also will play a large role, he said.
Wang agreed that industry growth is heavily influenced by public policy.
While he said he hopes solar will reach 2 percent of the U.S. energy market in five to 10 years, he added that it's hard to tell what the government is going to do.
"In solar, there's a lot of early stage investment, but there also are a lot of companies that are going to want to scale up and that will need capital for that," he said.
Arno Harris, CEO of Recurrent Energy, also participated in the panel.