Cleantech Overcoming Challenges, Rough Years, Tesla VC Investor Says

12/4/13Follow @MichaelXBD

Building revolutionary companies is not easy, and bad times have to be expected and endured. But dark days don’t dissuade visionaries. Ask Henry Ford, Thomas Edison, or the innovators who built Silicon Valley’s greatest companies.

In the eyes of Ira Ehrenpreis, an early investor in Tesla Motors (NASDAQ: TSLA) and a current director, it shouldn’t be any different in the cleantech industry.

“No renaissance happens overnight, and none is without its challenges,” Ehrenpreis said Tuesday at the National Renewable Energy Laboratory’s annual industry growth forum in Denver. The federal laboratory runs the conference to bring together startups, entrepreneurs, researchers, and investors.

Ehrenpreis has seen a lot as venture capitalist who specializes in cleantech. He’s a general partner at Palo Alto, CA-based Technology Partners, and is a well-known advocate for the industry. His experience and role with the most celebrated cleantech company of all have given him a unique perspective, and he sees signs of hope for the industry, even as some have tried to write it off of an overhyped fad.

“We have to remember as we try to create the cleantech sector, changes of this magnitude take time, and clearly we face formidable challenges, especially as the status quo is threatened,” he said.

—More than a pep talk. Ehrenpreis has been a regular commentator on cleantech and is typically bullish, often repeating the catch phrase “there is green in being green.” But on Tuesday, he didn’t try to obscure the setbacks over the past few years.

There have been the high profile bankruptcies of A123 Systems, a battery manufacturer, and Fisker Automotive, an electric carmaker. Cleantech incentives that were part of the 2009 federal stimulus package have expired, and the industry became a political football.

“The confluence of economic uncertainty, political inertia, and these high-profile bankruptcies have shaken peoples’ confidence in cleantech,” Ehrenpreis said.

—“Tourists” flee when times are tough. Those factors contributed to a 33 percent drop in venture capital investment in cleantech in 2012, and that money largely went to established companies as VCs invested in later-stage or bridge rounds, Ehrenpreis said.

While companies are adopting leaner businesses models and pursuing “capital light” strategies, they can only stretch money so far in industry segments that require heavy research and development and manufacturing investment.

“We are not an industry like the bits and bytes world,” Ehrenpreis said. “Many cleantech companies have to cross the valley of death to get to the market.”

But the tough times have led to needed consolidation. Technological dead ends have been identified, and VCs who wanted quick returns are gone in favor of more patient investors.

“In the early days there were a few investors in the clean tech sectors….and then all of a sudden the tourists came, and everyone thought that cleantech was easy. A lot of the tourists have left,” Ehrenpreis said.

Ehrenpreis’s ultimate advice is to persevere and be patient—as Tesla’s investors had to be.

—Hopes are not just hype. But there has been good news, with renewable energy reaching some important milestones.

In 2012, 49 percent of newly installed electrical generation capacity came from renewable sources, according to the Federal Energy Regulatory Commission, and in October, all the capacity added to the grid came from renewable sources.

Meanwhile, the technology keeps getting better and cheaper. Finally, global demand continues to increase, and renewables appeal extends into the developing world.

“Faced with these challenges it’s too easy … Next Page »

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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