Corporations: The New ‘Angels’ of Clean Tech?

Investors, entrepreneurs, policy and non-profit leaders convened on Wednesday to discuss the clean tech funding environment at the 4th Annual Cooley Clean Energy and Technologies Conference in Redwood City, California. Out of the ashes of Solyndra – the highly publicized, government supported solar technology company that closed its doors on September 1, 2011 - panelists and attendees identified the promising trends in clean tech financing. A primary theme: corporations are stepping up to provide expansion capital, compensating for the pull back of traditional venture investors. According to Bloomberg’s Nathanial Bullard: “Expansion capital is zooming.” Private equity and ‘corporate strategics’ are helping clean tech companies scale and compensating for a dearth of IPO opportunities and continued venture support. Bill Reichert, Managing Director of Garage Technology Ventures, underscored that clean tech needs to work beyond the traditional venture food chain: “A lot of the second and third round financing involve corporate partnerships. Intel and Chevron are likely two of the more “promiscuous” partners, but there is a broad roster of active strategic partners including Siemens, Applied Materials, Dow, ConocoPhillips.” These companies are securing important R&D innovations through these ventures. “This quarter we saw global enterprises continue to invest aggressively into cleantech,” said Sheeraz Haji, CEO of Cleantech Group. “While there was no stand-out buyer this quarter, Ecolab’s acquisition of Nalco Holding and several large investments from companies including Google, indicate there’s still plenty of interest from the corporate sector.” Corporations are not the only deep pockets. Gordon Ho of Cooley LLP sees accelerated involvements from angel investors, family offices, incubators, and the government: “These players are instrumental to funding the next generation of clean tech. Angels have stepped up their level of investment; they are now participating at $1.5 – 2million as opposed to $250,000. We have a syndicate of family offices worth $30B that is looking to deploy $1.4B to clean tech this year. Private equity is playing a role in commercializing technologies in a way they haven’t played before. The USDA, DOE, OPEC are all capable of providing scale up capital.” Reed Hundt, CEO of the Coalition for Green Capital and Former Chairman of the FCC, underscores the important role big firms like GE, NRG, and Goldman Sachs are playing in supporting the emerging clean tech sector. Even so, he contends that the government needs to play a useful role in financing alternative energies and green technologies. In contrast to new growth markets like China, the US market is a substitution play. We need to present an alternative energy into a market that is occupied by incumbent energy players and interests. To be successful, we need to use innovative financing mechanism to lower the cost of alternative energy. No new taxes, bonds or electricity hikes – just financing innovations. A recent example of just such a mechanism is the ‘Green Bank’ that Dan Esty, Commissioner of Energy and the Environment, just established in Connecticut. The Bank works on a revolving funds model. Technically known as the Clean Energy Finance and Investment Authority (CEFIA), the Green Bank leverages scarce government dollars to help finance clean energy and energy efficiency projects. Since the novel structure was announced in July 2011, ten states have inquired about following suit. Mr. Hundt is optimistic about the prospects for a robust clean tech economy here in the US. “This looks very similar to the communications sector in the 1990’s, before the Internet and the mobile phone were ubiquitous. There are two things that will drive change: technology breakthroughs and access to capital.” We are seeing movement on both fronts.