Venture Capital Comments Off
By CLAIRE CAIN MILLER
SHELBY CLARK, the founder of a start-up called RelayRides, was honored last week as a rising star in clean technology. But as he took the stage alongside companies creating new kinds of energy, he felt out of place.
RelayRides is a car-sharing start-up. Since when did encouraging people to drive carbon-spewing cars qualify as clean tech?
In Silicon Valley, where venture capital dollars nurture fledgling technology companies, clean tech is getting a makeover. Many investors are shying away from the high risks and costs of creating new forms of energy. Instead, they are doing what they do best — using software to cope with problems, in this case caused by climate change.
RelayRides, which lets car owners rent their vehicles to others, takes cars off the road because people can avoid owning them and the service’s users drive less than other people, Mr. Clark said.
“You can have a major impact on an individual’s carbon footprint by re-creating business models or behaviors without inventing a new energy,” he said.
This strategy has been percolating among some in Silicon Valley for a couple of years. But for many investors, doubts about alternative energy were confirmed last month when Solyndra, which made solar panel arrays and had raised more than $1 billion in venture capital and $528 million in government loans, filed for bankruptcy protection.
“A lot of people see it as a symbol of what they do not like in green investments or government involvement in tech,” said Nathan E. Hultman, director of the environmental policy program at the University of Maryland and a fellow at the Brookings Institution. “If the V.C.’s pull back, then a lot of these companies are going to have to fold, or at least put their plans on hold.
“This is a very familiar stage in the energy industry called the valley of death,” he said.
Green tech investing had been declining even before Solyndra. Venture capitalists invested $891 million in 80 such start-ups in the third quarter, an 11 percent decline from $1 billion in 88 companies in the second quarter, according to the National Venture Capital Association.
Investors, accustomed to financing low-cost Web start-ups, had grown wary of spending the money needed to pay for basic research and build factories to produce energy. Adding to their caution is uncertainty over whether Congress will exact a carbon tax, an increase in natural gas production in the United States and the difficulty of competing with the established energy industry.
But the Solyndra bankruptcy further spooked venture capitalists and particularly the pension funds, endowments and foundations that invest in venture capital, said Mark Heesen, president of the National Venture Capital Association.
Investors, he said, would continue to shift from investing in alternative energy to investing in companies that cope with climate change by, for example, using software to make buildings and cars more efficient.
Venture capitalists are on track to invest $275 million this year in start-ups that make software and other technologies that conserve energy or manage its use, up from $234 million last year and $104 million in 2009.
“Capital-intensive companies that take long cycles to create things, whether they’re solar voltaic cells or giant wind turbines, are not very scalable, so those are really tough businesses to imagine as venture-funded opportunities,” said Bill Maris, managing partner at Google Ventures.
His firm has invested in RelayRides and other start-ups that stretch the definition of clean tech investing. They include the Climate Corporation, for extreme weather insurance; Clean Power Finance, which runs an online marketplace for financing residential solar panels; and Transphorm, which makes tools that reduce power loss when electricity is converted in data centers or industrial motors.
“It’s tech companies that are applying their technology to this industry,” Mr. Maris said. “Those are the kinds of companies we tend to really understand and like.”
At first glance, companies like the Climate Corporation, which insures rural farmers, seem to have nothing to do with either technology or climate change. But David Friedberg, a Google veteran who is the company’s co-founder and chief executive, said its goal was “to help all the world’s business adapt to and understand climate change.”
For farmers, that means analyzing “crazy big data,” Mr. Friedberg said, from weather stations, government data feeds, soil moisture models and Doppler radar images. The Climate Corporation simulates the weather for the next two years and runs a Web site where farmers can enter their location and crop, buy insurance coverage and automatically receive payments for bad weather.
Soybean farmers in the Dakotas were recently paid for delayed planting because of an unusually rainy spring, and wheat farmers in Oklahoma and Texas were covered for a intense drought.
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