Foreign competition is rising, and U.S. consumers haven’t departed from their penny-pinching mentality of The Great Recession, and behind this double whammy the cleantech industry is feeling the squeeze. That’s one of the big impressions I came away with after polling a crop of cleantech experts from Xconomy’s network of advisors and op-ed contributors for their predictions for 2011. But take heart; there’s plenty of room for optimism, especially in the fields of energy efficiency and monitoring, where the U.S. may be leading the way to a greener future that’s much more achievable—at least in the short term—than through any form of alternative energy.

One sub-theme was pretty overwhelming among the responses I received: the actual materials manufacturing side of cleantech (i.e. the production of components for generating solar and wind energy, efficient batteries, and LED chips) is struggling, but energy-focused software and services are rising to the occasion. A number of Xconomists and contributors have pointed out that the U.S. cleantech manufacturing base is weakening due to competition from countries like China, which offer cheaper production and strong government incentives (or mandates) for adopting the new technology.

“It’s a rapidly commoditizing good,” Ray Demeo, VP of worldwide sales at Marlborough, MA-based Coolcentric, says of solar equipment. “The price that China can produce the product at is lower than U.S. manufacturers.”

Additionally, consumers and investors are nervous about spending upfront on things like efficient appliances, electric vehicles, or solar power, to get cleaner sources of energy into their homes (or cars), and would rather find ways to save. Makes enough sense. That’s actually the silver lining for the cleantech space, though, several experts say.

“The fundamental business proposition is we will go in and evaluate some aspect of your energy utilization and we will cut your cost—-I won’t be surprised to see those kinds of business models continue to thrive,” says Tom Ranken, president and CEO of the Washington Clean Technology Alliance. “Ten to 15 years from now, people might be slapping themselves upside the head saying, ‘how did I miss that?’”

Here’s a roundup of some specific predictions we gathered from our network of cities:

—Stephen Mayfield, director of the San Diego Center for Algae Biotechnology and a professor in UC San Diego’s Department of Molecular Biology, said we can expect to see a slew of biofuels advances this year:

• The first synthetic algal genome.
• The first significant scale-up of

… Next Page »

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Thomas Thurston usually charges big bucks for a consultation like the one he gave me this week. But you’re getting it for free here. Of course, maybe it’s a freebie that will make you seek him out for more information. Either way, consider yourself lucky. I do.

Thurston is the founder of Growth Science International, a research and consultancy firm in Portland, OR. If you’re an entrepreneur, startup investor, or just like to play the stock market, you’ll want to know about his work. Thurston has developed a sophisticated mathematical model of “disruptive innovation,” based on principles put forth by Clayton Christensen of Harvard Business School (who spoke in Seattle earlier this week). Using his model, Thurston claims to be able to predict, with 85 percent accuracy, the fates of companies.

Whether or not you believe his model, you might want to listen to his advice. Most of it hinges on the key idea of “disruption” coming from cheaper, lower-performing products that work their way up-market.

“The biggest mistake startups make is assuming the competition will leave them alone when they’re better-performing,” says Thurston, who previously worked at Intel Capital. “Startups always want to be better than their competitors. It’s so ingrained in their fiber. They’re with disruption theory until they have to be worse—but you can’t just be cheaper. Cheaper and better is ‘sustaining,’ not disruptive. Startups want to raise capital, so they want to talk about why they’re better.”

Without further ado, here are a few tips from the startup predictor. Ignore them at your peril:

1. Go non-mainstream.

Of course, there’s an art to pitching a “disruptive” startup to customers and investors. “You don’t go out and say, ‘I’m worse.’ You find non-mainstream customers who value what you’re good at, even though you’re worse at what the mainstream customers want,” Thurston says. “But if you’re making better margins in your competitors’ market, they’re going to want to take your business.” (What’s interesting here is that venture-backed startups usually target the biggest possible market; not so, disruptive startups.)

2. Study failures.

Thurston built his predictive model in part by studying which companies failed and why. “Most people look at companies who survived and try to learn why. Usually it’s random, it’s hard to see. What people don’t do enough is look at failures, because the data is harder to get,” he says. “When you study a lot of failures, you see patterns much more strongly. Startups aren’t spending enough time studying failures.” (This also ties into an interesting cultural discussion about the tolerance for failure in the Seattle innovation community.)

3. Pay attention to narrative—especially when it comes to your competitors.

Surprisingly, Thurston’s research suggests the valuation companies get from investors can vary by about a factor of three based solely on how they tell their story. Assuming a company has real … Next Page »

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All this week, the venture capitalists over at OVP Venture Partners in Kirkland, WA, have been posting their thoughts on 2009—such as the biggest surprises in tech and life sciences—as well as their predictions for 2010. It’s a common theme these days, sure, but it’s always fun to get VCs on the record about such things.

Here are a few observations that jumped out at me:

—Chad Waite is as amazed as I am that Facebook has so rapidly become a mainstream means of communication, “in spite of NO visible business model.” (I think “visible” is the key word there.) He predicts that in 2010, there will be thousands of complete human genome sequences compiled, as the field goes commercial.

—Rick LeFaivre was surprised by the “vehemence of the negative reaction” from people opposed to both U.S. healthcare reform and energy legislation this year. He remains optimistic that “comprehensive” legislation will be passed in 2010 in both areas. The latter “would put the U.S. on a path towards energy independence and environmental sustainability,” he writes.

—Gerry Langeler noted with surprise the fast rise of Android-based phones, and says we might end up seeing a fundamental Google vs. Apple dynamic in the mobile space, somewhat like PC vs. Mac. He also thinks the iPhone’s “lead in applications won’t last that long.”

—Carl Weissman says the economic recovery has taken longer than he expected, given the current transparency of government and financial institutions. “All of us could see on a real-time basis the reaction of the government and the banks and the financial infrastructure to the crisis, and whether you agreed politically or not, there was little doubt that heroic efforts were being made to ensure the stability of the system,” he writes. “This created confidence, no matter how tenuous, and has allowed money and credit to flow, albeit cautiously, on a time scale that is orders of magnitude faster than in the Great Depression. My surprise is that the underlying structural weakness has been sufficient to keep the recovery modest.”

Lastly, Weissman gave my beloved Red Sox the kiss of death by predicting they’d win the 2010 World Series. What is it with Seattle investors and Boston sports teams? (Andy Sack already jinxed the Patriots here.) Leave my teams out of it, will ya?

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It wasn’t so much the predictions as the discussion that was most interesting at last night’s annual predictions dinner, organized by the Washington Technology Industry Association. Will Twitter be acquired in 2010, and why? Who will have the dominant cloud computing platform in the next couple of years? What kind of startup are you looking to build or finance, and which areas are you staying away from?

A panel of Seattle-area tech entrepreneurs and investors gamely took the bait and had some lively exchanges over the course of an hour. OK, these guys all know each other, and we’ll take what they say with a grain of salt since it’s a public forum—but here were some of the most interesting points they made. (You can read more comprehensive recaps of the panel on Brier Dudley’s blog at the Seattle Times, and soon on TechFlash by moderator John Cook.)

The panel was split 3 to 2, with the narrow majority guessing Twitter will get bought next year. Andy Sack of seed-stage fund Founder’s Co-op predicted Twitter will make more money than Facebook in 2010 (surprising, given the current disparity in the other direction). Glenn Kelman, the CEO of Redfin, an online real estate firm, said Twitter should charge for search (as it has begun to do in partnerships with Google and Bing). Kelly Smith from Curious Office and the startup Pressplane argued that Twitter could be “absorbed by a big company,” but “it’s going to go nowhere.” By the end of the evening, Sack was predicting that Microsoft would buy Twitter next year.

There was a consensus that 2010 could be a big year for acquisitions. Bill Bryant of Draper Fisher Jurvetson boldly predicted that Amazon will buy Netflix, Blockbuster, and Hulu, while opening brick and mortar “Amazon media stores.” Greg Gottesman from Madrona Venture Group said Cisco might buy EMC (for VMware) and Seattle-based F5 Networks, while Microsoft might buy Research In Motion, the maker of the BlackBerry smartphone. Sack predicted Adobe would pick up Seattle photo-editing startup Picnik. Rupert Murdoch (News Corp.) would buy Seattle’s Cheezburger Network, and someone would buy Redfin.

Looking back on 2009 for a minute, the big deals that were questioned by the panel included Adobe’s acquisition of Omniture (Gottesman said it just didn’t make sense strategically) and … Next Page »

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Here are my 2009 technology predictions. It was getting harder and harder since my post is starting to look a lot like everyone else’s posts. I look forward to a better year for the world in 2009. Drum roll please…

10. Video finally takes off
Overall consumption of video increases significantly on Web. I have been saying this since my days at AtomFilms but it really does happen in 2009. Video advertising is finally going to get some traction. Higher quality will bring more eyeballs. There are some even better video predictions from my friend Alex Castro of Delve Networks (in full disclosure, I am an advisor to his company). His are spot on. I do disagree with his prediction that YouTube will lose market share. I think they’ll grow from their current market share of videos watched from 37 percent to 45 percent.

