With the news that famed analyst Mary Meeker will be joining venture firm Kleiner Perkins Caulfield & Byers as a partner in its digital practice, a big question remains: Will Kleiner be moving farther away from its foray into greentech and closer to its digital roots? Fortune ponders that and seems to conclude that yes Kleiner is “refocusing.”
If so, it’s been a long time in coming. Kleiner’s John Doerr has expressed concern over the firm’s greentech investments before. About a year ago, Doerr said during a speech that if Kleiner had seen how bad the market was going to crash, it probably wouldn’t have started it’s green initiative: (see Doerr videos from EETimes and the live stream of the event today on FORA.tv):
“If we’d been able to foresee the crash of the market, we wouldn’t probably have launched a green initiative, because these ventures really need capital. The only way in which we were lucky, I think, is that the government stepped in, particularly the Department of Energy. Led by this great administration that put in place these loan guarantees.”
For example, Kleiner backed 8-year-old fuel cell company Bloom Energy, which Doerr said in his speech has “required ten times as much capital,” compared to other venture companies. It took Google $25 million to get to an IPO, Doerr pointed out, and Bloom has already taken $250 million. Doerr said he’d wager Bloom will take “nine years to a successful public offering.”
The lack of exits of Kleiner’s greentech portfolio hasn’t been a secret to anyone who follows their investments closely. Yes, biofuel firm Amyris went public this year, but only produced a modest return. Power company Areva bought solar thermal startup Ausra, but terms of that deal were undisclosed and were likely also modest. That’s about it; the “bevy of successful exits,” as the Fortune article points to, certainly hasn’t been in greentech.
Has any high-profile investor made a lot of money yet from its greentech investments? Not yet. Last week, Sean Parker referred to greentech investing as a bubble in this New York Times interview: “It is not clear anyone will make money on their green-tech investing. It looks like it was a bubble.”
Peter Thiel, co-founder of PayPal and partner with The Founder’s Fund and Clarium Capital, expressed a similar sentiment earlier this year. Thiel said “cleantech companies for a variety of reasons don’t work . . . the one thing we haven’t done is an alternative energy investment. . . I think a lot [of alternative energy funding] has been misdirected.”
Last year, when Netscape founder and investor Marc Andreessen launched his $300 million fund, he went out of his way to note the fund would keep a wide berth from anything related to cleantech, energy and transportation. He told Fortune, flat-out: “No cleantech, no rocket ships, no electric cars.”
According to a widely cited report in Reuters, there’s been a sharp decline in investing in early-stage cleantech companies because of the lack of returns for investors. VC investment overall fell in 2009 because of the recession, but investments in new, early-stage, cleantech startups dropped even more compared to all investing: 35 percent of VC dollars went to early-stage and seed cleantech companies in 2007, but just 20 percent went to that group in the first half of 2010. Investors, lacking greentech exits, seem to be turning elsewhere.
But as I put it in this post a couple of months ago, I think there’s a learning curve happening for cleantech investors; it’s just taking awhile to happen. Yes, a bunch of the cleantech investors are getting weeded out, and some of the early funds have been misspent. There’s only so much LP money you can spend over so many years without giving some back.
For more research on cleantech financing check out GigaOM Pro (subscription required):
- Cleantech Financing Trends 2010 & Beyond
- Report: IT Opportunities in Electric Vehicle Management
- Car Data As the Next Platform for Innovation