Cleantech VCs count profit and loss from investments


By: SGN Staff


By Felicity Carus

AOL Energy


Poor performance for cleantech stocks this year may continue in 2013 despite some silver linings during 2012, a leading analyst and a panel of VCs recently warned.


Kevin Genieser, Managing Director and Global Head of Clean Technology Banking at Morgan Stanley, said that cleantech equities had underperformed this year despite a bright start to 2012 with three IPOs in the sector.

Biodiesel company Renewable Energy Group went public in January, bioenergy feedstock company Ceres followed in February and micro-inverter manufacturer Enphase in March. "But those that did go public traded down 50%-75% since the time they went public," said Genieser.

This year's high-profile bankruptcies such as like Energy Conversion Devices, owners of United Solar Ovonic and battery maker A123 did not improve investor sentiment in the cleantech sector. While other cleantech IPO registrations were withdrawn this year, including BrightSource, Genomatica, Enerkem and Elevance.

Early Stages of a New Business Cycle?
Venture capitalists admitted that 2012 had been a challenging year for them. Tesla has been an especially bright spot for VantagePoint's $1.5 billion cleantech portfolio, which also includes solar thermal developer BrightSource and MiaSole. MiaSole, a thin-film solar manufacturer, was acquired in a "distressed sale" earlier this year by Chinese company Hanergy for $30m. The company received $100m from investors, led by VantagePoint and $100m in tax credits.

Stephen Dolezal, who leads VantagePoint's cleantech practice, said he had seen growing pains in other VC-backed industries and dismissed claims that cleantech did not fit their investment model.

"One of the unfortunate patterns is that you carry the scars of previous battles. I remember this argument coming up when we were building out the computer infrastructure in the 1980s. I remember it coming up at the end of the 1980s when we were building out pharmaceutical infrastructure and trying to run clinical trials for biotech companies. I remember it in 2002 when we were trying to build out 3G networks.

"It seems like every single wave goes through a lot of enthusiasm, you've got to build out the infrastructure on which the industry will ultimately rely. But if we hadn't built disc drives, if we hadn't built solid-state memory, if we hadn't built internet networks, we wouldn't have Facebook, we wouldn't have social networking we wouldn't have cloud [computing].

"Without building smart grids, smart meters and solar panels and windmills, we won't have the infrastructure that will allow us in 10-15 years to manage this infrastructure in this high technology play.

"It would be nice to say we can go directly to the sexy stuff, the high margin stuff, but unfortunately, we've got to build the hard stuff first."

Dolezal said that the government's help was critical, especially to level the playing field with heavily subsidized companies in other countries.

"So much of this government talk is like playing by bridge rules when everyone else is having a bar fight," he said. "Should we be picking winners and losers, should we be doing early stage? The reality is, we play to win and we're playing in a global market and we're playing in a market where there's no question that the government in China absolutely intends to pick winners and the same is going on in Saudi Arabia. If we want to play by bridge rules, that's great. But that's not the set of rules that the others are playing by. So if we want to win this battle, we have to play to win... it's about picking policy direction and [backing] investors to stand behind us... that's what government policy needs to do."

Nat Goldhaber, managing director of Claremont Creek Ventures, said that it was a "fantasy" to assume that free market rules apply in the energy industry.

"It's all about government all the way down whether it's your local PUC, FERC or OPEC, a quasi-government organization. Everybody other than us is manipulating for price. So the question for us as VCs and entrepreneurs, how do you fit in within the wheels of that manipulation, try to anticipate in the appropriate way and build products and services that fit in as best they can independent of these smart or stupid decisions by government."


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