More From Less: Clean Energy Technology Driving Efficiency
This is the second piece of a two-part series. Read part one here.
Venture investors who know what they’re doing—KPCB, Westly Group, Khosla, Braemar, EnerTech and Chrysalix to name a few—are forging ahead when it comes to cleantech. Like the Department of Energy’s Loan Program, these investors are looking past the few early wipeouts to the longer-term successes in less capital intense areas of cleantech where software drives efficiency and data insights.
Two companies highlight this new trend:
1) Opower – Based in Arlington, Virginia, Opower works through utilities to serve up a suite of consumer engagement and cloud-based analytics products that have proven to reduce electric energy consumption for end-users. Opower went public in March at a roughly $1 billion market cap, delivering a win for backers NEA, Accel and MHS and proving that utility-facing services can ultimately be profitable.
2) Nest – Tony Faddell took Apple-honed design prowess and turned the boring, beige wall thermostat in a $200 device coveted by tech-savvy yuppies. Next turning their eye to the smoke alarm with their Protect device, Nest proved that design and a strong data backend can drive Internet of Things relevancy and Google agreed, paying $3.2 billion for the company.
Yes, we need many more of these types of wins (and perhaps a WhatsApp or two) to really pull the spotlight back to cleantech, but these latest venture data points are decidedly encouraging and are accelerating capital influx into these reimagined, efficiency-driven cleantech space. And we need more events like President Barack Obama recently announcing an additional $2 billion for federal building energy efficiency upgrades.
This new wave of cleantech encompasses a wide array of energy-technology and industrial-innovation technologies and, in many cases, this umbrella overarches the adoption of new technology by the auto and heavy manufacturing industries, players that don’t exactly have the most earth-friendly reputations. Cleantech is really a misnomer, having transcended the category around which is was coined years ago, but regardless of whether you call it cleantech or enertech, efficiency technology or greentech, at its core cleantech is about looking to technology to help us get more out of less.
When you start to think about cleantech as any technology that helps you get more out of less, as simply technology driving efficiency, the category starts to include a lot more than solar panels and wind turbines. It starts to include many of the newer collaborative consumption plays, too. What about RelayRides? Is it a cleantech company because it allows city dwellers to more efficiently tap into fixed automobile resources and share their rides? What about Airbnb since it leverages technology to let anyone become a hotelier and reduce travelers’ environment footprint? In fact, both of these companies were on the Cleantech Group’s 2013 Global Cleantech 100 list.
At ABB Ventures, we, too, view cleantech as a piece of a much broader efficiency technology tapestry in which some of the more-promising areas look nothing like the capital-intensive deals of cleantech’s early days. Our two most recent investments are in the robotics space, one of which is developing 3D-printed robot motor components that ABB will one day use inside of its own industrial robots. Both of these companies enhanced the performance and efficiency of existing technologies. Again, getting more out of less.
We have deployed sizeable capital into core renewables but are biased toward capital-light software startups where 0s and 1s can sit atop hard metal and make it more efficient, cheaper, better. So, when we’ve made a bet in the wind power space, it’s not in turbine technology, it’s in the optimization of wind energy, specifically in getting more out of existing wind turbine through lasers and some slick software. For a given piece of metal spinning in the breeze, we aim to get more out of it.
1776’s Challenge Cup and energy-focused incubators such as SURGE are effective tools at highlighting just these types of companies and the Opower and Nest exits reinforce investor appetite for these types of deals. Simple Energy is a Colorado-based startup that recently was funded by Westly Group and uses games and online engagement to decrease energy usage. Ohmconnect is another company that takes is a step further and allows consumers to cash out their accumulated efficiency ‘points’ right through PayPal. Closer to home, Aquicore, a DC-area startup backed by New Dominion and local angels, is re-envisioning how commercial building managers track and optimize their power usage.
As recently pointed out by Rob Day at Black Coral Capital, cleantech’s “Big Four”—solar, energy efficiency, transportation and biofuels/biochem—are soon going to be under half of all venture dollars in the space. Instead, they’re being readily replaced by software-heavy efficiency plays like Simple Energy and Aquicore. Looking at cleantech more broadly as getting more from less allows you to look at the problem space and see how software, in its most creative application, can drive smarter consumption of our world’s precious resources.
As a descriptor, cleantech may well have to evolve and investors are going to have to transcend the category to capitalize on all these efficiency innovations, but it’s clear we are in early innings and the game will be a great one to watch.
Grant Allen is Senior Vice President of ABB Technology Ventures (ATV), the venture capital arm of ABB Group. Investing since 2010, ATV has deployed over $150 million into a wide range of sectors including cybersecurity, robotics, smart grid, renewable power generation, data center efficiency and other areas of cleantech. Learn more at abb.com/ventures.