Thursday, September 10, 2009

Venture Capital: "Betting Our Green On Green Infrastructure"

Here's the pitch.
From the Wall Street Journal's Venture Capital Dispatch blog:

(Editor’s Note: The following is a guest column from Paul Holland and Steve Vassallo, two partners at Foundation Capital. The Menlo Park, Calif.-based venture capital firm raised a $750 million fund last year that invests heavily in clean technology companies.)

By Paul Holland and Steve Vassallo

Last year, venture-backed initial public offerings reached a 30-year low. Just six venture-backed companies made their public debut – and five of those six were trading below their offering prices by year-end.

This isn’t just bad news for venture capitalists, it’s bad news for our economy. Although venture capital represents only 0.02% of U.S. GDP investment, it is responsible for an astounding 10% of all U.S. jobs and 18% of U.S. revenue, according to the National Venture Capital Association.

Just as jobs are a lagging indicator in a downturn (unemployment often bottoms out after other indicators do), IPOs are a leading indicator of hopefulness, willingness to invest in innovation, and ultimately, real, sustained economic growth.

Right now, the mood is grim, but to be a venture capitalist is to be an optimist. Our job is to invest in the innovations of tomorrow. And that’s why we believe that despite the economic mood, there is a major area well-positioned to take advantage of new investment and reinvent our economy in the process. We’re talking about green infrastructure, and we predict that within the next three years we will begin to see green infrastructure companies going public.

Consider all of the federal and private investments being made to give America’s auto fleet a green makeover - an effort that is rightly seen as a key part of our national energy strategy. However, the dirty little secret about America’s energy consumption is that more than five times the energy we use driving goes into the construction and operation of the places we drive to. Cement production alone contributes about 8% of the world’s annual carbon emissions - only slightly less than cars.

Not many drivers today would be happy to have to start their cars with a hand crank, but we seem perfectly content to make cement the same way we did when it was invented in 1824 - mixing minerals together and then heating them to extremely high temperatures in a kiln.

And it’s not just cement that hasn’t been updated. Most homes and businesses still use the same basic double-pane window design that was introduced in 1865. We make drywall the same energy-intensive way we did when it was invented in 1917. We haven’t significantly upgraded the technology of our electric grid since the days of rural electrification projects.

Most of these elements of our infrastructure were conceived during the Industrial Revolution when energy was so inexpensive that it was effectively free and the environmental impact wasn’t understood.

It’s no surprise that the physical infrastructure we were left with is hugely wasteful - consuming more energy than manufacturing, agriculture, and transportation combined.

That is why we believe we’re about to enter a period of innovation during which age-old building materials are reinvented to be more efficient, more effective, and less harmful to the planet....MORE