Thursday Throwback

The sun is shining, the presumptive presidents are picking and Lehman is still living. In other words, it’s time for some Thursday Throwback.

First up were some emails on yesterday’s item about the differences between cleantech and nanotech VC funding booms. Chris: “Your commentary on cleantech investments and pipedreams is pretty much spot on.There's also another point, in that the successful cleantech deals are simply baby-step iterations or improvements on what a conventional energy solution already provides in the marketplace. Take EnerNOC for example. It’s a great concept, but its simplicity is also overwhelming - just use power at cheaper times or use less of it when its not necessary. A123 Systems - building the better battery.These and a few others have pretty clear value propositions in which the low hanging fruit of the energy spectrumis targeted.More importantly, this is fruit that can be harvested within the time horizon of the venture capital model.”

Robert: “The nanotech sector has historically been full of a lot of interesting science projects that were way too far from commercialization. I’m not sure that’s changed much. Cleantech has more obvious near term market apps as the world always needs energy. But the big problem for many cleantech plays, particularly energy production related deals, is that a huge amount of capital is needed to scale these deals up. There are a handful of VCs who have recognized this and have focused on building an expertise in project finance (VantagePoint comes to mind). But many VCs, it appears, have invested in cleantech plays without thinking through the longer term problem of how the technology they’re funding will scale up. Many deals will likely face a ‘getting to market’ problem. Funding a proof of concept is expensive and will probably be funded by initial investors. But will mainstream project finance sources then be able to take the idea and run with it? That transition is difficult and not well understood by many VCs. The key problem is that project finance doesn’t do technology risk and one prototype probably won’t be enough to address that risk. Which actually makes for an interesting fund opportunity there…”

Aaron: “Seems to me that a smart VC right now would eschew cleantech and focus back on nanotech. Rather have my pick of a weak litter than compete with dozens of other investors for overvalued cleantech deals.”

Cameron: “I get your point with nanotech companies not focusing enough on products, but you’d have to admit that a whole lot of cleantech companies also look like science projects. I’m thinking anything with the word hydrogen.”

Anonymous: “What’s great about you is that you think because you write a rag sheet keeping track of deals you have knowledge, insight to weigh in on things like is cleantech a viable investment opportunity. Go back to commenting about your old cars… Or maybe it’s time again to comment on why a marginal tax rate increase is so good. Oh yea, you’re from Massachusetts.”

*** Jordan writes to say he’s found a private equity firm with an office in Georgia (the country, not the state). It’s called Salford Capital – www.salfordcapital.com – and its portfolio includes Georgia-based Agro Business Bank.

*** Annie asks: “What’s the over-under on Greg Brenneman staying at CCMP Capital for more than two years? You really need to develop a way for us to vote on such things.” Well, if Rob Day can create a cleantech IPO futures market and there’s that website where you can bet on the likelihood of celebrity divorces… Ok, I’m on it.

*** Eric on Tuesday’s lack of column: “So what are you working on that caused you to just pimp out your website today? More shindigs? If so, I hope you’re not going to ignore us in San Francisco again.”

I’m actually working on two different things Eric, and you’re barking up the right tree on the first one. Details Monday. As for the second thing, details in another couple of Mondays…

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