Archive for the ‘Energy’ Category

Jul

12

 

Cleantech startups, here’s why you need a Commercialization Executive

Posted By CMEA Capital

I recently wrote an article on Cleantech startups and Commercialization Executives for VentureBeat.   Let me know if you have an example or a counter example.  The article is pasted below or you can find it on VentureBeat by clicking here.

Warning: Trite Statement to Follow: The leadership at a start-up makes or breaks the success of the company. 

Yes, you’ve heard it a million times. There are multiple reasons for this, and that topic alone calls for a whole different article. Right now let’s focus on one particular skill-set of a leader that has been a positive indicator of success time and time again for energy and ‘cleantech’ venture-backed companies: a successful energy investment requires a Commercialization Executive. 

Many venture capitalists will tell you that this is not so, and there are examples where a technical founder is the right CEO to lead the company from start-up through the early growth phase, through a public offering and beyond.  There are even studies showing that founder-led companies tend to outperform professionally led firms three years after an IPO.  However, these studies usually look at high-tech companies creating new products for new markets.  Having worked with and sat on the board of many energy and materials companies for years, we have observed that this sector necessitates this particular commercialization skillset.

Why?  The energy industry is dominated by large incumbents with years of experience delivering a commodity product with extraordinary reliability and a high degree of safety at a reasonable cost.  Think about it – when was the last time you stopped to question if a light bulb was really going to work before flipping the switch?  Or when did you stop to wonder if the gas you are putting in your car will get you to where you need to go?  The energy industry is not one in which you can throw a beta version out to the market and see how customers respond.  New products must meet the same reliability and safety requirements of existing offerings on day one. 

Additionally, selling a product in this industry means dealing with one or more of these large incumbent companies as a customer, distributor or partner.  Doing this successfully requires company leadership with personal experience in working with these companies.  Being a Commercialization Executive does not necessarily mean that the person doesn’t have a technical background or is not a company founder.  However, it always means that the executive has business experience, relationships, and a successful track record in either the exact same or a closely-related industry.

Take for example, the recent successful IPO of biofuel company Amyris.  Amyris was founded by UC Berkeley professor Jay Keasling and key members of his lab to design anti-malaria drugs, biofuels and chemicals sought by the market.  When the investors brought in a new CEO in 2006, they selected John Melo who was president of the $30 billion U.S. Fuels Operations business unit of British Petroleum, in addition to his experience in the refining and marketing segments of the business. John not only focused the company on biofuels, but also squarely on diesel production (the world’s most widely used transportation fuel) instead of the in-vogue ethanol.  Within six weeks, the company had its first yeast strains ready to produce a diesel precursor. 

This was someone with first-hand knowledge of the fuels industry on a commercial scale – a Commercialization Executive.

CMEA Capital has applied this lesson to our portfolio companies, including Danotek Motion Technologies.  Danotek makes permanent magnet generators, largely for the wind industry.  The founder developed the initial innovative technology and successfully led the company through the development stage.  Now that the technology is proven and it is time to grow the company, we have added an experienced Commercialization Executive.  Don Naab was most recently a Group President with Broadwind Energy, running a $120M business in Gearworks and Energy Maintenance.  His success in the wind industry gives him the authority and contacts needed to develop Danotek as a major supplier to that industry.  As a result, he has been able to multiply the sales pipeline by more than 10X since coming on board.  In talking to customers, many have mentioned that their prior relationship with Don is the reason that they are confident in the success of their contract.

Are there exceptions to this lesson?  Of course!  Lots of them.  One notable exception is in the area of customer-facing energy software products.  This sub-sector of the overall energy industry looks much more like high tech, where a founder with sufficient high-tech experience is probably more valuable as a leader than a senior executive from a utility’s IT department. Should we not invest in a company where the technical founder is still leading the company?  No, but an ongoing conversation needs to be started. As the company begins to grow, a plan must be in place for the leadership of the company to get through the critical commercialization phase.

As recent NVCA statistics show, significant VC money is still flowing into energy companies.  Do you have examples that either meet or contradict this perspective on a Commercialization Exec?

Rachel Sheinbein is a Principal in the energy and materials practice at San Francisco investment firm CMEA Capital. She is also a board member for Expanding Your Horizons, which encourages girls to pursue careers in math, science, engineering and technology. Twitter: @RachelSheinbein 

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Dec

15

 

China’s Continued Domination in Cleantech Investing

Posted By Michael Melnick

Kee Ming Chi from the Hong Kong office of O’Melveny & Myers recently gave an interesting presentation on Chinese investment in cleantech.  China is way ahead of the rest of the world when it comes to cleantech investments and Kee Ming Chi covered two big reasons why.

(1) He calculated that $34B in Chinese stimulus money was SPENT on cleantech in 2009; that’s compared to $33B DOE ARRA funding authorized with only $8B disbursed so far.

(2) China’s 12th Five Year Plan sets energy efficiency and GHG targets, and is expected to call for investing another $753B in cleantech over that period. A lot of that will go to building out China’s electricity grid, including a focus on ultra-high voltage long distance transmission lines, interconnection of regional grids and a focus on making the grid smarter.

However, China’s cleantech investment path is not without some obstacles.

(4) Feed-in tariffs are project by project, and even without them they get a lot of very low loss leader bids on new power projects that make it very difficult for foreign companies to compete.

(5) Capital markets in China are “temperamental”; Xinjiang Goldwind, for example, is doing a $916M IPO in Hong Kong after pulling their IPO earlier in the year, but the feeling is that the capital window could close at any time. Project financing in China has become much more conservative and revenue based, though some private equity and utility funding has stepped up as have China Development Bank and China Exim Bank.

