The venture capital panel at today’s at the Green:Net conference here in San Francisco was a mess of contradictions. The panelists debated the role of government in cleantech before finally coming to the conclusion that while government will have to play a role in their cleantech investments, it would be stupid to rely on t for subsidies that would unsustainably boost a business model. “Subsidies are good, they are like icing on the cake, but businesses need to have real economic models,” says Navin Chaddha managing director of Mayfield.
Paul Holland, general partner with Foundation Capital, also warned that the stimulus package won’t have a lot of money for startups because it’s designed to generate jobs today rather than in the distant future. Steve Westly, managing partner at The Westly Group and an investor in Tesla, which is seeking government subsidies, argued that the government has a role to play in cleantech, not just for subsidies but also for regulatory mandates and standards.
Westly also pitched Tesla, saying the company had revenue of $14 million last year and was on track to bring in $140 million in the coming year. Ironically, Westly also said he was unwilling to make investments in cleantech startups that will require a lot of capital and take a lot of time to reach an exit. Tesla seems to contradict this, but Westly’s rationale that the returns on cleantech deals will be lower than the thousandfold returns on web and IT-related deals of the last boom makes sense.
Westly was the optimist of the panel, predicting that the market for initial public offerings will open up in the first quarter of 2010 and “perhaps sooner.” Mark Zanoli, managing director at J.P. Morgan, was less optimistic. He pointed out that the reason there are no solar IPO deals today is mostly because the startups need to have manufacturing at scale and gross margins that investors will like. Most simply aren’t big enough. Added to this, the customers of solar panels need money to buy the solar panels that they don’t have today. Zanoli anticipates that in the coming months these solar startups will face a race between when the solar companies get their market and when their money runs out.