Tuesday, September 28, 2010

Cleantech in the Northwest

Expert Panel Provides Insight

Perkins Coie cleantech panel at the Arctic Hotel 9/23/10
Moderator Kha Dang readies a question for (L-R) Brad
Zenger, Michael Butler, Jeff Canin and (not shown)
Rick Lefaivre and Byron McCann
Some of the best industry panels locally are put on by law firm Perkins Coie, who always manages to assemble speakers culled from the local industry A-list. Last Thursday was no exception, as Perkins attorneys Bruce Dick and Kha Dang hosted a stimulating and lively panel of cleantech experts in the fabulous Dome Room of the Arctic Hotel. On the dais were Brad Zenger of Pivotal Investments, Michael Butler of Cascadia Capital, startup CEO and angel investor Jeff Canin, OVP partner Dr. Rick Lefaivre, and Byron McCann of Ascent Partners, who also heads the Pacific Northwest region of the Cleantech Open.

Evan Scandling has a good post over at NW Cleantech that hit the highlights, so I'll just add a few other things from my notes that struck me as also finding broader concurrence from the panel.

The lead question was about what kinds of investments they favored. Several panelists drew parallels between the IT/computer industry of the early 1980's and the cleantech/renewable energy industry of today. (Butler's recent blog post on the subject here.) Lefaivre stated flatly that we are at "the start of 30 years of an energy economy that will parallel" that astonishing growth arc. Seattle has been a software/IT/web town for years, so it's no surprise a majority of the panel spoke favorably of the investment potential at the intersection of IT and cleantech. "Efficiency" found much favor, with panelists finding appealing companies that focused on energy efficiency opportunities and which were capital efficient in doing so. (What's efficient? A maximum of $20M over 3-5 years for VCs, maybe $5M for angels.)

There was considerable doubt about what funding would be available for more capital-intensive plays over the next several years. Butler pointed out that deal size has shrunk dramatically but capital needs for more intensive companies had not. The result is many fewer institutions willing to do the size of deals that capital-intensive cleantech companies need to become commercially viable; the market opportunity must be truly "massive." Several panelists suggested a growing "bifurcation" of funding: larger deals would be done less by VCs than by strategic investors, a point made repeatedly as well in Perkins Coie's panel on funding back in April. Most VCs will likely focus on deals in IT that needed smaller and fewer rounds, while "real VCs" (Lefavire) might find promising capital-intensive cleantech sectors like fresh water and waste-to-energy.

There were several other points addressed particularly to entrepreneurs in the audience to consider in building their companies:
  • Great team, great idea, focus, and a fundable business model are all necessary (Zenger)
  • There is no "cleantech" per se; build on other technology and be broad-based and multi-disciplinary (LeFaivre)
  • Look at taking an existing process or supply chain and improving it (McCann)
  • Scalability is key (Lefaivre)
  • Leverage the local software ecosystem (Butler)
  • Great ideas are coming out of our universities; great entrepreneurs should work with them (Butler)
  • Do "impedance matching" to find the best market entry that sidesteps regulatory impediments and sometimes significant variations in market adoption rates (Zenger)
  • Have good alignment between value proposition and target customer need (McCann)
  • $100B will be spent in the next 10 years on potable water, especially desalination (Canin)
  • Avoid businesses that need project finance (Lefaivre)
Lefaivre summarized the thinking of many on the panel when he noted that entrepreneurs with "cool ideas" critically need guys with "cool business savvy" to identify and address issues of scale, manufacturability, and, most important, to talk with customers well before product finalization. Canin added that the depth of cleantech experience locally amongst entrepreneurs wasn't great, but that was OK because core skills were "transferable from other sectors."

Panelists had several thoughts in response to the question of what they expected government's role in funding cleantech would and should be; these remarks will be part of a future post.

(Have a cool idea and need that savvy and years of cleantech experience? I'm available!)

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