VCs in DC: Local Energy Investors Take A DOE Field Trip
It wasn’t a secret meeting, but it wasn’t widely publicized either. A small group of Boston-area venture capitalists, along with a few representatives of local energy-related enterprises, journeyed to the nation’s capital in late August for a two-day session with the Department of Energy’s Office of Energy Efficiency and Renewable Energy. They were part of a select group of 26 guests from around the country invited for a first-of-a-kind briefing on key DOE clean-energy projects that the agency is hoping can be commercialized.
The Venture Capital Technology Showcase was held on August 21 and 22, and if the purpose was to put the federal government on venture capitalists’ radar, it seems to have succeeded. “It exceeded expectations,” sums up Xconomist Bill Aulet, entrepreneur in residence at the MIT Entrepreneurship Center, who facilitated the participation of the Boston contingent in the event. Besides himself, the group included fellow Xconomist Ken Morse, managing director of the MIT Entrepreneurship Center, Konarka executive chairman Howard Berke, and representatives of six venture firms—RockPort Capital Partners, Flagship Ventures, Forge Partners, Matrix Partners, the Massachusetts Green Energy Fund, and @Ventures. Aulet admits he didn’t exactly have high hopes about the commercial expertise inside a large government organization. However, he says, the DOE’s experts “were very savvy about the business, so that was very encouraging.” (He stayed an extra day in Washington to conduct a workshop on innovation and entrepreneurship in the energy industry for about 100 DOE staffers, so they should be even more savvy now.)
Aulet, who wrote a controversial post on energy investing last month, says the trip grew out of a July 24 visit to Boston and MIT by Alexander “Andy” Karsner, the assistant secretary for Energy Efficiency and Renewable Energy (EERE). According to EERE officials, Karsner, who took office in March 2006, has made it a point of his tenure to push commercialization of technologies developed by the office.
To that end, he brought in EERE’s first full-time business development executive. And it was that person, Director of Commercialization & Deployment Brad Barton, who organized the DC showcase. Barton packs a Stanford MBA and a track record in business that includes some seven years as an advisor to Ross Perot Jr., for whom he oversaw investments in enterprise software, pharmaceuticals, natural gas, and clean energy. “I’m kind of an average private equity guy,” is how the Texan describes himself. He arrived at DOE in October 2006.
One of the first things Barton and, apparently, Karsner did was to begin meeting venture capitalists, initially in Silicon Valley. In the past, Barton says, EERE officials weren’t negative on the private sector, “they just never made any effort to do outreach. So people were very anxious to hear what we had to say.” The warm reception the DOE representatives received on those trips led to forays to other areas, including Boston, and eventually to the August technology showcase in DC.
The EERE, with an annual budget of $1.5 billion, has 10 program offices, eight of which directly address clean energy technologies in the following sectors: wind, solar, hydrogen, biomass, geothermal, industrial efficiency technologies, building technologies, and vehicle technologies. These groups fund work at national labs, startup companies, large companies, and universities. “We do a lot of stuff that wouldn’t necessarily be interesting to a VC,” Barton admits. “But there are certain things that we are doing that you could get a startup business around.” Or, he adds, that could be licensed by a venture firm’s portfolio companies.
All eight of these groups presented to the VCs in DC. The majority of the venture capitalists present came from California, including representatives from Khosla Ventures and Kleiner Perkins Caufield & Byers, but the Massachusetts group was the second largest. Barton made sure the program managers and other presenters described the technologies as clearly as possible, explained who the primary researcher was and what they were doing that was unique, gave brief overviews of the potential market applicability, and noted who held the intellectual property rights. “We tried to keep it small and at a discussion level,” says Barton. “As far as I can tell it was an overwhelmingly positive response.” The only criticism was that the presenters sometimes went a little too deeply into some of the science. One attendee jokingly asked when the lab portion of the course would be held. Still, says Barton, everyone who attended said they would be willing to attend a similar event again.
Attendees from the Boston area seem to agree. Rob Day of @Ventures noted on his personal blog, “First of all, taxpaying readers will be pleased to know that the DoE is not spending any money on free lunches, drinks or coffee for venture capitalists…What budgets are made available to the Department are going only into productive research, clearly!”
Day went on to praise the presentations. “The first day was very informative, with a lot of great market and cost data in key research areas like solar and biofuels…It was a very strong performance and hopefully a good jump-start in turning some of these needed technologies into new entrepreneurial efforts toward broad market adoption.”
Peter Rothstein, executive in resident at Flagship Ventures in Cambridge, was similarly impressed. The vast majority of the presenters, he says, “were very close to the research and the technology but also had a pretty healthy perspective on the industry. I found it very valuable.”
Rothstein says he’s already done some due diligence, and seems cautiously optimistic that something will come out of it. “I have my short list.”
That’s the kind of stuff Barton likes to hear. Over the next few months, his team will make follow-up visits to some of those who attended, including those from Boston, and “really figure out what did they gain from it.” He adds, “Hopefully they see something that is worth investing in and deploying into the marketplace and helping the American taxpayer get a return on their investment in the research of this technology.”
Barton notes that the EERE is working on ways to broaden its reach and increase awareness of the commercial potential of its programs. To that end, the office has made the VC showcase presentations available on the web. You can find them here.
“The whole idea of this is dissemination of information,” Barton says. “The more people we can touch, the better off we are.”