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As Cleantech Matures, So Does Approach to Funding

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Cleantech Investing Panel: Adam Grosser and Cathy Zoi, Silver Lake Kraftwerk, at Green:Net 2011The rumors buzzing around venture capital circles are true: greentech has been bulking up in the off-season and is primed for a wildly successful sophomore season. And venture capitalists can profit handsomely on the resurgence –- if they can ditch the freshman mentality and get a little smarter, a little more calculating and a lot more discriminating about what they fund, said private equity firm Silver Lake Kraftwerk’s Adam Grosser.

The leaders of Silver Lake’s brand new greentech fund Silver Lake Kraftwerk — Grosser (formerly from Foundation Capital) and Cathy Zoi (formerly the DOE’s Under-Secretary for Energy) — took the stage together at Green: Net for the first time to discuss what they’ve learned over the past decade in the wild west of greentech investing.

Grosser compared venture capitalists in the first wave of investment to wildcat oil speculators drilling holes in the ground and coming up dry most of the time. “A lot of us jumped in and put a lot of bets that didn’t understand the nuances of the market,” he said. He also admitted investors like himself were “overly enthusiastic” about the social good aspects of their work and funded clean energy projects that should exist but under the purview of government and national labs.

“A lot got spent on academic science projects,” he said.

These days, VC money is shifting away from clean energy and into the green IT movement — it’s more capital efficient, it’s less risky, and there’s quicker returns on investments, compared to investing in clean power. Grosser and Zoi said said their new strategy includes investing technologies and companies that are close to being self-sustaining and just need a slug of investment and perhaps guidance to achieve rightful stature in the marketplace.

They are also looking overseas for investment. Only 25 percent of investment is taking place in North America, and Silver Lake is opening an office in Shanghai at the same time it opens the peninsula.

“Right now, a project in Brazil is equally attractive as in Menlo Park,” he said. Finally the pair said VC’s in the past might have been a little too naive about funding energy projects and and hoping they would get through the regulatory framework. “Its easier to stop something than to get something through,” Zoi said.

Watch live streaming video from greennet2011 at