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The N.Y. Times Magazine has a long article on how uber-VC Kleiner Perkins is helping to jumpstart the clean tech revolution. It is a must read because what Kleiner and other VCs are doing — pushing a broad spectrum of carbon-mitigating technologies out of the lab and into the market — is some of the most important climate progress going on anywhere in the world.
Venture capital is now as important if not more important than U.S. government spending on cleantech, as I’ve argued (see “Despite market downturn, cleantech venture investment hits record $2.6B in 3rd quarter“). VCs invested a stunning $1.75 billion in U.S. cleantech companies in just the third quarter — that is about twice what my old office at DOE spends in a whole year, and, thanks to the Bush administration, we waste a large fraction of that on R&D into the “The car of the perpetual future.” How important is VC money?
A recent study by Global Insight noted that such businesses [that received VC funding] 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.”
Kleiner Perkins was not the first VC in the clean energy space, but it was probably the key player in bringing serious money and credibility to VC investment in this area. Given their investor-enriching track record — Amazon, AOL, Compaq, Flextronics, Genentech, Lotus, LSI Logic, Macromedia, Netscape, Sun Microsystems, and, now most famously, Google (“in 1999, Kleiner Perkins and Sequoia Capital paid $25 million for 20% of Google,” a 1000-to-1 return based on Google’s current market cap!) — when they bet the
farm valley on a new area, people don’t just listen, they jump in.
The article expalins how venture-capital works in this space [-- lingo alert, if you want to sound like you know what you're talking about to VCs, you have to use the word "space" to describe an investment area]. The piece focuses on John Doerr, “one of Kleiner’s managing partners and arguably the world’s most influential venture capitalist.” It also includes a brief interview with KP’s most famous partner, Al Gore.
Doerr and Kleiner have laid out a very serious strategy in this space, what they call “the map of grand challenges”:
The bailout legislation passed by Congress and signed into law by President Bush on Friday has a $17 billion energy tax package. This post will focus on the clean energy credits. Part 2 will focus on the dirty ones.
The biggest winner is certainly solar. As Scott Sklar, former head of the Solar Energy Industries Association and now President of the Stella Group summarizes:
This package extends the 30-percent federal investment tax credit for both residential and commercial solar, small wind, ground-coupled heat pumps installations from 4 – 8 years. This bill also completely eliminates the $2,000 monetary cap for residential solar electric installations. This bill also provides a [new] ITC for water energy applications (tidal, wave, and ocean currents and thermal) and combined heat and power. The federal production tax credit was extened for biomass power, geothermal and wind energy as well.
In particular, the 8-year extension of the ITC for is a crucial step in ensuring the success in this country of one of the most critical climate solutions – solar baseload or concentrated stored thermal electric. Everyone I spoke to in the industry thought this was the single most important thing the federal government could do to provide for stable growth.
Plug in hybrids also got a very big boost that should help jump-start the market: