John Doerr on Cleantech

Why is John Doerr's opinion important? His firm made prescient bets on biotechnology and the internet. And they are placing bets on cleantech. See the benefits and challenges going forward. Editor's note: I agree with the virtues of clean technology, but I am not convinced cap and trade legislation is prudent. We'll have to wait and see on energy policy.

John Doerr's Take on Cleantech

By Nick Hodge
Tuesday, November 24th, 2009

I spent last week in Silicon Valley, literally bumping elbows with some of the smartest people in the finance business.

I heard from Vinod Khosla and Steve Westly, pioneers of Sun Microsystems and eBay, respectively.

And I personally spoke to John Doerr, who was in on the venture level of companies like Compaq, Amazon.com, Intuit, and Google.

Now that the Internet is maturing — and these men have walked away with billions — they're turning to cleantech.

You see, all these billionaires know that clean energy is the next great profit frontier. And they aren't ashamed of it. They know a fortune can be made while doing something that benefits humanity and the planet.

Over the next few weeks, I'll share some of the insights I gained by listening to what they had to say. Today, we'll start with a recap of John Doerr's thoughts on the cleantech industry.


"It's More Clear Every Day"

That's what Doerr had to say about this statement: Cleantech is the largest economic opportunity of the 21st century.

And here's how he backed it up...

The billionaire venture capitalist likens cleantech to the Internet. Only, he says, the Internet is a $1 trillion industry serving 1.2 billion people... while energy is a $6 trillion industry serving 4 billion people.

So cleantech has the chance to be at least 4 times bigger than the Internet.

The Last Great Network

Think of it like this: Clean energy really has the chance to be the last great network.

Railroads were first, followed by the highway system. Then came phone, cable, and electricity transmission networks. All followed by the Internet.

But cleantech — through the smart grid — is becoming the next great network. Homes and neighborhoods will be linked together through smart networks and devices... all talking to the utility... providing real-time data allowing for the easier introduction of renewably-produced resources.

And fortunes will be made as it happens. That's why these mega-investors are foaming at the mouth.

Thing is, there are still a few hurdles remaining. Doerr did his best to identify them and provide ideas for how to overcome them.

An Environment that Fosters Innovation

According to Doerr, the main hurdle facing cleantech is its capital intensity.

He said it took $25 million and 3 years to bring Google to an initial public offering (IPO).

Compare that to Bloom Energy, a Doerr-backed fuel cell company. Bloom has already gobbled up $250 million and seven years. Doerr said it'll be nine years before they think about an IPO, even though it has "substantial revenues and orders."

According to Doerr, there is simply more "capital required to grow a great green company." And that's what has delayed major investment — both public and private — thus far.

The intense need for capital has created an equally intense lack of investment will. And, at least in the U.S., Federal policy hasn't really done much to help.

Technology-specific subsidies and lobbyist-inspired energy policies have left us far behind our European and many Asian counterparts.

Instead of subsidizing the lobbyists' favorite technologies... we need to create a policy environment that fosters innovation, namely by putting a price on carbon either through a tax or cap-and-trade.

Again, Doerr turns to the Internet for an analogy.

When the Internet emerged from military application into the public realm, it wasn't Congress deciding the way forward. Could you imagine if they subsidized dial-up while stymieing DSL or cable? We'd all still be stuck with modems.

Similarly, energy policy needs to evolve. Winners need not be chosen by politicians, but by economics.

And failing to do that is one of the main reasons the U.S. remains a laggard in clean technology.

Think about the year 1996. Where were the top Internet companies based or founded? All in the U.S.

Now think about the top solar, wind, and battery companies... Mostly European and Asian locales come to mind.

It's not only sad for our country — it's dangerous, with respect to both energy and economic security.

Doerr's Last Words

This lack of political steadfastness has led to "woeful underinvestment" in clean energy. And that's part of the reason we're now giving stimulus dollars to overseas firms for wind turbines and other clean technologies.

Europe is literally 10 years ahead of us. Early adoption is the reason the tiny country of Denmark exports billions of dollars worth of wind turbines annually.

Doerr was hopeful, though. He's going to keep investing because he sees an upside to multiple bottom lines.

And while he doesn't favor subsidies for any one sector, he did have three policy suggestions:

"Put a price on carbon. Put a price on carbon. And put a price on carbon."

Only when businesses don't have the right to treat the atmosphere like an open sewer will there be meaningful migration away from fossil fuels.

That's what Europe did. And look who we're now paying for wind turbines.