Venture in 2013 and the Biggest Venture of the Last Quarter

Dallas Kachan is an influential voice and investor in the cleantech world.  He was formerly a Managing Director and Executive Editor of the Cleantech Group, a provider of information on the cleantech sector, and now has his own company, called Kachan & Co..  His group has released both its predictions for the sector in 2013, as well as something Kachan calls a “State of the Union” for the cleantech sector.  Both outline what lies ahead for the sector in light of what it has faced over the last several quarters.

Both are worth reading, but check out the State of the Union for a shorter snapshot of the industry.

Here are some of the group’s thoughts and forecasts:

1.  Venture funding for cleantech was down in 2012, and likely won’t leap back up in 2013.

Though it is likely to hover around the same amount.  Q2 is usually slow for the sector in terms of venture deals, and they expect Q3 venture investment to total about $2Billion.  Kachan calls that “not great, as compared to previous years on record, but it’s okay.”

He lists a number of deals done over the last quarter:

• $200m to China Auto Rental, efficiency/collaborative consumption, Beijing
• $136m to Alarm.com, efficiency/smart grid, Virginia
• $104 to Elevance Renewable Sciences, biochemistry, Illinois
• $104 to Fiskar Automotive, transportation, Irvine CA
• $93M to Element Materials Technology, advanced materials, the Netherlands

Three out of the five deals he lists are American, which might bode well for the sector in the United States.  Then again, with the very developed technology ventured community in the US, it isn’t really much of a surprise either.

Each of these deals merits some individual attentions, so I will devote a post to discussing some recent news about each one.

On my way back from class today I stumbled on an anti-fracking poster in Manhattan (Broadway, just north of 4th Street).

Meant to be a play on John Lennon’s song “Imagine” (Yoko and Sean?), the poster bears  Twitter handle (@nygovcuomo)and a hashtag #dontfrackny.

Yoko Ono and Sean Lennon erected a billboard on the Major Deegan expressway back in November and apparently, with some help, are continuing the campaign around New York City.

Here is a link to a story in Rolling Stone on the original billboard.

Since I just posted on this topic,  I want to provide some follow up to some of the issues I discussed in a previous post.

Scientific American has just published an article authored by Glenn Scherer, making a case that scientific research has actually underestimated the effects of climate change.

Fingers are pointed directly at the U.N. Intergovernmental Panel on Climate Change, which has failed to get the numbers right on several different points.

Here is a breakdown:

1. Decline of summer sea ice in the Arctic:

“In the 2007 report, the IPCC concluded the Arctic would not lose its summer ice before 2070 at the earliest. But the ice pack has shrunk far faster than any scenario scientists felt policymakers should consider; now researchers say the region could see ice-free summers within 20 years.”

2. Sea-Level Rise:

“In its 2001 report, the IPCC predicted an annual sea-level rise of less than 2 millimeters per year. But from 1993 through 2006, the oceans actually rose 3.3 millimeters per year, more than 50 percent above that projection.

Some other important points brought up in the article:

1.  The IPCC does not conduct original research.

The organization’s job is to synthesize findings from studies conducted around the world and provide meta-analysis

2.  The IPCC was awarded the Nobel Prize (along with Al Gore) in 2007, for its findings on climate change.  This is not thought to be an organization of climate change skeptics.

3. There are scientists producing material that produces far more dire predictions for the planet than the IPCC is offering.

I’m not going to go into too much detail here, but you can check it out for yourself on the SciAm website.

Typical of climate change coverage, there is a conspicuous absence of possible SOLUTIONS to the climate change problem, though I must concede that perhaps we cannot begin solving a problem that a significant proportion of us do not believe even exists.

Like just about any article published by a significant news organization on the Internet, the SciAm story is worth checking out for the comments section alone.

Here is one posted by user “Sisko”:

“Let’s review some of the claims in this propaganda piece by Scherer

He wrote- “The IPCC’s overly conservative reading of the science, they say, means governments and the public could be blindsided by the rapid onset of the flooding, extreme storms, drought, and other impacts associated with catastrophic global warming.”

My response- Idiots try to claim that any recent bad weather has been caused by CAGW but when you look at the actual long term data trends you find that there is not any significant change from the long term data.”

What is CAGW?  That’s Catastrophic Anthropogenic Global Warming.

