The Watt-com Era

Stephen DeAngelis

March 16, 2007

I recently posted a blog about the surge of coal-fired power plants being constructed in the U.S. (Coal Rush in U.S. as Europe Gets Greener). In that post I wrote: “Many pundits argue that a green enterprise sector will eventually emerge and that sector will create jobs, raise awareness, improve efficiency, and make environmentalism not only a priority but a reality — and a profitable one. … This is an area where the innovators will rule and the world will win. I’m optimistic that we’ll eventually meet the challenge.” Now comes word that Silicon Valley is getting involved in a big way [“Start-Up Fervor Shifts to Energy in Silicon Valley,” by Matt Richtel, New York Times, 13 March 2007]. Richtel writes:

“Silicon Valley’s dot-com era may be giving way to the watt-com era. Out of the ashes of the Internet bust, many technology veterans have regrouped and found a new mission in alternative energy: developing wind power, solar panels, ethanol plants and hydrogen-powered cars. It is no secret that venture capitalists have begun pouring billions into energy-related start-ups with names like SunPower, Nanosolar and Lilliputian Systems. But that interest is now spilling over to many others in Silicon Valley — lawyers, accountants, recruiters and publicists, all developing energy-oriented practices to cater to the cause. The best and the brightest from leading business schools are pelting energy start-ups with résumés. And, of course, there are entrepreneurs from all backgrounds — but especially former dot-commers — who express a sense of wonder and purpose at the thought of transforming the $1 trillion domestic energy market while saving the planet.”

This is good news for everyone. The country — the globe — will become much more resilient as a result of bright people and market forces getting involved in environmental issues. It’s the kind of the eclectic group of people we hope will get involved with the Institute for Advanced Technologies in Global Resilience. The one cautionary note made in Richtel’s article is that false steps, resulting from over-exuberance and false hope, could cause the growing enthusiasm for environmentalism to collapse if such missteps result in huge monetary losses.

“Andrew Beebe, one of the remade Internet entrepreneurs, … said the Valley’s potential to generate change was vast. But he cautioned that a frenzy was mounting, the kind that could lead to overinvestment and poorly thought-out plans. ‘We’ve started to see some of the bad side of the bubble activity starting to brew,’ Mr. Beebe said. The energy boomlet is part of a broader rebound that is benefiting all kinds of start-ups, including plenty that are focused on the Web. But for many in Silicon Valley, high tech has given way to ‘clean tech,’ the shorthand term for innovations that are energy-efficient and environmentally friendly. Less fashionable is ‘green,’ a word that suggests a greater interest in the environment than in profit. The similarities to past booms are obvious, but the Valley has always run in cycles. It is a kind of renewable gold rush, a wealth- and technology-creating principle that is always looking for something around which to organize.”

Profits and environmentalism may seem like strange bedfellows, but pragmatism is almost always the best approach to problems. It’s the only approach that can draw together people from both sides. Zealots may decry such accommodations and compromises, but they risk cutting off their noses to spite their faces. The fact that this may be a cyclical short-term venture capital interest shouldn’t raise concerns. Everything runs in cycles. Getting venture capitalists and technologists interested in environmental issues is great. Eventually that interest will pay off in inventions, processes, and approaches that hold great promise. As those innovations are implemented and mature, venture capitalists’ interest will wane as they look for the “next big thing.” In their wake, however, they will have left a sustainable legacy that helps the world. Does this all have a chance of working? Richtel thinks it does:

“The energy sector is not so distant from other Silicon Valley specialties as it might appear, say those involved in the new wave of start-ups. The same silicon used to make computer chips converts sunlight into electricity on solar panels, while the bioscience used to make new drugs can be employed to develop better ethanol processing. More broadly, the participants here say their whole approach to building new companies and industries is easily transferable to the energy world. But some wonder whether this is just an echo of the excessive optimism of the Internet boom. And even those most involved in the trend say the size of the market opportunity in energy is matched by immense hurdles. … This time around, entrepreneurs say they are not expecting such quick returns. In the Internet boom, the mantra was to change the world and get rich quick. This time, given the size and scope of the energy market, the idea is to change the world and get even richer — but somewhat more slowly. Those drawn to the alternative-energy industry say that they need time to understand the energy technology, and to turn ideas into solid companies. After all, in contrast to the Internet boom, this time the companies will need actual manufactured products and customers. ‘There are real business models and real products to be sold — established markets and growing economics,’ said George Basile, who has a doctorate in biophysics from the University of California, Berkeley and specializes in energy issues.”

The fact that an eco-friendly business sector is slowly emerging should bring hope to even the most jaded environmentalist. If a sustainable eco-friendly commercial sector can be developed, it won’t matter if opportunists eventually look elsewhere for profits. Are there opportunists? Of course there are!

“The sudden interest of lawyers, accountants and other members of the wider Valley ecosystem strikes some as opportunistic. ‘There’s a large amount of bandwagon-jumping right now,’ said Mark Hampton, chief executive of Blanc & Otus, a technology-oriented public relations firm whose clients have included TiVo, Sybase and Compaq. Still, he understands the interest of relative newcomers: ‘There’s a huge opportunity.’ They are all, plainly, following the money. In the first three quarters of 2006, venture capital firms put $474 million into a broad range of Silicon Valley start-ups in energy storage, generation and efficiency, according to Cleantech Venture Network, an industry trade group. Energy was by far the fastest-growing area of interest, and the amount was on par with what was put into telecommunications and biotechnology. Yet the amount of money involved is still relatively small compared with the boom years. Over all, venture funding last year was still less than a third of the nearly $34 billion venture capitalists invested in the region in 2000, the peak of the bubble, according to the Center for the Continuing Study of the California Economy, based in Palo Alto.”

Entrepreneurs will always follow the money, but their ventures will be sustained by both traditional business people and true believers. Richtel notes, for example, “just as the Internet promised to decentralize computing and put control in the hands of users, the Silicon Valley version of energy innovation intends to decentralize the industry by making power generation more local — like solar panels on rooftops.” The advent of the Watt-com Era is a good thing and those individuals who Richtel interviewed believe we wil
l start seeing its benefits within the next decade.