Look Out, Cleantech VCs: Oil's Got a Leg Up On Energy


Neal Dikeman, CEO of Carbonflow and a partner at Jane Capital, offered up some impassioned words of wisdom for the optimistic cleantech VCs in Silicon Valley over at the Cleantech Blog yesterday: For all the talk of a green boom in the midst of the downturn, don’t expect just any cleantech investment to survive.

His advice was largely to heed the warning contained in the old tortoise-and-the-hare fable: When pitted against the foolish and fast, slow and steady wins the race. Most of today’s hottest cleantech categories are energy related, and Dikeman points out that energy is an old, complex, global business that few entrepreneurs are well-positioned to either understand or navigate:

Beware Silicon Valley, the great fortunes, wars, and economic crises of the world for 100 years are not technology ones, they were energy made. Half the schools you went to were built by oil money. And the entreprenuerial spirit in this industry was born in the hardscrabble oilfields of Pennsylvania and Texas, and grew up in the far reaches of the globe. And the oil companies those entrepreneurs founded have forgotten more about technology in energy than you even know existed.

Dikeman, who is a friend of mine, has often lectured me that the big oil companies are in a better position to evaluate and invest in emerging technologies than venture capitalists — their pockets are deeper, they have in-house experts and they understand the supply chain. And as a result of all these things, they’re able to be more patient. (One of his favorite examples is the low-profile ConocoPhilips, to which he is an adviser.)

For the blog, he put it more bluntly:

Be forewarned, you do not have a comparative advantage here. The oil men invented risk taking, AND risk management. The oil men are bigger, faster, smarter, richer, have more scientists and more entreprenuerial spirit than you, AND they know energy.

While Dikeman may like to razz the VC community, he does so for the benefit of VC-funded startups: “The little guys whose pension funds are paying you a cushy 10-year guaranteed contract are counting on you to put aside your hubris.”


Dan Gill

I agree and disagree. Companies like ExxonMobil take an enormous amount of heat for not investing enough in clean-tech R&D, but that’s not their job. Their job is to run the most profitable company they can and until more clean-tech options can prove themselves as potentially profitable standalone businesses without subsidy, they will continue to do what they do best. It is the role of venture capital and government to fund these early stages.

Where I think Neal gets it wrong is that with north of $35 billion (with a B) sitting in the bank, Exxon and other oil companies are in a great position to acquire and scale businesses and technologies that they believe in once proven. That liquidity is ultimately the goal of VCs, so by placing some very early bets at low valuations, they stand to make massive multiples on the few companies that prove themselves.



All true.

But oil companies also have a vested interest in maintaining the status quo. A small but real liability in a period of change such as Peak Oil.

I agree most VCs from Silicon Valley don’t understand energy. Look at what they’ve chosen to invest in!

It all boils down to whether we are at a leaping off point to move away from oil, or that time has not occurred yet. Oil companies have an ability to delay that time to some extent (blocking innovation, etc.) but cannot do so indefinitely.

The Prius/Ford Escape hybrids will prove to be the camel’s nose that finally got under the tent. Because hybrids are leading to plug-in hybrids, and PHEVs will lead to dramatically lower oil use, and considerably less sway of big oil on transportation.

Yes, we should all beware hubris. Even the oil companies.

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