Here is an excerpt from a rebuttal by dubay.denis (addressing to “Mr. Sisko (if that is your real name)”:

“If at some point you want to check on the propaganda you have filled your mind with, you might check out the following report prepared by the National Research Council of the National Academy of Sciences, (see http://www.scribd.com/doc/98458016/Climate-Change-Lines-of-Evidence).

We all need to debate what to do about climate change, but as the above report will indicate if you choose to read it, the existence of climate change is not a matter to debate, it’s a matter of evidence, which is very clear.

To suggest otherwise is to mislead, misrepresent, and misinform, with the simple goal of creating doubt, so you and your cohorts can win the policy debate before it even begins. That is dishonest, and dangerous to our democracy. Stop it!”

It goes on from there.  Check it out…

http://www.scientificamerican.com/article.cfm?id=climate-science-predictions-prove-too-conservative

Along with kelp, raw sewage and gasoline, Hurricane Sandy has also managed to wash onto our shores a hearty dose of post-disaster apocalyptica.

Sandy has been rough for New York (for some New Yorkers more than others, of course) but, the total bill for Sandy is estimated at $50 Billion.  My completely uneducated guess is that it will be much more, because it seems that these estimates always fall short of the total in the end.

But the conversation about rising sea levels and global warming (sorry, ahem, “climate change”) has found new fuel in the aftermath of the hurricane.  Perhaps rightly so, or not.  For those advocating the climate-change agenda, you could say this began a pivotal battle in an ongoing war.

And you could say the man who inadvertently ignited it was Andrew Cuomo, Governor of New York.

“There have been a series of extreme weather events. That is not a political statement; that is a factual statement,” Cuomo said in a press conference after Sandy hit. “Anyone who says there is not a change in weather patterns is denying reality.”

Cuomo was not explicitly connecting hurricanes to climate change, but his insistence that his words were “not a political statement” suggested an acute awareness of a sensitive issue.

Others are not being so subtle.

There may be no connection between Sandy and climate change–we have to be willing to acknowledge that possibility.

Some people at Fox News certainly have and they have quoted some scientists who argue against the contention that climate change caused or magnified Sandy.  REAL scientists.  By that I mean, NOT Ann Coulter.

Then again, a smart writer named Mark Fischetti at Scientific American has a well-reported piece arguing exactly how Sandy WAS in fact magnified by climate change, and that extreme weather events.  Fischetti according to  a recent op-ed in the Washington Post by James Hansen at NASA’s Goddard Institute for Space Studies in New York,

“Our analysis shows that it is no longer enough to say that global warming will increase the likelihood of extreme weather and to repeat the caveat that no individual weather event can be directly linked to climate change. To the contrary, our analysis shows that, for the extreme hot weather of the recent past, there is virtually no explanation other than climate change.”

Well there you have it.  We are absolutely sure that climate change is affecting weather patterns.  And, yet, some of us (some actual scientists) are absolutely sure that we cannot be sure climate change is affecting weather pattern.

Consider one scientist quoted in the aforementioned Fox News piece.

“Neither the frequency of tropical or extratropical cyclones over the North Atlantic are projected to appreciably change due to climate change, nor have there been indications of a change in their statistical behavior over this region in recent decades,” said Martin Hoerling, a meteorologist with the National Oceanic and Atmospheric Administration (NOAA).

This is a contentious debate, and, oddly, it seems to carry an echo of debates between believers and atheists—it doesn’t feel futile, it just leaves me wondering if it is the best use of our time.

On November 24, the New York Times ran this piece and this piece and this piece, all opinion pieces about climate change, inevitably rising seas, and what to do about them, or how we can do nothing to stop them.  They were fine articles and were written by people who have researched the topic, and, to be fair, one was written by professors at Wharton and was about how we should begin to think about paying for the damage incurred by extreme weather events, should they continue or proliferate.

I would like to discuss each of these pieces in greater depth, but it is not so much their content that concerns me now.  It is the fact that they all have struck at the same time.  And, beyond asking ourselves how we should assess the risks and damages associated with future storms (and who should foot the bill), I sometimes think we are not really going anywhere with this discussion.  It seems clear that economic concerns continue to trump the specters of climate change and atmospheric pollution, and it sometimes seems as though it will have to get worse–much worse–before the entire world, or enough of the world, gathers the will to do anything about it.

Mayor Bloomberg endorsed Barack Obama for a second presidential term, citing climate change.  

