Can venture capital save the planet? Tech and political leaders look to change climate for energy innovation

Source: Lisa Stiffler, Geekwire, June 4 2019

Climate change poses an “existential threat” to human civilization, a new study says, and many tech leaders believe innovation could be key to preventing its most dire effects. But despite the high stakes, venture capital dollars flow overwhelmingly to companies developing online games, virtual reality and other consumer products instead of breakthrough batteries or cheaper solar panels.

Last year, less than $7 billion dollars of private investments went to U.S. companies in clean technology — and that was a jump compared to previous years going back nearly a decade. By comparison, IT companies in 2018 raked in more than 14 times the amount raised by businesses innovating in renewable power, electric transportation and other clean products, according to an analysis by PitchBook.

In the Northwest, most of the clean energy businesses that have been financially successful — including LevelTen Energy, which on Monday announced a $20.5 million Series B funding round, and last month’s acquisition of EnergySavvy by Tendril — are software-based. But some business and political leaders believe that could change.

In recent months and years, a series of policies, funding programs and startup initiatives have emerged from Washington state with the goal of unleashing game-changing investment and discovery in clean energy:

  • This spring, Washington lawmakers passed and Gov. Jay Inslee signed a law requiring utility companies to stop using coal power by 2025, reach carbon neutrality by 2030 (which can include carbon offsets) and emit zero carbon by 2045. Climate experts are calling the policy “groundbreaking.”
  • The state capital budget over the next two years includes $25 million to pay for the research, development and deployment of clean energy and grid improvements.
  • The University of Washington’s Clean Energy Institute has, in the two years since its launch, partnered with 36 companies and 270 researchers who are using its cutting-edge facility for energy research and development.
  • This month, the Cascadia CleanTech Accelerator is expected to announce its fourth cohort of clean tech startups.

“We’ve got a gold mine,” said Rep. Gael Tarleton, a Seattle Democrat and the lead sponsor of the state House bill that created the clean energy goals. And the best part is that it’s a gold mine ready to help, rather than hurt, the environment. … We’re on the verge of something really profound. I’ve only been down this kind of a path a few times in my career where everything changes, and we’re at it. It’s the cusp.”

Yet even with regulations and institutions pulling in the right direction, the clean energy sector in general is notoriously tough to crack, and Washington state might not be the place to do it. One reason for the disparity in investments between software deals and energy hardware is simple: it’s more difficult to make money from capital-intensive companies producing solar cells and solid state batteries than from scrappy startups producing lines of code. Innovation doesn’t come from good intentions. It comes from a deep, broad sector of high-performing people.

“Compared to other tech sectors, clean tech is hard to get funding for,” said Rachelle Ames, manager of the Cascadia CleanTech Accelerator. “These are very hardware intensive, where it’s not going to be a quick turnaround for getting your return on investment. You have to be willing to play a longer game with them. The ability to get to that point can be very difficult.”

Beyond the question of funding, investor Chris DeVore points to the small pool of talent and expertise in clean energy locally. Thanks to Washington’s cheap, plentiful hydropower from dams, there has been little incentive over the decades to build out the sector, and the new legislation might not be enough to reverse that.

“Innovation doesn’t come from good intentions,” said DeVore, managing partner of Founders’ Co-op and managing director of Techstars Seattle. “It comes from a deep, broad sector of high-performing people.”

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