Source: Russ Weed, Graham & Dunn blog, August 10, 2011.
I was struck at a recent meeting with a “player” in the cleantech financing space that all of the deals on which that firm is working involve companies located elsewhere than the State of Washington. Why should that be when Washington continues to rank as the #2 sustainable state in the U.S.? Part of the answer is the criteria used for evaluating sustainability:
- Green Industry projects including renewable energy manufacturing and supply chain facilities, biofuels and biomass, recycling plants, electric vehicle supply chain, etc.
- Number of LEED Certified projects
- LEED Certified projects per capita
- Level of incentives support for green projects
- Per capita renewable energy generation
- EPA Brownfield Redevelopment Funding
- Per capita EPA Brownfield Redevelopment Funding 2010
- Energy Efficiency Scorecard rankings
- Alternative-fuel vehicles in use per capita 2009
- 2011 Clean Energy Leadership Index rankings
These criteria are focused on infrastructure and energy generation and usage, rather than on cleantech technologies. So Washingtonians (those in the place where the cab drivers do not invariably have political radio playing) can be proud that they are top sustainable consumers, but not that they are top cleantech entrepreneurs.
This can and should be changed. Yes, Washington’s current technology strengths are aerospace, software, e-commerce, mobile, and gaming, for which there are well-understood reasons (also click here and here). And yes, because Washington benefits from relatively inexpensive hydropower, we don’t have the same energy market pressures on consumers found elsewhere in the U.S.
Nonetheless, developments in the sustainable industries market, specifically the efficient energy sector, have opened an opportunity for Washington’s software entrepreneurs that must be seized. Large companies like IBM, Schneider Electric, and Toshiba have recently acquired efficient energy software and service technology companies. Other big companies like GE, Siemens, and Honeywell are making moves in the efficient energy sector as well.
According to one sustainable industry analysis, the efficient energy sector benefited from a rotation of M&A activity in Q2 2011 away from the capital-intensive biomaterials/biofuels and solar sectors and towards the capital-efficient efficient energy sector. Reportedly, that sector became the largest in Q2 2011 in terms of both number of deals (38) and amount of invested capital ($428MM).
Meanwhile, the Seattle tech community has been having a lively debate about why venture capital investment in Washington has slipped to 10th in the US, even though Washington was recently rated #2 in the U.S. under a “State Entrepreneurship Index.” The discussion has included a challenge to Seattle venture capital firms to back 100 seed-stage start-ups in the next 24 months; a challenge back to Seattle entrepreneurs to generate 100 investment-worthy start-ups in that time period; a public call for the Seattle tech community to “Get F___ Aggressive” (GFA); and putting “the money where the mouth is.”
I’d sum up what should happen now as, Washington entrepreneurs should use their software expertise to found and grow start-ups that “swing for the fences” in the efficient energy sector. For those so interested, check out the thoughts of a Seattle entrepreneur who has pointed out that a number of important successful industries have historically shared the commonality of being “public utilities,” or society-wide technologies.
More next time.