Does Bloomberg think Obama can stop climate change?  Or hurricanes?  Scientists cited in one of the articles hyperlinked above (“Rising Seas, Vanishing Coastlines” by Benjamin Strauss and Robert Kopp) said,

“This past summer, a disconcerting new scientific study by the climate scientist Michiel Schaeffer and colleagues — published in the journal Nature Climate Change — suggested that no matter how quickly we cut this pollution, we are unlikely to keep the seas from climbing less than five feet.”

(Hyperlinks not mine)

Some have the idea of building floodgates, or levees around New York City–and those may be necessary.  Maybe they will even work.

But I cannot see how these sorts of conversations will push us closer to adopting cleaner technologies in the short term.

Simple economics might, though.  Cleantech will win every time it can add even a few cents to someone’s bottom line.

In the meantime, don’t forget your water wings.

US companies are inching closer to liquified gas exportation.  A recent piece in the Wall Street Journal observes that the Department of Energy recently released a report showing that liquefying natural gas for export would result in a net benefit for the economy.

Writing for the WSJ, Keith Johnson and Tennille Tracy said,

The looming prospect of the U.S.’s becoming a major exporter of natural gas underscores how the energy revolution is transforming the nation’s economic prospects. Just a few years ago, many energy companies were planning to build facilities to import liquefied natural gas into the U.S.

This of course is not without its barbs.  Environmental activists are not keen on what Johnson and Tracy call a “glut of cheap gas”, and some are calling for more attention to the alleged toxicity of shale gas removal methods.

“It is baffling that this report omits the serious threats increased fracking and gas production pose to our water, our air, and the health of our families,” said Michael Brune, the executive director of the Sierra Club, in the article.

Meanwhile, some think that US manufacturers are increasingly using natural gas and that NERA Economic Consulting, the group who conducted the survey, is underestimating domestic demand.

Dow Chemical Vice President George Blitz was quoted as saying that the report was “just not an honest assessment”.

The authors note that availability has “has helped underpin a revival in manufacturing and helped lower electricity costs for consumers.”

Key to this, I think, is the fact that much of this liquefied natural gas is not meant for domestic consumption, but rather for export.  Apparently, it is more profitable for companies to ship the fuel overseas than it is for them to sell it to domestic customers.

This may help to win over skeptics of the controversial hydrofracturing technology, particularly those in the Obama administration.

The US economy still needs sources of new growth, and selling LNG as an export takes pressure off of political leadership to bolster the economy while still allowing allowing Obama to pursue domestic green energy goals.  In theory.

Also, the piece observes how LNG exports can be a powerful geopolitical tool for the Obama Administration.  Some have observed that Obama’s second term will be dominated by foreign policy concerns.

Johnson and Tennille write,

“Pipelines from Russia now supply a big chunk of the natural gas to Western Europe, but alternative sources could undercut Moscow’s sway. In Asia, the U.S. can bolster allies such as Japan and South Korea by helping lessen their dependence on gas imports from unstable regions.”

In other words, it could be a nice card in Obama’s deck.

Here is a link to a story I did awhile back on the NYU Entrepreneurs Challenge for Forbes.com.

I interviewed one of the founders of the startup, Bianca Padilla, about a startup she is trying to get off the ground with two friends.  I traded emails with her recently and she told me that they dropped out of the NYU Entrepreneur Challenge this time around, but are going to work on their concept and enter again next year.

Anyhow here is the link.

http://www.forbes.com/sites/nyuentrepreneurschallenge/2012/09/29/networthkids-raising-a-generation-of-smart-savers/

The U.S. Department of Energy, though its subsidiary, ARPA-E, (that is, the Advanced Research Projects Agency–Energy), announced last week that it will be funneling $130 million into 66 different “transformational energy technology projects through its OPEN 2012 Program.  According to the agency’s press release,

“ ARPA-E seeks out transformational, breakthrough technologies that show fundamental technical promise but are too early for private-sector investment. These projects have the potential to produce game-changing breakthroughs in energy technology, form the foundation for entirely new industries, and have large commercial impacts.”

A fine objective, based on a sound conclusion: a great many green technologies are brilliant money losers.

As I wrote in my recent post, “Fading Greenery”, the US is poised to become the world’s top producer of oil by 2020, due to the development of new shale oil and gas extraction technologies.  Government subsidies to the oil industry in the United States are generous, and well-liked.  President Obama’s efforts to end them have been rebuffed.

