bi-weekly column with timely,
relevant and possibly irreverent
insight into the BC technology
May 2nd, 2008
Greenstone Venture Partners
Making Green Going Green?
“When green is all there is to be,
It could make you wonder why,
But why wonder why? Wonder,
I am green and it'll do fine, it's beautiful!
And I think it's what I want to be.”
Kermit The Frog, It Isn’t Easy Being Green
Today, venerable VC Kleiner Perkins announced a $500M
Green Growth Fund to invest in global green companies in
order to help “speed mass market adoption of solutions
to the world’s global climate crisis”. Well, phew.
Glad they are here to rescue us. You knew, of course,
that Al Gore is a partner of the fund. I’m sure you
could put Al’s entire knowledge of early stage companies
and venture capital into one solar cell. But he is
Captain Green, saviour of the universe, so in a way it
makes sense to have him aboard.
Massive private equity firm KKR announced a partnership
with (drum roll please) an environmental group, the
Environmental Defense Fund (EDF) to develop analytics
for all of its investee companies to essentially go more
green. The theory is it will save money as well as save
the environment. Wow... Birkenstocks and Boss suits in
the same boardroom. I am struggling to see how the
partners at KKR are going to drive Smart cars instead of
their new Audi R8s or Porsche 911s.
How long before we see David Suzuki sitting at the board
room table of a Canadian venture fund deciding on which
companies to fund while concomitantly deciding which
politicians and executives should go to jail?
Somewhere Naomi Klein must be squirming... capitalists,
the most evil people in her world, are going to make
money on saving the environment? Her new book will
likely be about the massive government conspiracy to
fabricate the global warming crisis to make a buck.
Let me just say for the record that I am in Michael
Crichton’s camp regarding global warming. Read
State of Fear and think hard about
whether Leonardo DiCaprio is correct in assuming that
all of the science around climate change is infallible.
Interesting that Hollywood isn’t making a movie based on
that story, huh? But I digress...
What is going on here? I want to look at this green
phenomenon from two perspectives. The first is as a
greedy venture capitalist (Sorry, Naomi... it probably
won’t work between us). The second is from the BC
technology industry perspective.
As my friend Paul Kedrosky likes to say, there is
nothing VCs like more than a bubble. And the bubble is
just forming in clean technology. Remember that there
are two distinct phases of an overhyped sector: the
phase where you make money on potential and the phase
where you make money from actual paying customers. It
is usually early stage investors (angels and VCs) that
make money on the first phase. Steve Jobs had the best
quote ever about an overhyped sector in 1989
(multimedia) which he dubbed the “Zero Billion Dollar
Industry”. That is where we are today with Clean Tech,
a definite zero billion dollar industry. Sure, sure
there are companies that have been in the environmental
business for decades making money in wastewater
treatment, recycling and other green areas... but
technology companies focused on the new mantra (reduce
carbon emissions) are just starting out on the long
journey to “mass market adoption”.
We had a mini-bubble in the industry FKA alternative
energy. Since it didn’t work out (the second phase
never materialized), the clever capitalists just came up
with a new name: Clean Technology. The previous bubble
was mostly about fuel cells and their non-polluting
ways. The problem with fuel cells is that they do
pollute, just not locally. Splitting water molecules to
get hydrogen turns out to be a very energy inefficient
process. But the threat of hydrogen cars did have a
good social benefit... it advanced the electric car
technology and the battery technology a long way. The
result is the hybrid vehicle, which I suspect we will
all be driving inside 5 years.
People that know how to make money are betting big on
clean technologies. The overwhelming push from
governments and the developed world to lower carbon
footprints is a big enough driver of the hype. Anytime
a polar bear wanders into a populated town south of the
Arctic circle, we start wringing our hands more
furiously. A bubble built on guilt... gotta love it.
You feel good making the investment because you are
going to make money AND make the world a better place.
Here are some numbers:
Clean Technology VC investing in the US in 2007 was up
56% in number of deals done over 2006. The dollar
amount invested ($2.2B) in the sector was more than
that invested in any of telecom, media and
entertainment or semiconductor sectors.
Canada saw an increase of 40% in Clean Tech deals in
2007 over the previous year ($169M), which is very
good in a year where overall VC investment was up 20%
In BC, we have dedicated Clean Technology funds (Chrysalix)
and clean technology partners in every other VC. As a
region, we tried to capture the title of “fuel cell
capital of Canada” in the last mini-bubble. That could
easily translate into Clean Technology capital based on
the fact that we are in the most eco-friendly region of
North America and have been for forty years. I love the
irony that big business centers like Toronto and New
York thought we were a bunch of tree-hugging fruitcakes
for years. Now they are flying out in their very carbon
friendly private jets to see what great clean technology
we have here to invest in.
I think Kermit the Frog should be the logo for BC’s
clean tech industry because it wasn’t easy being green
for many, many years. Now, the world wants to be like
us. That perception could build into money for
innovation, people that can and want to build big
businesses and capital by the truckloads.
Whether you are a believer in the guilt that we are
warming the globe or you believe that the world simply
warms and cools as it has for roughly 2 billion years,
it doesn’t matter. The bubble is upon us, the masses
believe we need the technology to help save us and this
region is uniquely positioned to reap a lot of the
benefit. Hopefully we will build a stable industry that
benefits us all after the bubble bursts as well.
What Do You Think? Talk Back To Brent Holliday
Something Ventured is a bi-weekly column designed
to supplement the T-Net British Columbia web site with
some timely, relevant and possibly irreverent insight
into the industry. I hope to share some of the
perspective and trends that I see in my role as a VC.
The column is always followed by feedback (if its
positive or constructive. I'll keep the flames to
Something Ventured Archive