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01 Nov 08
In many parts of Silicon Valley, it seemed misguided to regard the U.S. economy as reliant solely on Wall Street. The future still depended on entrepreneurs and innovations and green-tech businesses getting “traction,”
climate_crisis energy fuel economy wall_street innovation entrepreneur technology silicon_valley california al_gore government regulation brazil
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while government has a longstanding role in underwriting scientific research and regulating or (with less positive results) deregulating industries, government doesn’t really innovate, at least not in the sense of readying technologies for the marketplace and integrating those technologies into mainstream companies. That’s left to firms
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Many of the most innovative American companies — FedEx, Amazon, Apple and Google, for instance — have received venture money; a recent study by Global Insight noted that such businesses now account for nearly 18 percent of America’s gross domestic product and 9 percent of our private-sector employment. According to Josh Lerner of the Harvard Business School, “When you try to quantify it, a dollar of venture capital is somewhat equal to three or four dollars of corporate R&D.”
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In truth, there have been scores of recent scientific developments in wind, solar, biofuels and energy efficiency that have not yet entered the market, in part because the private sector has deemed them risky investments in a world where gas, coal and electricity are cheap. As Andy Karsner, who recently stepped down as the Department of Energy assistant secretary in charge of renewables, told me, “Venture capital’s interest in the sector didn’t arise until price signals and climate change came into play a few years ago.” Before that, he says, green technology “was in a state of suspended animation.” Dan Arvizu, the head of the National Renewable Energy Laboratory in Golden, Colo., echoes this sentiment. Whenever Arvizu testifies in front of Congress on the state of renewables, he told me: “They always ask the same questions — ‘When is this going to be real?’ And I say: ‘It’s real now.’ ”
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Entrepreneurs sometimes refer to the period between a project’s origins and its commercial deployment as “the valley of death.” The meaning of the term may be self-evident: it is the bog where most ideas stall and expire. Kleiner’s partners will tell you that ventures usually die because they fail to overcome one of four risk factors. To begin with, there is technology risk. As Ted Schlein, a Kleiner partner, put it one morning: “Can it be built? How hard is it to build it? And if you can build it, can other people build it just as well?” Next, Schlein said, is what he and his partners call “people risk.” How good is the team pitching the idea, and can its members execute their idea well? The third risk involves selling a product in the market, which most Kleiner partners believe is the hardest to gauge before making an investment. In Schlein’s words: “O.K., let’s say we can build it and get great people. Will anyone buy it?”
The final risk is financial.
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The company’s appeal, according to Vassallo, was not so much technical wizardry as “a simplicity and elegance of design” that persuaded the partners its installations would be durable, easy to manufacture and easy to operate. Moreover, because the technology uses available commodities — steel, glass and ordinary turbines — it could be deployed quickly
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FloDesign intends to replace the common propeller wind turbine with something that resembles a jet engine. Doerr told me that the company’s product, which is perhaps 18 months away from a prototype, would cost 25 percent less than any other kind of wind generation — that could make it one of the cheapest renewable-energy sources in the world. Sundrop, meanwhile, is what Joe Lacob, a Kleiner partner, calls “solar assisted” fuel generation — a process that combines the ingredients of carbon, hydrogen and sunlight to create a petrol-like product. “We can actually take CO2,” Lacob told me, “which is what we’re trying to get rid of, and make that our source of carbon, and use the sun’s energy to create liquid fuels.”
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Rather than a swift series of eureka moments, progress took shape in setting goals, testing, tweaking and then setting more goals.
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“If you look out far enough, I have no doubt that many of the bets will pay off,” says Paul Kedrosky, a former investment banker, blogger and longtime observer of the venture-capital industry. “But in the venture business, being early is indistinguishable from being wrong. That’s why everyone is terrified of being too early.”
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their portfolio could be very profitable without any public-sector policy changes, but it’s hard to see how that could be the case. A price on carbon could, in one quick stroke, make Ausra’s carbon-free solar electricity even cheaper than coal- or gas-powered electricity, which would both rise in cost because they produce CO2; as a result, there would be virtually no limit to the demand for Ausra power. That’s how you get a green-tech Google.
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“I think the private-sector investments that are being made are going to make a very big difference, but one can see where the bottlenecks will come if this is only left to private capital.” Sachs notes that putting a price on carbon is a crucial action. But it’s not the only one. The electricity grid, he says, would almost surely need to be rebuilt as the country switched to renewables, a change requiring federal financing and policy action in land use, interstate law and liability.
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Many green-tech companies are building products that require entirely new industrial processes, which might trap them in a kind of innovator’s paradox.
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06 Oct 08
Michael MoyerNYT Magazine story about the Green Tech investment community
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