Whether oil companies should be subsidized is another matter entirely, but it certainly appears that oil will remain a dominant energy solution due to already widespread use, still abundant resources and favor among politicians.  Green energy solutions may chip away at oil here and there–solar panels will improve and lower in price, wind turbine technology will improve, and so on.  But for any kind of real green tech revolution to occur there may have to be some kind of government support.  Unfortunately, we have already learned that this can be quite dangerous for a politicians career (Obama/Solyndra).  Even the election-immune Chinese government has run into some financial trouble in its attempts to bolster the growth of it’s own alternative energy sector, though it will likely pull out of them if it can continue to grow demand at home and parry probes from European and American companies seeking tariffs on Chinese imports.

Among the technologies the OPEN 2012 Program says it will evaluate are “advanced fuels, advanced vehicle design and materials, building efficiency, carbon capture, grid modernization, renewable power, and energy storage.”

Approximately 47% of the projects were led by universities, 29% by small businesses, 15% by large businesses 7.5% by national labs and a meager 1.5% by non-profits.

The good news for capitalists is that businesses, large or small comprised 34% of applicants, which is not too shabby.  That universities comprise almost have of all project awarded funds should not surprise, though it might say something of the importance of higher education to anyone who wants to work in cutting edge technology research and development.

The real question here is whether we should consider investment in green energy technologies a “public good”–a good that government must provide in the absence of interest from the private sector.

This was a project I completed for my graduate journalism program, and it was inspired by Dan Ariely’s book “Predictably Irrational”.  For my own experiment, I asked people in New York City whether they would prefer to give or receive a gift card, or the same amount in cash.  In light of the upcoming holidays, I hope you enjoy….

I used to love gift cards.  When I was a kid I liked getting them. As an adult, since I am bad at choosing gifts, I like giving them.   Dan Ariely, author of Predictably Irrational, seems to like them too.  In a blog post titled “An Irrational Guide to Gift Giving”, Ariely suggests,

“you can think about gift certificates for iTunes, drinks, movies, etc. as gifts that not only get people to experience something new, but also get them to experience something guilt-free, and without the pain of paying.”[1]

Ariely, I concede, makes a good point.  His overall thesis in this post is that “A good gift is something that someone really wants but feels guilty buying it for themselves.”  Ariely here is considering a gift card a kind of “nudge” in a particular direction, to borrow a term from behavioral economist Richard Thaler and Cass Sunstein.  Limiting a person’s choices helps to clear his mind, and guide him toward beneficial decisions. But is there some a bit creepy about furtively choosing for someone else?

Some might argue that these sorts of tricks are manipulative and paternalistic.[2]  They make the giver look good or feel good, rather than give the recipient what she really wants. One can almost hear some libertarian economists braying their dissent.[3]  Should a gift please the giver or the receiver?

Ariely states in Predictably Irrational that human beings have “market” norms and “social” norms.  There are certain ways we behave in different situations that reflect different values and different rules.  In the aforementioned book, Ariely asks whether people would buy a boss or a coworker a $100 gift, or simply give the person the same amount in cash.  Most, he says would choose the gift, although it is not inherently more valuable.  The idea is that giving cash in this case would be inappropriate, even though it might be more useful.

I wanted to explore this question by comparing a cash gift with gift card or gift certificate.  My thesis was that most people would prefer to give gift cards, but would prefer to receive cash.

I asked 33 people in New York City whether they would rather give a gift card to a friend for a special occasion, or give the same amount in cash.  Twenty-five out of 33 would prefer to give the gift card.  I then asked if it would make a difference if a) the store issuing the card also charged a nominal (no more than 5 dollars) fee for the card, or b) if the card carried an expiration date or inactivity charge.  Most people said no in both cases, with one person in each case saying “I don’t know” or refusing to answer the question.

However, the most interesting fact for me was the fact that almost the same number of people—24 out of 33—said they would rather RECEIVE cash instead of a card.

This latter choice is a perfectly rational economic decision, and it was what I expected.  Cash is more liquid—it can be spent anywhere.  Also, cash does not really expire, and some gift cards do.  For example, the Stanford Shopping Center, a premier mall in Palo Alto, California, has outsourced its “all-mall” gift cards to a company called Simon.  Simon cards charge a monthly inactivity fee of 15% if they are not used within a year.

