If you’re been following the cleantech industry for awhile, you know that cleantech, more than any other venture-backed sector, is very reliant on support from Uncle Sam. As David Anthony, founding partner of 21Ventures, put it to us recently: “There’s more money allocated to cleantech in the stimulus package, than there’s probably going to be invested by venture capitalists in North American cleantech startups over the next three years combined.” But two figures that the Wall Street Journal recently published really drove that point home for me, suggesting that the sector has hit a turning point at which the ability to get Washington aid now rivals the importance of the tech innovation itself.
The first data point, sourced from the Center for Responsive Politics, is that employees of the venture firm Kleiner Perkins have donated more than $2.2 million to political campaigns, largely to Democrats, including President Obama and Hillary Clinton. Kleiner, which employs Al Gore, has been one of the most aggressive venture firms focusing on cleantech, pledging a third of its latest fund to the sector plus $400 million for later-stage, less risky cleantech startups.
While it’s not unusual for partners at venture firms to donate funds to support candidates and parties (read: Why Cleantech Investors Love and Back Obama), we can expect campaign contributions from cleantech-focused venture capitalists and investors to only increase given such high stakes for cleantech in DC. Kleiner hasn’t had too many successes yet in terms of exits for its cleantech startups, and the Wall Street Journal raises the question of the connection between a recently promised loan to Kleiner-backed Fisker Automotive and Kleiner investor Al Gore. The DOE tells the WSJ that Gore had no influence on Fisker’s application, but Gore’s involvement couldn’t have hurt the company’s prospects.
Lobbyists are already starting to make a major difference when it comes to aiding a startup or sector to grab federal aid. For example, lobbying dollars spent by the backers of three-wheel electric vehicle maker Aptera, succeeded in getting some lawmakers to reconsider the definition of an electric car to include three-wheeled vehicles, which could make them eligible for the government’s loan program.
It’s unclear yet if either Fisker or Aptera are demonstrating any kind of breakthrough innovation, and neither is yet producing vehicles. Aptera has delayed its production to the end of the year, and Fisker pledges to use its loan to move into production of its first car and start on development of its second. But the situation clearly puts the DOE in the position of picking which company has the best technology and prospects — something it’s probably ill-equipped to do.
The other “wow” figure comes courtesy of the smart grid stimulus, which we’ve been tracking here. In another article the Wall Street Journal says that there’s been 570 applications so far from utilities asking for $14.6 billion in smart-grid funds. There’s only $4.5 billion available, so that’s more than three times what’s available.
Because there’s so much competition for these funds, I suspect that the most important factor in getting these funds is how well-versed the company is with the stimulus application process. Many leaders in the smart grid industry are very concerned about putting “well-meaning bureaucrats” in charge of choosing technology leaders. Some execs are even predicting that lawsuits will follow the awarding of the funds, because of misplaced funds.
At the end of the day the amount of funds that the DOE is allocating for cleantech is so high, compared to private investment, that the ability of a startup to get these funds has become more important than the company’s innovation potential itself. Kleiner saw the writing on the wall when it hired Al Gore in the first place, and until the government funds are allocated, connections, lobbying efforts and who you know in Washington will continue to steer the industry.