9. More ad networks versus less
Contrary to a number of predictions, there will be more ad networks versus less. With 80 percent of the ad supply being sold through indirect channels, there will be more (rather than less) ad networks. There will be better control over supply by publishers, and everyone on this Comscore list will be there by the end of 2009. Anyone who is building unique IP will have a chance at an acquisition. Yield technology in advertising is going to be a big theme in 2009 since all other forms of targeting are basically commodities.

8. Everything is simpler and smaller
We don’t have the IT budgets that we once did. Smaller and simpler devices will take off. For example, industry sources say more than 11 million netbooks worldwide were sold in 2008, up from just around a million in 2007. Netbook sales will easily double in the new year. Also, the majority of all phones next year will be smart phones (over 50 percent).

7. The giant sucking sound
There are going to be tons and tons of consolidations in the technology space. Big guys will buy big guys. Small guys will merge with small guys. Small guys will get bought by big guys. There will be a lot of great deals out there for companies with capital.

6. It’s cooler to start a business than a rock band
There are massive layoffs and the economy is bad. Per the above, when consolidation happens, unemployment increases. People are only an hour away from registering online for … Next Page »

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Everyone loves a good prediction. Well, last night there were many of them. I attended the Washington Technology Industry Association’s “Predictions for 2009″ dinner event at the Westin Hotel in Seattle. Before I get to the panel discussion, just a couple of tidbits overheard around the room:

—Ben Elowitz, co-founder and CEO of Wetpaint, told me about “Superwoman Teriyaki.” This is a little restaurant in Seattle’s Pioneer Square (its real name is Asia Ginger Teriyaki) that is legendary among local entrepreneurs because of the woman behind the counter who takes orders, makes the food, delivers the food, manages the tables, and everything else—all at a blindingly fast pace. “CEOs want to hire her,” Elowitz said. Imagine her doing search engine optimization, he added.

—At dinner, I sat next to Big Fish Games founder and chairman Paul Thelen. (The fact that I was wearing a nametag from a PopCap Games event probably didn’t go over too well, but he humored me.) I asked for his thoughts on the casual games industry in 2009. He pointed out that some companies are cutting back because of the recession, but added, “We’re growing faster than ever.” The $83.3 million that Big Fish raised in September probably doesn’t hurt. Not too surprisingly, Thelen’s an avid gameplayer on his iPhone.

—Ken Myer, CEO of the WTIA (and an Xconomist), said he had a very successful trip to China last month, meeting with companies and potential partners together with a host of Seattle-area mobile tech companies. More on this soon.

Now for the main event. The “predictions” panelists were Mark Anderson, CEO of Strategic News Service; Ben Elowitz of Wetpaint; Matt McIlwain, managing director at Madrona Venture Group; and Kelly Smith, founding partner of Curious Office and founder of Pressplane. The panel was moderated by John Cook from TechFlash, who took audience questions via text messages on his iPhone. I’ll leave the more comprehensive roundup of the panel to John, and just give my top five take-aways here:

—Microsoft is stronger than ever. Three of the four panelists listed the Redmond giant as the big company best positioned to thrive in the economic downturn. Why? “An ungodly amount of cash,” as Elowitz put it. Smith pointed out the wealth of opportunities Microsoft has because of the number of interesting companies that could be for sale on the cheap, such as Adobe. (McIlwain chose Amazon’s position instead, because it knows how to operate cost-effectively as the “Wal-Mart of online,” he said.)

—Yahoo will be bought, though it probably shouldn’t be. But by whom? Anderson called the failed Microsoft acquisition “the dumbest deal that ever didn’t happen.” Smith and Elowitz thought it would be a good enough bargain for Steve Ballmer now. McIlwain said Disney would be “the most logical choice,” because it understands how to monetize content.

—Flat is the new up. We’ve certainly heard this before, but the reality of the economy is that holding steady is about all you can ask for in 2009, whether it’s online advertising, VC investments, or startup revenues. Elowitz noted that Wetpaint hasn’t touched the $25 million it raised in May yet. McIlwain warned that we could be headed for a Depression if there are big tax increases, trade policy changes, and more national bailouts in the coming months.

—The biggest issue in technology is far from unanimous. Anderson voted for broadband access and energy, while Elowitz cited the broader economic and financial climate, and McIlwain and Smith touted “education and talent” to foster innovation and the information economy.

—The trends predicted for 2009 are not sexy. McIlwain joked that the biggest trend would be “tax shelters,” but then said it would be “helping extend what I have further.” Elowitz concurred, saying it would “not be a sexy year,” but rather would be all about focusing on return on investment. Smith cited cloud computing and virtualization as the tech trends to watch, while Anderson pointed to the confluence of biology, chips, and software. All in all, that sounds pretty conservative, gentlemen.

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