Hybrid of Public/Private Financing for Renewables

March 8, 2010

PhotobucketI wrote not too long ago about the huge, long-term role that the National Renewable Energy Laboratory (NREL), as part of the Department of Energy, plays in supporting the development of clean energy technologies.  Their work with solar energy leader Solyndra is a perfect example of a case in which this public support made it possible for a private company to raise critically important addition capital, by preventing their initial private investors from getting scared away.  At a certain point, new (very large) rounds of cash were required to get the company to its next level.   As I recall, NREL supported this effort to the tune of over $700 million — and this robust commitment showed investors that they weren’t alone in their belief that the company was on the right track. 

But not every company that asks for money receives any at all — let alone $700 million.  So exactly how does this process work?  How fair is it? What criteria are most important?  What types of companies are favored over others, and why?  Are more mature renewables technologies, like photovoltaics (in which Solyndra plays), favored over newer ideas?  (Solyndra has a very well proven breakthrough in deployment of CIGS (copper indium gallium (di) selenide), generating a significant leap in PV efficiencies and reduction in costs).

Unfortunately, it’s not clear.  I suppose it’s not supposed to be.  Take solar thermal/CSP (concentrated solar power) as an example of a new technology.  Technologies like PV and wind have a several-decade head-start over CSP.  When I interviewed industry leader Ausra‘s founder Dr. David Mills for my book on renewables, he told me that Ausra had gotten to the second round in one of these mega-contests in which the DoE selects its favorites to back, but that they didn’t make the finals.  When I asked if he resented their decision, he — perhaps simply out of good sportsmanship and professional courtesy — said that he didn’t, and told me that he’ll simply try again another time.

I can’t count all the people who have asked us for our insights at 2GreenEnergy on this matter — and I regret that all I can turn up are anecdotal incidents like these.  I ask readers to share their own experiences with this process so that all my learn.  Thanks.

By Craig Shields | Posted in Renewables - Business | Tagged , , , , , , , , | Comments (4)

Renewable Energy and Venture Capital

January 7, 2010

PhotobucketA great number of readers have written in recently asking about raising investment capital. Most are fairly non-specific about this, hoping, I suppose, to find an extremely wealthy angel investor who likes their idea – in terms of both its risk/reward profile and its philanthropic merits – and is willing to roll the dice. This can happen – in fact, is does happen every day.

Yet I want to write a short post on venture capital. By contrast to angel investors, VCs tend to:

1) Use other people’s money rather than their own; they represent large pools of capital that come from pension funds, government entities, endowments, etc., and

2) Be extremely selective about the deals they take on, looking to “swing for the fences,” as I like to say, i.e., embracing deals whose upside potential is enormous, where an occasional success more than compensates them for their many (smaller) failures.

Looking back on my 25-year career as a marketing consultant to high-tech companies, I remember the good old days fondly. Most of our clients were Fortune-sized: Sony, Pioneer, Oracle, Microsoft, National Semiconductor, IBM, 3M, Philips, 3Com, ITT, Fedex, Xerox, Hewlett-Packard, as so forth — but many were venture-capitalized start-ups. As one of several examples, I worked for years for a nascent company called etNetworks – a joint venture with IBM that was focused on using satellite technology to deliver IBM courseware to computer resellers worldwide. Representatives of the venture team were in most of our meetings, and I got to know the type of expectations they have and the way they like to interact with the management teams (and consultants) within their portfolio companies.

The upside potential of etNetworks, as I demonstrated in my numerous research presentations, was most definitely there. The numbers penciled out beautifully in terms of the size of the reseller market-base, their disdain for travelling to receive training, and their willingness to pay for training and educational services. Initially, a venture capital giant took a huge position in the company.

And, to a lesser extent, so did I; in exchange for a substantial reduction in billings, I received over $1 million in etNetworks’ stock. I remember my seven-year-old son was so excited when, in an effort to get him to grasp the concept of equity ownership, I explained this all to him. “How many Lamborghinis can we buy if etNetworks goes public at $5 a share?” he’d ask, his eyes as wide as tennis balls. “A whole parking lot full of ‘em,” I replied, hugging him close.

