Cleantech-less in Seattle
Nikesh Parekh7/7/11Follow @nparekh00
Every entrepreneur or executive would like to “do well by doing good.” That is the dream of being socially responsible and financially successful at the same time.
After working in venture capital and selling Internet advertising for eight years, I decided to focus on cleantech for my next career adventure. Though I live in Seattle, I was approached by a venture capital firm called XSeed Capital from San Francisco to be CEO of a next-generation biofuels and renewable chemicals called Bio Architecture Lab, founded by a professor from the University of Washington named David Baker, a post-doc from his lab and an MBA from UC-Berkeley.
Though our market timing in 2008 was challenging, given the financial and energy market crashes, we had a great run. We raised $35 million in financing, received the largest ARPA-E grant in the country for advanced energy research from the Department of Energy, and established partnerships with DuPont, Statoil in Norway, and the Chilean oil company ENAP. As of 2011, Bio Architecture Lab is a 40-person company located in Berkeley, CA and Chile, making great progress commercializing seaweed (or macroalgae) as a next generation sugar source for biofuel and chemical production. In 2010, we hired a fantastic, “been there, done that” energy CEO from Shell named Dan Trunfio to take the company to the next level. Dan has the much-needed experience in complex energy infrastructure, operations, and supply chain that I do not. As everyone knows, start-ups are all about people. Dan is the right guy at the right time for the next phase of growth for the company.
After a year of commuting to the Bay Area, I returned to Seattle to seek the next adventure. With young kids and a love for Seattle, I was focused on doing something local. I was equally open to another cleantech or Internet adventure.
We are almost five years into the “cleantech” revolution and, unfortunately, a cleantech cluster has yet to evolve in Seattle. There has been a lot of discussion of the importance of clusters in the evolution of industry and technology in general. For those interested, here are two good articles on technology clusters from Hosein Fallah at the Stevens Institute of Technology and another on industry clusters by Mercedes Delgado of Temple University and Michael Porter of Harvard Business School. San Francisco and Boston have established technology and biotech clusters. San Francisco is probably the dominant cleantech cluster, which is why our board decided to move Bio Architecture Lab to San Francisco in late 2009, even though it was founded in Seattle.
Why has Seattle not achieved critical mass in cleantech? Though Seattle has a lot going for it, I point to a number of factors:
• Finance: Raising money for cleantech in Seattle is hard. The venture capital community in Seattle is small, in general, AND cleantech is a very different industry from biotech and tech, requiring knowledge of energy and basic materials. Most Seattle venture capital firms and angel investors are focused on software and Internet investments, based on our Microsoft and Amazon roots. The only local funding source in Seattle that has been consistent to cleantech is the Northwest Energy Angels. Pivotal from Portland has also been making some small investments throughout the Northwest. OVP has made a number of cleantech investments but only EnerG2 in Seattle. Off the top of my head, most other VCs in Seattle have taken a similar approach of opportunistically looking at cleantech, but not making it a priority in Seattle. Arch, Vulcan, Polaris, Cascade, Second Avenue, and Voyager all have at least one cleantech investment, but most are not located in the greater Seattle area.
• People: Seattle is a GREAT software and Internet town, but it does not have a critical mass of people needed for many of the challenges involved in cleantech. When I think about cleantech, I think of it as a cleaner version of more traditional manufacturing industries. We have some large blue-chip corporations that are not Internet and software oriented in the Pacific Northwest. Weyerhaeuser, Boeing, and Nordstrom are a few. These companies are not producing a large number of entrepreneurs or trained workers who are seeking employment in the cleantech sector. But Boston and San Francisco really do not have this talent pool either. Great engineering talent resides in the Midwest or the South. Generally, well-financed companies are relocating the right people or relocating themselves to take advantage of them. Seattle does have a strong biotech community, but there is yet to be a local biotech or synthetic biology company pursuing cleantech (at least that I know of).
• Government Support: Though I have been impressed with the new direction at the University of Washington in terms of technology transfer and licensing, overall the Washington state government has not focused on cleantech as an investment area. There was a lot of talk in the 2006-2008 timeframe about cleantech and biofuels being the next big thing for Washington state. That has yet to emerge. During the Great Recession, the Washington State Energy Program was 100 percent focused on near-term job creation and “shovel ready” projects. Unfortunately, projects focused on the next wave of clean technology were not supported.
So what’s an entrepreneur or an executive to do? If you are an executive focused on cleantech, you must be open to opportunities outside of Seattle. Most of them will be. If you are an entrepreneur focused on cleantech, you must raise financing outside of Seattle (I found money in San Francisco, Chile and Norway) and then decide whether you build your company in Seattle. Software or Internet focused cleantech companies (smart grid, energy conservation) can be successful in Seattle based on our talent pool and our green leanings. Biofuels, solar, wind, green chemicals and materials, water, and other cleantech industries will be harder in Seattle.
Personally, my wife and I decided that Seattle is home and we are taking the long view of a life in Seattle. Though I love the mission and social purpose of cleantech, I love Seattle more. In 2010, I started looking at both cleantech and Internet opportunities in Seattle for my next adventure. In the end, I found more compelling non-cleantech opportunities locally and now I am CEO of a professional social network and blogging platform in the real estate industry called ActiveRain.
I certainly hope the cleantech cluster in Seattle develops over the coming years or decade. Success breeds success. Unfortunately, cleantech in Seattle needs more visible and proactive leadership in the finance, industry and government if it is to emerge as a major employer or technology focus in the future.
So who is up for the challenge to lead the cleantech cluster in Seattle?
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