Posting in Energy
In the second installment of The Green Polymath, Vinnie Mirchandani reviews the Kleiner Perkins cleantech portfolio and shows how a successful infotech firm is moving into the green space.
Editor’s Note: This is the second installment of a new guest column: “The Green Polymath,” by Vinnie Mirchandani. Over the next few weeks, Vinnie will discuss how some of our most familiar enterprise corporations are leveraging an array of new technologies to solve not just their own daily issues, but also the “grand challenges” the world faces. You can read the first installment here.
This is the second in my guest column series excerpting from my upcoming book, The New Polymath. The book defines the term as an enterprise that excels in multiple technologies — infotech, cleantech, healthtech, biotech and other emerging areas — to create new medicine, new energy and new algorithms.
Kleiner Perkins Caufield & Byers, of course, is the storied venture capital firm with whopper successes in Amazon, Netscape, eBay and others.
Its website makes the firm's mission clear: "In search of the next big idea."
All those investments were in information technology, which is what its portfolio largely focused on six years ago. That's very different from the world of methane and selenium that Kleiner finds itself in today. It has transitioned there under the stewardship of executives such as Ray Lane, ex-president of Oracle, and Bill Joy, ex-founder of Sun Microsystems -- both, of course, icons of infotech.
It helped early on to have the support of firm leaders like the legendary John Doerr and Vinod Khosla. Khosla now runs his own fund which co-invests with Kleiner on a number of deals.
At the outset, the firm drew ambitious boundaries for its cleantech investments. As Joy likes to say, "If you cannot solve the problem, make the problem bigger. If you draw a bigger circle, you start to see several systems you can work on."
Kleiner evaluated more than 5,000 cleantech opportunities, but invested in about 50. In each area, the team evaluated current art, underexploited areas (e.g. relatively cheap oil may have encouraged certain types of behavior), the practical best and theoretical scientific limits.
So the portfolio is comprised of varied companies, including Bloom Energy, Silver Spring Networks and Luca Technologies.
Bloom Energy: Bloom Energy, which last month had a pretty impressive coming-out party, is literally based on rocket science. With roots in NASA research on turning stored electricity into air and fuel on Mars, it now is reversing the process and turning air and various energy forms into cleaner electricity. Initially shipping to commercial users, the vision is to have a "Bloom Box" in every backyard.
Silver Spring Networks: Utilities such as FPL in Florida and PG&E in California are planning to roll out their smart grids to nearly 10 million homes and businesses by 2011. Both rely on networking equipment from Silver Spring to facilitate two-way, IP based communication with various homes, businesses and future end-points like charging stations for electric cars.
Luca Technologies: Luca makes "nutrients" which coax anaerobic organisms -- that is, those that are buried deep and can survive without oxygen -- in coal beds, shale, and older oil fields to release methane. The promise is that you can harvest the energy but leave the carbon in the coal in the ground -- in effect, "pre-sequester" the carbon dioxide.
Add to those three firms a wide range of other Kleiner investments in electric cars, solar film technology, sustainability accounting and you begin to see the polymath pattern in the portfolio.
The learning process has not been easy for Kleiner. For infotech, venture capitalists thought in terms of six to eight quarters to a liquidity event. For cleantech, it is much longer: sometimes six to eight years.
Or, as Ray Lane has said: "Cleantech investments are far more influenced by global economic and political vagaries than information technology ever was." That influence can come from the widely fluctuating price of natural gas, and the reality, as we will discuss next week, that countries such as Germany and China have taken a much more state-driven investment strategy to encourage their own cleantech industries.
The stakes are high for domination of the burgeoning global cleantech market. The U.S. has been a dominant supplier in IT. Whether it will be in cleantech is going to significantly dependent on how Kleiner's portfolio performs.
It is that strategic.
When you look back and see the big thinking occurring as Kleiner moves into this space, the new sciences that the firm has had to learn and the financial and operational risks associated with the venture, I can think of no better moniker than polymath.
Vinnie Mirchandani is the founder of Deal Architect, a site about technology trends and economics. He’s a former Gartner technology industry analyst, PwC outsourcing executive and entrepreneur.
Apr 28, 2010