Weekly Update

Is cleanweb the future of cleantech investing?

From hackathons in places as wide ranging as Los Angeles and Rome, to meetups at pubs in London, the cleanweb phenomenon is picking up steam. The term “cleanweb” is a couple years old but broadly defines the use of internet, social media, and mobile technologies to address resource constraints. And perhaps more important than any definition is the fact that VCs are showing interest in the space at a time when overall cleantech investing is declining.

What do VCs like?

1) There’s no technology risk. Cleanweb companies are built upon IT tools and analytics that have been in development for two decades. There isn’t a new solar cell material that may or may not achieve the desired efficiency and there’s no worry about whether that material can be manufactured at a cost that makes it viable in the market.

As Carter Bales, who heads up environmentally oriented NewWorld Capital, told me earlier this year, “We will not take physics risk or science risk. It isn’t just whether the product works or the technology works, it’s whether you can scale the manufacturing without getting a lot of risk.” Science projects are definitely out right now.

2) Hey, wait, we’ve done this before: The generalist VCs that got into cleantech a few years ago with the idea that cleantech was a hot new investment space in addition to social media, consumer IT and mobile, are leaving cleantech. Most are leaving after having taken bad losses.

But the intriguing thing about cleanweb is that the business architectures are similar to the ones that have made generalist VCs so much cash over the past decade. Build an application, either for consumers but even better if it’s for businesses. Get traction with customers. Refine the idea further. Figure out how to charge for it. Scale. Rinse and repeat.

Honest Buildings, which raised its first round of funding in September from a group led by RockPort and Mohr Davidow, is a good example of this. Its service aggregates data on commercial buildings’ energy characteristics. It offers up this information for free online, but also has a subscription service that would connect building service providers with building owners. It hopes to be the platform that connects energy efficiency services for buildings with those who manage those buildings.

3) You wanna scale, no problem. Solyndra raised over a billion, fuel cell maker Bloom Energy is at the $974 million mark, and embattled luxury plug-in EV maker Fisker is at $1.2 billion raised at it looks for more capital. Cleantech is more or less a bad word right now in VC circles and that’s because of the massive amounts of debt capital needed to get some of the most ambitious ideas off the ground and through production.

That problem doesn’t exist in cleanweb. At most, you may be dealing with a sales team if you’re trying to market and sell a service to customers, but even in those situations there’s generally incremental revenue that comes along the way as the company invests in sales and marketing. That’s money that can be reinvested in the business to help it grow. Which is very different from biofuel companies, for example, where hundreds of millions of dollars are spent just to find out if a technology can be scaled and before a single dollar of revenue is generated.

4) Efficiency is easier than new power generation: This final fact is really the crux of the cleanweb movement. While we’d all love to replace fossil fuels with renewable energy, it’s far easier just to get people and businesses to ratchet down their energy use.

And as long as your efficiency technology costs an amount commensurate (or more likely less) than the amount of resource being conserved, you have a compelling case for your product.

Efforts like Sidecar, a ridesharing service which seeks to more fully utilize cars on the street, or the experimental new app, called snApp, that shows homeowners their realtime energy usage on their iPhone, are elegant solutions that leverage mobile technology to produce value for users and to subtly alter behavior toward resource conservation. And while these solutions won’t immediately stop drilling for oil or the proliferation of gas power plants, they will more quickly start to reduce the energy footprint of your average consumer.