However the choice to receive cash begs me to wonder why we then would give something to someone else that we would not prefer to receive ourselves?  This seems to be an almost-statistically-exact case of irrationality.  Almost everyone asked would prefer to give something they would rather not receive, and receive something they would rather not give.

I should add that most people I interviewed did not value gift cards as highly as an actual gift, but when asked why they would gift a gift card when they would clearly prefer to receive cash, most said that the gift card gives the impression that you have “put some thought into it”.  I did not take notes on every person’s comment, but this was a common answer.  Most also seemed quite surprised to realize they would actually prefer to receive cash.

Here are my numbers:

I did not expect the majorities to so closely mirror each other—I expected more people would appreciate the gesture of someone actually selecting a gift card for them.  I was not surprised that many people still chose to give a gift card when the store assessed a fee or included an expiration date, even though to do so is completely irrational. When you consider that gift card is really just another form of currency, it seems silly that you would give someone $105 and only expect $100 in return, or that you would agree to a time limit on a contract.

Only one person actually volunteered a point that might support Ariely’s quote above—that gift cards give people a chance to buy things they would otherwise feel too guilty buying for themselves. The person in question told me that gift cards are good to give young recently-married couples who are concerned about finances.  She claimed that many men in these relationships often immediately start funneling any cash gifts into bills or a down payment on a house.  Giving a gift card allows the couple to—really, forces the couple—to spend the money on other, less practical things that might bring more fulfillment or contribute better to happy memories of the wedding.

One mistake I regret is that I did not record all of the reasons my subjects gave for their answers—especially those that preferred to receive gift cards.  In most cases I chose to stick to my survey questions to stay efficient and to reduce distractions and variables.  But, I suspect that if I has asked one of the nine who preferred to receive gift cards, one might have answered something akin to the point Ariely made in his blog post—that by restricting our choices, gift cards allow us to splurge on things we might otherwise not buy.

I was also reminded (yet again), that I am no better than anyone else.  My choices would be no different from either majority.  I would give the gift card rather than the cash in many cases—especially to recipients whom I do not know well enough to confidently choose a smart gift.  But I would almost always prefer cash.  I have a small stack of unused gift cards with tiny balances on them in desk drawers.  Some have expired; some were misplaced; some I just keep forgetting to put in my wallet.  I have a $100 gift card to a restaurant in San Francisco that went out of business before I could redeem it.  I am much better at keeping track of dollar bills.

It is important to bear in mind that ‘irrationality’ should not carry the stigma it often does.  This experiment, like many people such as Ariely, Kahneman, and Tversky do, simply shows that we are complex beings with myriad concerns.  The best practical lesson I could draw from this experiment, and from much of Ariely’s work is the importance of being mindful, alert, and aware as we live our lives and make decisions.  Within reason, we can do whatever we want, but we should at least know what we are doing.

One-time-Presidential-candidate Mitt Romney famously to Tesla Motors—a Silicon Valley company that builds fast sports cars with electric engines—one of Barack Obama’s “losers”.  In the first presidential debate, Romney said, “

But don’t forget, you put $90 billion, like 50 years’ worth of breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1. I mean, I had a friend who said you don’t just pick the winners and losers, you pick the losers, all right? So this is not the kind of policy you want to have if you want to get America energy secure.”

Ouch.  To be fair, Obama’s record funding green energy companies has not been stellar, though, unfortunately for Romney, Obama now has four more years to make up for mistakes.  But Solyndra has been a disaster and has prompted investigations from both the Energy Department and the Treasury.

Ener1, a lithium ion battery company, also the receipient of Department of Energy funds under Obama, had to file for bankruptcy in 2012 (though it has since reemerged).  Of course, also, the Anaheim-based  plug-in hybrid car company Fisker has a fate that is by-no-means secure, but the company has delivered at least 500 models to customers already.

Tesla Motors, based in San Carlos, CA, might be the brightest of the bunch, and may not at all be the “loser” Romney considered it.  Motor Trend just voted the Tesla Model S the 2012 Car of the Year  and investor analyst opinion on the company with a 3.5B market cap is slightly favorable.

At a sticker price of $59,900.00 Tesla’s offerings are a bit too rich for the modest consumer, especially in this economy.  But with carbon dioxide levels at record highs in 2011, demand for electric vehicles may grow faster than we think.  That could be a huge win for the company that has the highest-performing electric engines on the market.