Corporate Venture Perspectives: Are Most Cleantech Inventors 'Screwed'?
America's energy innovation agency, ARPA-E, is now five years old. Since it was officially funded in 2009, the agency has helped leverage hundreds of millions in private dollars for early-stage technologies being proven in the lab.
Part of ARPA-E's mission is to help identify potential end markets for new energy technologies. But it can only help so much. The agency's core mission is to get "crazy" ideas off the ground -- the hard work of wide-scale commercial deployment will need to come from the company, its investors or other government entities.
That still leaves a lot of room for trouble as inventors and entrepreneurs attempt to break into the energy market.
Speaking at ARPA-E's energy innovation summit this morning, William Caesar, an executive with Waste Management, had some blunt words for inventors in the crowd when asked about troubles with commercialization.
"They're not all screwed. A lot of them are," declared Caesar.
That jaded view is understandable. As a major investor in 25 biofuel and waste processing startups since 2007, Waste Management has seen "no successes" in the sector thus far, said Caesar. As a result, the company said last month it was shifting its focus toward commercialized technologies rather than lab-scale opportunities.
The problem, said Caesar, has not been proving the technology -- it's been integrating the technology into existing energy or waste disposal infrastructure: "It’s not that the technology doesn’t work. It’s that the economics don’t work."
"The jury is still out" on whether Waste Management's investments will pay off, he added.
Caesar gave an example of a startup making diesel out of food waste. The technology performed well in the lab, but the company needed at least 1,000 tons of food waste per day to make the economics of fuel production work. But there is currently no city that collects that much food waste per day. As a result, the technology is "sitting on a shelf."
Stefan Blank, CEO of BASF's venture arm, said his company has seen the same problems with startups.
BASF, one of the world's largest chemical companies, uses as much energy per year as Washington, D.C. As such, the company looks for industrial solutions that will help it more efficiently use energy or make chemicals and materials in a new way.
Many of the companies BASF evaluates need "massive" changes to infrastructure to make the technology work. And that can cause problems at scale.
"When the infrastructure isn’t there, or will not be there as earlier as assumed, the economic assumptions break apart," said Blank.
By their very nature, Waste Management and BASF -- a large waste services company and a large chemical company -- require capital-intensive solutions to fit in with their business. They don't exactly operate in an area where capital-lite "cleanweb" technologies will transform what they do.
The industry is hailing Google's acquisition of Nest and Opower's coming IPO as evidence that cleantech venture investing is once again gaining momentum. But only focusing on the success of those companies ignores the vast majority of the energy and materials market, which is much tougher to break into.
Caesar said that inventors and entrepreneurs should be thinking realistically about their chances in the market -- not getting overly excited about an IPO and becoming a millionaire.
"That may happen. But there are lots of other technologies that are simply going to be licensed. It may not make a business model, but it is a valuable technology," said Caesar.
The more boring reality for lots of startups may be that the technology is handed over to a bigger corporate firm with the ability to bring it to scale. And those are the lucky ones that aren't "screwed" by poor timing or too many infrastructure demands.
ARPA-E's yearly summit is a chance for the industry to rally around the power of invention and innovation in energy. But this morning's panel was a reminder of how difficult the market is for the people and organizations trying to bring those technologies to scale.
Caesar said he is "still waiting" for a big success in Waste Management's venture portfolio.
"It is a lot of work managing a portfolio of companies where you have a lot of positive things [being developed], but they don't happen when you think they're going to happen," he said.
Photo Credit: Cleantech Investment Troubles?/shutterstock
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Stephen Lacey is a Senior Editor at Greentech Media, where he focuses primarily on energy efficiency. He has extensive experience reporting on the business and politics of cleantech. He was formerly Deputy Editor of Climate Progress, a climate and energy blog based at the Center for American Progress. He was also an editor/producer with Renewable Energy World. He received his B.A. in ...
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