Patience, Honesty, and The Strings of Free Money: Five Financing Themes from the Seventh Annual Conference on Clean Energy

11/2/11Follow @xconomy

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its product has the potential to disrupt the marketplace and succeed as a standalone company (not just become an incremental innovation for an existing energy giant).

—How to impress a potential seed investor for your cleantech startup? Having “landscape knowledge—when someone really, really knows their field, knows where their innovation sits in that field and relates to the other innovation,” says Kleiner Perkins’ Wells. “Here’s someone who’s reality based and really understands what’s going on here and how their innovation might play out.”

How not to impress an investor? “Being a little slippery about a point or coming across as dishonest is one sure way to lose potential investors,” says Ron Rubbico, a member of CommonAngels and Boston Cleantech Angels. In essence, don’t make up an answer to investor questions. “Its OK to say, ‘I don’t know, we’re going to find that out with the money you give us,’” Wells adds.

—All free money is good, right? Maybe not. Rubbico says “anytime you can get non-dilutive financing into your early venture it’s a great thing.” Though he and the other panelists cautioned entrepreneurs closely to examine the time it takes to pursue and satisfy the conditions of grants and how it might detract from actually developing their product. “Figure out what the strings are,” says Padaria.

—Re-think government funding. Just dumping a bunch of money into an industry or company isn’t really the way to enable cleantech innovations to succeed in the market. Cheryl Martin, deputy director for commercialization at the Department of Energy’s ARPA-E program, expressed concern that the money a government like China is pouring into cleantech is accelerating the space too fast and might topple. And recent flops in political cleantech bets have also proven that governments have to “be careful of what they support publicly,” says Issam Dairanieh, global director of BP’s Alternative Energy Venture team.

The better move for government is to enact regulatory changes that allow cleantech to succeed in the marketplace,” said SK’s Parvez. “Subsidies don’t last forever and they’re hard to predict.”

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