The most recent issue of The Economist features a grizzly ex-Soviet Winnie the Pooh licking sweet crude off his oily paw. Beyond the bearish petrophilic cover, there is an article inside exploring the venture capital of cleantech. Similar in tone to the New York Times’ golly-gee article on solar in Silicon Valley, “From Geeks to Greens” explores the migration of IT VCs to the world of cleantech.
The article seeks to define cleantech venture capital in terms relative to the more familiar IT VC. While IT VCs are good at managing technology risks, it notes the cleantech world is far more prone to public-policy risks. With a fluctuating and lapsing regulatory framework haphazardly constraining the cleantech sector, entrepreneurs can’t guarantee that certain tax incentives that make their business profitable will still be in place a year from now.
“Managing public-policy risk is not something traditional technology executives have had to do, so there will be a steep learning curve,” Diana Glassman, an environmental-business banker at Credit Suisse tells The Economist.
The scope of cleantech investing is another defining difference, the article says, both in terms of early-stage capital required and time horizons — both of which are greater for cleantech. But bigger risks mean bigger rewards and the article does not mince words in quote cleantech VC guru Vinod Khosla as saying that “replacing coal and oil” will be a huge market.
And while it lays out a number of key differences between the two sectors, the most interesting conclusion is the key similarity between the two. Citing Khosla, who’s described as a “wily Washington wheeler-dealer,” the article says that “Venture capitalists are good at understanding and managing technology risks, in whatever industry they are in.”
And buried at the bottom of the article is a tidbit of breaking cleantech news. The Economist reports that Shai Agassi of Project Better Place is confident that he will secure another agreement between his startup and a national government “within 100 days.”