Its current value? Zero. It wasn’t the homerun it looked like a few years earlier — more like a ground-out to the shortstop – a disappointment for everyone – including my son and me.  Essentially, the advent of a reliable, ubiquitous, high-bandwidth Internet did the same thing to etNetworks that it’s in the process of doing to the video rental industry.

Of course, new venture deals happen every day — and many create huge rewards for all concerned.  In the process of discussing renewable energy business consulting with 2GreenEnergy readers, I’ve provided my experiences with this process, and offered whatever advice I’m able to.

To add to that, I just came across this truly excellent article on the realities of pitching VCs on an idea; the author explains this process far better than I can from my perspective.   Enjoy, and good luck.

By Craig Shields | Posted in Renewables - Business | Tagged , , | Comments (2)

Solyndra – Renewable Energy Cinderella Story

September 16, 2009

PhotobucketDr. Kelly Truman was good enough to update me on what I have to call a textbook success of the business he started with his partner CEO Chris Gronot.  Solyndra, a venture-capitalized photo-voltaics company, is based in Fremont, CA — and seems to have done essentially everything right.  And that starts with the company’s proprietary PV technology, using cylindrically shaped elements coated with the semiconductor copper indium gallium (di)selenide (or CIGS), which is perfect for large, low-slope roofs, and is targeted mainly to commercial buildings.

There are several features of this technology and its implementation that have come together to form a highly differentiated product that is making a real name for itself around the world in a period of time that is, relative to other similar ventures, unbelievably short. First, because wind blowing through the elements tends to hold the installation on the roof (rather than blow it way) the system can be put in place very easily, quickly, and inexpensively with no penetration of the rooftop itself. Also, CIGS deployed in cylindrical elements results in 25% to 100% more power than conventional thin-film technology installed onto equivalent roofs.

As a business consultant, I’ve lived through dozens of stories of venture-capitalized start-ups, and I have to say that Kelly’s narration of the company’s history makes it sound – to me at least — like one of the smoothest in VC history. The company received its initial venture funding in 2005 and went about the business of building prototypes, working with the National Renewable Energy Laboratory (NREL) which provided the equipment and technology for deposition. Soon the technology was demonstrated, the technical milestones were reached, beta customer feedback was positive – and actually serendipitously helpful; customers would often provide constructive input that none of the principles had thought of — e.g., “Do you realize that this could be used for — (some new application)?”

But the good news goes on: Solyndra took over a facility that Seagate (the hard disk-drive manufacturer) had abandoned when they took their operations overseas, and smoothly completed its third-party testing, validating not only the energy efficiency of its products, but also their seismic and wind readiness. By mid-2008 the first volume customer shipments were coming off the loading docks, and the company has grown in revenue in every subsequent quarter.

Looking for some plot twist or at least some conflict to make this story more interesting, I asked if investors getting antsy for a liquidity event, like an IPO on an acquisition by a publicly traded company. “No,” Kelly says, “They’re wonderfully patient. They know we’re in this to make a real difference against the reality of global warming, and that will require some time for growth. To give you an idea of their patience, we received a nine-figure from the DoE which required us to put up 27%. Even in this financial climate, our investors made sure this happened.”

Kelly Truman and I don’t know one another outside of this one-time encounter, and so I didn’t feel it was my place to ask anything else. When the interview was over, I politely thanked him and hung up. But I have to admit that I was wondering: Do his kids have naturally straight teeth? Are they headed for Ivy League colleges on full academic scholarships? I somehow feel that I want to hang out with Kelly, as he’s obviously doing a great number of things right.

I’m kidding here, of course. What I really mean is this: congratulations.

By Craig Shields | Posted in Photo-voltaics | Tagged , , , , , | Comments (5)