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Green technology lowers friction and attracts VC

Climate changes, humans respond. People jump on new opportunities. This pattern is as old as humanity. One theory on why 150,000 years ago early man moved out of Africa points to climate change in that continent.

Today the concern is that climate change seems to be speeding up. With rising valuations and evaluations entrepreneurs with green technology or anything green are jumping on the opportunity.

This post is about innovation, entrepreneurship and investment, all topics of interest for regular readers of this Lightbulb blog.

We're seeing increased activity and market interest in offerings arising from our following four client matters, two of which have been going for years:

  • fendi_great_wall_fashion_showa technology for generating electricity from wind,
  • a technology for increasing the efficiency of electricity-generating plants,
  • a web development and public relations practice focused on the green message, and
  • a turnkey concrete production facility designed to be green and efficient.

Concerns are mounting globally as four climate and economic forces are in friction between each other:

  • climate change,
  • oil price swings and and the growing need for sustainable sources for energy,
  • the consequences of the current financial crisis on the climate and energy debate, and
  • accelerating developments with China, India and other countries apparently unwilling to negotiate over slowing the rapid growth of their middle class and consumption habits Westerners have taken for granted for a century or more. (Speaking personally the reality of middle class developments in China hit home in 2008 when I saw photos of a Fendi fashion parade on the Great Wall of China. I admit it, I like my Fendi suit, and understand the Chinese appetite for Fendi.)

Given the friction between these forces, some things have gotta give.

As a law firm we profess no expertise about any of the above four climate and economic developments or forces. Pleasingly we have independent consultant collaborators who have not only monitored the topics more closely, but also written on them at some depth or even practised in the field in the case of consulting engineers. See Economic conditions for Australians, November 2008.

These collaborators provide useful perspectives and models. Their message is that for Australia and the planet there are very real dangers, but it's not slash your wrists time.

One reason to be positive is that entrepreneurs are active in green projects and investors are listening.

Technology which removes friction attracts venture capital

In the first decade of the 21st century internet entrepreneurs growing successful businesses like eBay have been described in a wonderful Americanism as being successful because they "removed friction in business". This is illustrated by eBay for example, it is said to have succeeded because it removed the friction out of Joe Average auctioning a preloved household item. Auctions became a type of transaction free of friction.

In the second decade of the 21st century many in venture capital are saying that the kudos, profits and other rewards will go to entrepreneurs and the backers who reduce friction for the environment.

Throw America's engineers at the problem, John Doerr has said. He is perhaps the most famous venture capitalist in America and a partner of Kleiner Perkins Caufield & Byers. Green technology advocate and former Vice-President of the United States, Al Gore, joined as a partner in November 2007.

As has been widely reported since 2007, in Silicon Valley venture capital investments have shifted in favour of technologies and businesses addressing the perceived risks of the planet heating up as well as carbon energy sources drying up.

Comparing opportunities - internet versus green technology

Doerr was cited by Fred Krupp who wrote The Mother Lode, a short article in the April 2008 issue of the US magazine FastCompany. The following table appears in that article and neatly illustrates the opportunity for green technology and venture capital.

    Internet Green Tech
  Made Of: Bits, Pixels Atoms, molecules
  What is At Stake: Finding Friends on FaceBook Life on the Planet
  Capital Needed: LOW Google needed US$25 million HIGH Hundreds of millions
  Time to success: QUICK 3 to 5 years LONGER 5 to 10 years
  Market Potential: LARGE Billions ENORMOUS Trillions

Credits: Melting pocket watch painting by Salvador Dali, titled "The Persistence of Memory", 1931. It has been held since 1934 at the New York Museum of Modern Art.


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