I may be late coming to the party, but Al Gore’s Oscar-winning documentary, An Inconvenient Truth, made a dramatic impact on me. Like many others, I am now a believer in global warming. And I can see that great fortunes are going to be made by people who solve the riddles of energy efficiency and sustainability, waste disposal and water desalination and purification. And I suggest you find a hybrid, clean-burning bandwagon to jump on as well.
Since the mid-19th century, mankind has seen tremendous technological breakthroughs, from the Industrial Revolution to the Information Revolution and then the Knowledge Economy. Each shift created significant changes in the way we live and work. From Sears and Ford to Edison’s General Electric and Canada’s own Research in Motion, great fortunes have been made from disruptive technologies. I believe the same thing will result from the Environmental Revolution now dawning.
There seems to be little debate left that industrialization has seriously harmed our environment, from the exhaust spewed by cars and factories to the depletion of the earth’s natural resources due to our ever-increasing demand for energy. The economic and social impacts of global warming are already being felt. China and India’s growing prosperity are positive events economically, but their industrialization will only increase the pressure on the environment and our depleting fossil fuels.
Responsible citizens should be asking three questions: How much time do we have until our short-sighted behaviour creates catastrophe? Is it too late to do something about it? And, if not, what should we be doing? Responsible entrepreneurs should ask one more question: How can I profit amidst all this upheaval and the rush to develop effective solutions?
You won’t be the first. In February, I attended the Cleantech Forum XII in San Francisco, a conference that brings venture capitalists together with aspiring companies in the “green” (or “clean”) technology space. Last year, 400 people attended Cleantech XI. The count this year was more than 800. Canadians were well represented: Toronto-based venture capitalist Nicholas Parker is co-founder and chairman of Cleantech Group, while Jim Harris, former leader of the Green Party of Canada, is managing partner for Cleantech’s advisor group. And Canada’s consul general sponsored a breakfast.
What struck me most, however, was that the same VCs who chased the Web 1.0 and 2.0 bubbles were out in full force in San Francisco. Steve Jurvetson was there, the legendary managing director of Draper Fisher Jurvetson who was a founding VC investor in Hotmail and later got in early on Skype. This conference felt like a class reunion for Silicon Valley’s most successful investors, VCs, bankers and lawyers of the past decade. You could feel the buzz. (You could feel it, too, because Cleantech XIV is coming to Toronto in October.)
Billions of dollars are being poured into making existing energy consumption more efficient and developing alternative sources. Cleantech says VCs invested US$934 million in “green” investments in the third quarter of 2006, up 11% from the previous quarter. The Lawrence Berkeley National Laboratory at UC Berkeley has just been given US$500 million from British Petroleum for an Energy Biosciences Institute to develop renewable biofuels. Old-school companies such as Dow Chemical and Shell Oil Co. are all going green.
While early investments in clean technology focussed on ready-for-market execution plays, huge bets are now being placed on early-stage technology opportunities, even before their market viability has been proven.
My sense is that we could be heading for another bubble, not unlike the dot-com euphoria of the late 1990s. As an investor, don’t get too caught up in the enthusiasm. Do your homework, understand your market and know what you’re investing in. (And if you are a “green” entrepreneur, get the money you need while the getting is good!)
But just as Web 2.0 followed the dot-com meltdown, the green revolution is here to stay. Opportunities abound.
The obvious ones involve energy efficiency and alternative energy. We have already seen the introduction of hybrid cars and biofuels. Solar and wind power are already prevalent in Europe. In 2005, Toronto-based SkyPower Corp.’s Wind Energy Fund LP raised more than $75 million to invest principally in wind projects here at home.
There’s also gold in garbage. Montreal-based PyroGenesis Inc. has developed a high-temperature plasma-based waste-treatment system, targeted at naval and cruise ships.
Real estate developers in California are already building environmentally efficient homes and retrofitting older ones. Geothermal heating and air-conditioning systems are being installed around the world. It’s just a matter of time before we see solar panels on every roof here in Canada.
Al Gore may not have invented the Internet, but he’s ahead of the curve on global warming. Catch the wave. As Bob Dylan might have said, the smart money is blowin’ in the wind.
Jeff Dennis is a serial entrepreneur and president of Toronto-based Cale Financial Corp., which provides strategic advice and financing to fast-growth companies. He is also a co-author of Lessons from the Edge: Survival Skills for Starting and Growing Business. You can reach him at Jeff.Dennis@PROFIT.rogers.com.