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“I thought we’d go with the race car driver,” says Nicholas Parker. “People need a dose of fun.”
Parker is referring to NASCAR racer Leilani Münter, tonight’s final speaker at Cleantech Forum XVIII, a gathering of investors, entrepreneurs, fund managers and others interested in the business of clean technology. It’s Sept. 16, the day after Lehman Bros. declared bankruptcy after 158 years in finance. Wall Street is in the throes of its mid-September meltdown.
Regardless, the forum, organized by Parker’s company, Cleantech Group LLC of Ann Arbor, Mich., and San Francisco, has attracted more than 500 movers and shakers to a Washington, D.C., hotel. The guests include U.S. Treasury undersecretary for international affairs David H. McCormick, whose unenviable job it had been earlier that day to announce the government’s decision to take control of 79.9% of the assets of failed insurance giant American International Group Inc. (NYSE: AIG).
The reason Parker’s event remains hot while markets freeze is simple. Though liquidity has drained away from many sectors through 2008, so-called cleantech has, on balance, remained an investor magnet. Private equity and venture capital deals in clean-energy companies globally notched a record US$5.8 billion in the second quarter of 2008 alone, according to New Energy Finance Ltd., a London-based consultancy.
The forum’s speaker on Sept. 16, Leilani Münter, is a race car driver who doubles as a green activist; she adopts an acre of rainforest for each race to offset the carbon cost of her sport. Münter outlines why it makes sense for someone who drives race cars to be a poster child for the environmental movement. “In the United States, more people tune in to watch NASCAR than baseball, basketball and hockey combined,” she explains. “Just imagine, 75 million NASCAR fans, recycling.” The well-heeled crowd roars its approval.
Picking Münter to speak at his forum’s dinner is classic Parker. During a three-day conference laden with serious sessions such as “The Importance of Project Finance in Cleantech” and “The Cleantech Town Hall,” he likes to balance things off with a light tone. Earlier in the day, he’d introduced his opening presentation — hastily rewritten as “Toxic Assets in a Toxic World” — with a cartoon about the business plan for inventing the wheel.
But the magnitude of what Parker has achieved in the brave new world of the low-carbon economy is no joke. After all, it was Parker who coined the term “cleantech” and helped invent the asset class that accompanies it. Now a global industry, cleantech represented 10% of all VC investments made last year by U.S. firms, including US$2.6 billion in the first three quarters of 2007 alone, according to statistics from Thomson Financial and the U.S. National Venture Capital Association. And that’s just for new ventures. A Goldman Sachs report published in fall 2007 puts total worldwide investment in renewable energy technologies at US$70.9 billion in 2006, up from US$45 billion in 2005. So far this year, according to Cleantech Group, VCs invested US$6.6 billion in the sector, including a record US$2.6 billion in the last quarter.
Nicholas Parker’s role in catalyzing the growth of this sector cannot be overstated. Generating serious green off going clean has become his life’s work. Together with Michigan entrepreneur Keith Raab, Parker co-founded the Cleantech Venture Network in 2002. Conceived as an industry data and networking organization for venture capitalists interested in cleantech, it’s since grown into the Cleantech Group, a network of entrepreneurs, VCs and private equity investors who together represent more than US$3 trillion in assets.
The Cleantech Group maintains offices in Silicon Valley, Ann Arbor, Beijing, Delhi and London. It counts among its fee-paying membership famed venture capitalists Sequoia Capital — the VCs that seeded Google and Apple — and Vinod Khosla, a co-founder of Sun Microsystems. In February, Cleantech Group launched what it calls the Cleantech Accelerator — a program to connect companies looking to source more energy-efficient fuels and alternatives to hedge their energy costs. Its first client: Wal-Mart Stores Inc.
Cleantech Group — and the asset class it defines — has grown so quickly at such a rate for a very simple reason. While the price of oil will fluctuate as global economies slow, many economists, led by CIBC’s Jeff Rubin, believe higher energy prices are here to stay. In recent years, the smart money, including Texas oil baron T. Boone Pickens, has decided the future belongs to those businesses that can contain their exposure to higher energy costs. Those businesses that achieve this will dominate their markets. Those that cannot will not survive.
And those who figure out how to supply the most competitive energy-efficient alternatives at low cost — in other words, cleantech startups — stand to make stupendous profits. In its 2006 World Energy Outlook, the International Energy Agency projects a sector outlay of US$20 trillion over the next 25 years. That’s one hell of a market opportunity.
But let’s back up a second. What exactly is cleantech? Is it wind power, smart grids or scrubbers for smokestacks? At the Washington forum last month, representatives from tiny greywater-filtration startups stood side-by-side with delegations from giant oil companies like Royal Dutch Shell. It all seemed a tad imprecise — as though any company could add some green to its brand, put out a press release touting one tiny initiative as energy-efficient, and call itself “cleantech.” Canadian environmental economist Mark Jaccard heaps scorn on the term for precisely this reason. “It’s difficult or impossible to define,” he says. “Every technology involves varying degrees of throughputs of energy and materials. Thinking we can have some kind of a dichotomous relationship — that something is green or not green — is really misleading.”
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