To reverse a decline in cleantech investing and deals, entrepreneurs need to cater to our desires for savings, convenience, performance, and being cool
So you bought An Inconvenient Truth on DVD. You drive a Prius. You offset your carbon footprint by seeding rainforests in the tropics. You even very seriously considered putting solar panels on your roof.
Congratulations. You've helped make saving the planet—once the domain of a sandals-and-granola fringe—a trendy preoccupation of the mainstream middle class. And let's face it. You did it not so much because you're worried about global warming but because you're, well, selfish.
When oil prices were soaring, you eschewed gas guzzlers to save a buck. When the economy tanked, energy-sipping solar suddenly got sexy. And, let's face it, going green made really good cocktail party conversation.
Wake up and smell the recovery, tree huggers. Stock markets are rebounding, growth is on the upswing, and saving the polar bears is so 2008. Nowhere is the impact being felt more clearly than in venture capital. The number of cleantech deals is down roughly 30% this year, and the amount invested is off 60%, according to recent figures from Dow Jones VentureSource. The biggest drubbing is in solar. This year, there have been just nine solar deals done. There were 24 solar deals done in the first half of 2008 alone.
In the Fast Lane: Tesla, Better Place
Cleantech would do well to remember what made it finally resonate with the broader public. The cleantech companies that emerge in the best shape from the current trough will be those that learn to play not only to our collective conscience but to our self-serving instincts—specifically, our predilection for what's cool, convenient, money-saving, or superior in performance.
Some will get bonus points for appealing to more than one of those qualities, but aiming for all four at once is a fool's errand. Companies that do rarely do any one well.
Here are a few who handle one or two criteria ably. The poster child for cool and performance is Tesla Motors, maker of ultrahip electric cars. They're not cheap; the Roadster is $100,000, and the "mass market" Model S in development is $50,000. But the cars are so sexy and powerful they don't need to be cheap or convenient. There are few Tesla showrooms, you have to put down a sizable deposit to get a spot on the waiting list, and Bank of America (BAC) only just started offering Roadster financing.
Sticking with cars for a moment, there's also Better Place, the company started by Shai Agassi, former CEO-in-waiting at German software powerhouse SAP (SAP). Better Place aims to build networks of charging and battery replacement stations while getting Renault (RENA.PA) to build electric cars that would be sold on the cheap. It's even willing to subsidize sales when buyers commit to a "subscription" to Better Place electricity. Not exactly high on the cool or superior performance axis, but done right, the idea will excel in the affordable (especially if you factor in the cost of gasoline) and possibly in the convenience categories—assuming Agassi gets those electricity stations built.
Here are four other areas crying out for cleantech innovation:
Battery life: Whether it's ultralight laptops and netbooks, the Amazon (AMZN) Kindle, or Apple's (AAPL) iPhone, there's a renaissance of gadgets that leave us more connected, more entertained, and less tethered to the PC than ever before. Unfortunately, the battery life doesn't let us stay that way for very long. To realize their potential, these devices need to stay on for a while—say, the length of a cross-country flight.
As companies like Tesla and Better Place dramatically push ahead on car battery technology, surely breakthroughs can help make my Mac Air last as long as my car. And as more people consume those batteries, prices should fall. Better batteries would satisfy our collective desire for, at least, cost savings, convenience, and superior performance. Some gadgets even make us look cool.
Data centers: One of Google's biggest costs is powering its fields of data centers that house and crunch all the world's information. This cost is only going to go up as data and Internet consumption explodes. For now, Google has had a huge competitive advantage: Its insanely lucrative search business means it can power more data centers than any other company. But margins will come down if and as Google loses its edge. So the company is smart to invest some of those profits now in solar thermal energy plants in the Mojave desert.
There are equally huge opportunities for a startup to build a solar, wind, or otherwise powered data center and undercut the entire market on price. It'd be a huge initial investment, but it's harder to find a market with more certain long-term demand. Again, on our selfishness matrix, these would result in cost savings and superior performance for all manner of Web-delivered services.
Planes: At a Charles River Ventures summit last March, Tesla CEO Elon Musk was asked what his next business would be now that Tesla has its government loans in the bank. The other business he runs, SpaceX, has landed a NASA contract. Musk said that while he's still pretty busy with those two jobs, he thinks a lot about supersonic electric planes that land vertically. Yes, please, Mr. Musk.
No, it's not a mass-market concern. Nor was a $100,000 electric roadster. But for weary road warriors who spend their lives crisscrossing the planet, the idea of real innovation in planes is more appealing than a lifetime supply of free upgrades. Do you remember how excited we all got when JetBlue (JBLU) introduced TVs in every seat? Imagine a real technology upgrade.
These planes would be insanely expensive at first, as with any new technology. But over time, imagine if fuel costs and noisy polluting engines were cut from the equation and faster flying times were added in. It could reinvent aviation on two fronts: no more dangerous hedging with oil prices causing havoc with publicly traded airlines, and a new world of face-to-face business transactions made possible by quicker flights. When you factor in landing vertically, you've got cool and superior performance down cold.
Consumer power consumption: We waste loads of energy in our homes. And over time, we'd save a lot of money by changing our behavior. Both Google and Microsoft (MSFT) have pilot programs designed to help us better monitor how much energy and money we're wasting.
But those applications focus on monitoring and analyzing energy use; you still have to remember to turn off the TV or AC. Enter a promising company I met on a recent trip to London. It's called AlertMe and it makes a sexy little device that's won a slew of awards and a trial agreement with British Gas New Energy to be installed in homes in Britain.
AlertMe can monitor and affect the energy consumption in your home using the Internet, your broadband network, key fobs, e-mails, and SMS messaging on your phone. (See a truly condescending video about how even women can install AlertMe's home security app here.) Possibly best of all, AlertMe includes tools that let you remotely turn on or off heating, cooling, or electronics and track how much you save. The device can also automatically turn off appliances left idle, or know when no one is home and adjust the temperature for you. Convenient and cost-saving all in one.
Come on cleantech. Selfishness sells.