Cleantech is losing its mojo to upstarts peddling coupons. That’s apparently a prevailing sentiment among some tech startup executives and investors these days as they compare cleantech to hot web upstarts like Groupon, which generated a lot of buzz when it turned down a reportedly $5-6 billion offer from Google late last year.
“No one in cleantech is worth (billions). Yet you can create this small online team that creates billions of dollars in market cap,” said Kevin Surace, CEO of Serious Materials, an energy efficiency product and service provider in Sunnyvale, Calif., at the SolarTech summit in nearby Santa Clara, Calif. on Wednesday. “John Doerr said it was about energy, energy, energy, and now they do anything they can to get back to the online space.”
Comparing cleantech to Internet companies might be a futile exercise in self-loathing. Internet startups have always been the darlings of Silicon Valley and will remain so for a long time (until we get that Netscape cleantech moment). But the fast rise of Groupon, which found a smart method to help consumers “clip” coupons, highlights the slow uphill climb of many cleantech firms for investors and Internet veterans who switched to cleantech. A similar reference to Groupon and cleantech showed up in this Cnet story on Thursday.
Surace and fellow panel speakers were brainstorming new business models that might make solar and energy efficiency more attractive to consumers and business owners when the subject of Groupon and investment in cleantech came up. Private equity investors and cleantech startups have talked more and more about the difficulties of raising money and making money from cleantech in the past year.
The term “cleantech” covers a broad swath of companies, but in general, it’s used to describe technologies as diverse as renewable energy, smart grid, energy efficiency and electric car tech and batteries. Investors in solar, in particularly, have spoken loudly about how they’ve piled on hundreds of millions of dollars only to have to wait ever longer to get their money back. Even though solar fetched the most private investment dollars in 2010, the bulk of the money went to a handful of companies that had gotten loan guarantee offers from the federal government to build factories or power plants.
“What you’ve seen in the past year is degradation in new startup funding,” Surace said. “Venture capitalists are still doing follow-up rounds, but this space is collapsing from four to five years ago.”
It’s not just new entrants having trouble getting funding. Even some startups that have been around for a while and should have already been generating decent revenues and thinking about exits are struggling to reach those milestones.
“We were waiting for the batons from the venture guys, and they ran past us because they couldn’t figure out how to get out of their own deals,” said Ed Feo, managing director of USRG Renewable Finance, which provides debt financing to renewable energy projects.
The world of energy efficiency technologies, from LED lighting to power management chips and software, has actually experienced a big growth in terms of deal numbers and values over the past year, according to reports by PricewaterhouseCoopers and Peachtree Capital Advisors. Investors typically like to talk about how energy efficiency technologies are an easier sell because they tend to be a lot cheaper and piggyback on big, existing markets such as IT.
The merger-and-acquisition deals for smart grid is certainly hopping. We’ve tallied at least nine new deals so far this year. Those buyers are among the well-known players in the space, including GE, IBM, EnerNOC and Johnson Controls.
Some would argue investing in cleantech is a much more worthwhile cause than online coupon brokers.
“If you look out 30 years, it will be obvious that we should have put money in this,” said Derrick Rebello, CEO of Quantum Energy Services & Technologies, an energy efficiency service company in Berkeley, Calif. “China has a government who knows they should be putting money in energy and energy efficiency. They aren’t putting money in social networking, because they think it’s bad for them. History will show that they’ve made the right choice.”
Still, with some Silicon Valley investors re-focusing their efforts on Internet companies, it’s no wonder those in the cleantech world are feeling less love these days.
“Cleantech and renewable energy have become less glamorous,” said Matt Cheney, CEO of San Francisco-based Cleanpath Ventures, which finances renewable energy projects. “Efficiency was marginally glamorous. But you don’t talk about it at a cocktail party unless you have a LEED platinum building.”
Photo courtesy of SDC2027 via Flickr