Cleantech 2.0

Cleantech just can’t escape it’s reputation. Bradford Cross, in his rundown of AI predictions for 2017, said AI would be “cleantech 2.0”: a trendy area where VCs are likely to lose a lot of money. Bradford is an investor at DCVC and has been working in AI for decades. There’s a lot of great stuff in the post and I encourage you to read the whole thing, but here’s the section on cleantech:

“Cleantech isn’t a market, it’s a cross cutting concern. … [C]leantech for cleantech’s sake doesn’t work because it doesn’t start from the premise of a customer need. Great businesses start with customer need. Great missionary businesses start with a vision defined by customer need, and incorporate a mission that aligns to satiating the need. An organization with a societal mission but without a customer-centered vision is at best a moderately effective philanthropic organization. Great business put customer needs first, not a cross-cutting technology trend, even if it’s a missionary one.”

– Bradford Cross. Emphasis added.

Bradford is absolutely right that businesses don’t succeed unless they focus on customer needs. It’s also fair to say that some of the cleantech failures didn’t start from customer needs. In other cases, they were addressing needs that didn’t exist. Plenty of biofuels companies bet that customers would have certain needs when oil prices went to $300 a barrel.

A different cleantech 2.0

The time to buy is when there’s blood in the streets.

– attributed to Baron Rothschild

During the panel I moderated last week at the ARPA-E Summit, I asked Ira Ehrenpreis (DBL Partners) and Mike Biddle (Evok Innovations) about the bad rap Cleantech got with VCs, the subsequent flight of venture funding from the sector, and what’s different now. After all, DBL recently closed a $400m fund and Evok raised $100m to invest in early stage cleantech startups. Ira pointed out that Facebook and Google rose out of the ashes of the dot-com bust. In his view, “cleantech is a widening prism.” That is, there’s more than just solar, batteries, and biofuels. Now they’re seeing better and more diverse companies. Companies that focus on real customer needs, not just pushing innovations to an unreceptive market. Investors are practicing better discipline—no more $100m equity rounds to build factories before R&D is done. As they see it, founders and investors learned some tough lessons. In their view, Cleantech 2.0 is here and they’re betting on it.