The aforementioned obstacles aside, China will continue its domination over the United States when it comes to cleantech investing.  Why?  The U.S. continues to focus on innovation; even though we’re good at it we cannot rely on innovation as the cure to our economic ills though, because we will not capture sufficient economic value and job creation unless the US government learns from the Chinese example and helps bridge the valley of death between innovation and manufacturing. China’s focus on project financing for manufacturing helps give them their competitive edge in areas of strategic importance like alternative energy. DOE’s loan guarantee program was a great step in that direction but still a baby step compared to what the Chinese are doing; hopefully the program doesn’t fall victim to the Republicans. Without more of this kind of government support the valley of death likely cannot be bridged by younger companies in the current financing environment, and they are our best hope for significant job creation.

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Filed Under: China, Clean Energy, Energy, Innovation  |  

Oct

22

 

Proposition 23: Nothing More Than Misdirection

Posted By Jim Watson

I did an op-ed piece for Xconomy which was published this morning entitled Proposition 23: Nothing More Than Misdirection.  In the article I write about the impact Prop 23 will have on clean energy startups and how its supporters would like voters to believe that there is some imaginary correlation between climate legislation and unemployment.  I look forward to hearing your thoughts on this important subject.

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Filed Under: California, Clean Energy, Energy, Government  |  

Jul

16

 

Here’s To Secretary Chu And The End Of Energy’s Dark Ages

Posted By Maurice Gunderson

I wrote a guest blog for Forbes Velocity earlier this week about Secretary Steven Chu and the effect he is having on energy innovation, entrepreneurs and the relevance of the Department of Energy in general.  The post is entitled, Here’s to Secretary Chu and the End of Energy’s Dark Ages.  Enjoy the read!

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Filed Under: Clean Energy, D.C., Energy, Entrepreneur, Government, Innovation, venture capital, Washington  |  

Jun

30

 

Alternative Energy: Creating Non-Exportable Jobs

Posted By Faysal Sohail

Earlier today, my guest blog post was published on Forbes Velocity Blog.  I write about the alternative energy industry being the latest in a series of waves of innovation in the Valley and how this new innovation will affect job creation.  I look forward to hearing your thoughts and comments on this subject.  You can read the entire post on Forbes.com.

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Filed Under: Energy, Entrepreneur, Innovation, Silicon Valley  |  

Jun

02

 

California Dreaming: Why AB32 Makes More Sense as Federal Law

Posted By Maurice Gunderson

I wrote a guest post for Forbes, which was published today, entitled California Dreaming:  Why AB32 Makes More Sense as Federal Law.  In it I discuss the pros and cons of AB32 going into effect on its original schedule and how, unlike most energy issues, I am having difficulty choosing sides.

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Filed Under: California, Energy  |  

May

25

 

Social Good with Market Returns — A Report from the Skoll World Forum

Posted By Jim Hornthal

Last month, I was fortunate to attend the 7th Annual Skoll World Forum, with around 800 of the world’s most impactful and influential social entrepreneurs and key partners who gather at the University of Oxford to exchange ideas, contacts and information.  One of the highlights was a panel that confronted the conventional wisdom that social returns come at the expense of financial returns.  Or, to put it more simply, could you have your cake and eat it too?

This was the position of David Chen, from Equilibrium Capital, who maintains that forward looking investors (owners, not traders), can help solve market problems and have a positive impact on the environment and society while generating market rates of return.  However, there is often a role for public policy in facilitating and encouraging innovation in key sectors.

The US economy is no stranger to these practices.  The creation of the 30-year mortgage was a reflection of the public policy to make home ownership more affordable.  Rural electrification, the interstate highway system, the Telecommunications Act, and the internet are further examples of how effective public policy can stimulate huge market growth.

This lesson has not been lost on the Chinese.  Taking note from Tom Friedman’s editorial last fall, the US is at risk from trading our current addiction to Middle East oil for a future addiction to solar panels made in China.  Fortunately, we are not completely asleep at the wheel.  The DOE is doing it’s part with innovative loan guarantees to support emerging technologies.

The question is, are we doing enough?  Free markets are great if no one is pulling strings.  When nation states sit at the table, the stakes increase, and so does the governmental ante.  Do we have the political will to take a long term, patient view of the horizon?  If we don’t, then “We’re Number Two” may sadly become our future rallying cry.

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Filed Under: Energy, Government, Public Policy, Social Entrepreneur  |  

Mar

03

 

Partnering with Universities to Keep U.S. Competitive

Posted By CMEA Capital

Tom Baruch

Over the past 30 years, responsibility for the research function at major US companies has shifted from the flagship R&D labs at venerable institutions like Bell Labs and HP Labs to the science and engineering departments of public and private universities. 

This sea change has left the US vulnerable to the aggressive threats from low-cost labor in Asia seeking to undermine US manufacturing competitiveness. It has become abundantly clear that we must nurture a research function in our Universities that not only performs world leading basic research but also drives product and process innovation in American industry. 

Recognizing this urgent societal need, Commerce Secretary Gary Locke and his associates at the U.S. Department of Commerce gathered a group of about 50 like-minded individuals on February 25, 2010 in Washington, DC to discuss U.S. university strategies for technology commercialization.

What became clear after 4 hours of intense discussion is that our U.S. universities are a national treasure for commercialization of research leading to sustainable growth and the creation of quality people owning quality jobs.

(more…)

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