A 2011 Tool Kit for Savvy Cleantech Investors

3/24/11

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combine project finance and venture capital, create innovative approaches for the combined use of debt and equity, craft innovative joint ventures between strategic and private equity players, explore the use of public-private partnerships, de-risk projects by integrating innovative clean energy technologies with existing conventional products, develop innovative insurance products to mitigate risks, and creatively tap utility balance sheets for project support.

I’m encouraging cleantech investors to think in terms of a “cleantech tool kit” that can help them minimize risk and take advantage of these emerging trends and opportunities. Some of those tools include:

—Intellectual property. Many cleantech companies are taking advantage of the U.S. Patent and Trademark Office’s accelerated patent examination program for “green technologies” to build their patent portfolios. This program is taking off with over 1,200 patent applications undergoing accelerated examination and 177 patents issued, creating value and choice for investors. With a steady rise in the number of cleantech patents issued, we will likely see a rise in cleantech patent litigation as companies fight to secure their lead in this technology race. Performing patent due diligence to identify key patents and players in the field will help mitigate these investment risks. Further, identifying the cleantech companies that can leverage their intellectual property assets by entering into cross-licensing partnerships will also be key to cleantech ventures that will successfully cross the valley of death.

In general, a deep understanding of cleantech intellectual property is key to reducing technological risk. Evaluating the strength of a cleantech company’s intellectual property assets involves understanding the scope of coverage of a cleantech company’s patent portfolio, as well as assessing freedom-to-operate in the cleantech patent landscape. Domain specific intellectual property expertise will be essential to investors in picking cleantech winners and losers.

—China. In 2010, China surpassed North America in terms of cleantech dollars invested for the first time. We are facing a “Sputnik moment” in cleantech, and it is China that is our competition. Renewable energy ambitions are central to the current five-year plan of the Chinese government. China’s ability to quickly implement its public policy to transform from a net importer of “old” energy in favor of becoming an exporter of “new” energy creates enormous opportunities for almost all energy companies. China’s importance in cleantech is reflected in the market by the increasing interest among foreign … Next Page »

Steve Rowles, a partner with the Morrison Foerster law firm, is chairman of the firm’s San Diego corporate group and former co-chairman of the emerging company venture capital group and private equity fund formation group. Follow @

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