Friday, July 15, 2005

Where Green And Wall Street Intersect

UtiliPoint has a great piece up today about renewables and venture funding for these same:
Having run an energy and environmental venture fund for two years and seeing many well intentioned but uncommercial alternative energy projects, it occurred to me that something new needed to enter the "Green Finance" space. Things tend to happen when you least expect them. Call it serendipity or just dumb luck, but that's what's been revealed to me recently as I entered the energy & environmental hedge fund world a year ago. Venture capital wants returns. Hedge funds want those returns even faster. So, what's a poor entrepreneur to do? Impatient investors want returns and don't want to hear that you didn't make your numbers.

It may be helpful to review what is now occurring in the "Clean Technology" also called Clean Tech space recently. When mainstream press like Business Week, Forbes and The Economist all have articles in one week on this topic as it did in June 2005, the time has arrived for green technology for main street to take a hard look. But the space is very different than many envision. Unfortunately, it is now frankly over-hyped, and I am seeing poorly conceived business plans getting funded. So-called "science experiments" don't cut it on Wall Street where I live. The mantra of good venture projects for the clean technology space, as with any other venture capital project, is "revenue stream, seasoned management team or repeater CEO, exit strategy." Science experiments in this space today are mostly funded by the Pentagon as they have the deep pockets to fund financially unsustainable technologies (since when has the government ever been run like a business with a P&L). Many of these technologies are so debt ridden that they will never be commercially viable. They depend on government funding to continue their research and perfect their commercial applications. I would add to this equation all those hydrogen economy projects that the United States' DOE is now so fond of should be included in this science experiment group.

As has been stated in this column before, we should be ramping up both hybrid engines and gasification of coal technology for rapid deployment and commercialization. These are two fundamental energy technologies that work and would contribute most effectively to the dual goals of energy efficiency and emissions reductions using today's technology.