Energy Innovation and Cleantech Investment

The White House sponsored a day long “bull session” (quit laughing and read) on May 7th with help from the Cleveland Foundation and the Kauffman Foundation.  The subject of the day was energy innovation and there was an interesting set of speakers.  You can watch video clips of the panel discussions online.

I’m not sure the White House got much energy innovation insight out of the day but I thought several of the speakers offered insights in other areas that would have made the day well spent. It was refreshing to hear some views about how the center of gravity in investing in innovation was shifting from venture capital firms and National Labs back to traditional university research programs even with smaller funding levels.

Here are a few takeaways to consider:

  • Entrepreneurship Grew Faster in 2009 than Any other Year. Despite the recession and record high unemployment, 2009 saw business startups reach their highest level in 14 years – even exceeding the number of startups during the peak 1999-2000 technology boom. The Kauffman Index of Entrepreneurial Activity, a leading indicator of new-business creation in the United State, said 558,000 new businesses were created each month (0.34 in 2009). The index increased for the second straight year with more than 27,000 more starts per month than in 2008 and 60,000 more starts per month than in 2007. [1]
  • Cleantech Sales up 17% without Waxman-Markey. In the period from June 2008 to December 2009, for example, clean tech sales increased 17 percent, according to The Stella Group, Ltd., a Washington, D.C. marketing firm.  But I doubt the White House was very happy about the undercurrent that the private sector left alone might actually do a better job of achieving the clean energy economy than all those bureaucrats.
  • Google seeks to provide More and Better Information for Policy Makers. Dan Reicher, Director of Google’s Climate Change and Energy Initiatives said there were three critical dimensions to Google’s initiative: capital, technology and policy. Google was investing capital and technology for cleantech to meet its own requirements and to advance its policy by accumulating and providing more and better information for policy-makers to set better policies.
  • Challenge of Commercializing Research and Innovation.  Desh Deshpande of A123 Systems (NASDAQ: AONE) said in the cleantech space he felt  the center of gravity for innovation is no longer at the national laboratories, and is slipping away from the private sector returning to universities as basic research. If that trend continues the challenge will not be funding but the inefficient commercial capture of the innovation that actually happens at universities.
  • Washington’s Plan to Punish Investors will Bite Back. Carl Schramm, President of the Kauffman Foundation said he worried that angel investors and venture capital firms are going to be hurt badly by proposed regulations aiming to reforming financial transactions including carried interest tax treatment.
  • Market Based Survival of the Greenest.  Tom Baruch, Managing Director at CMEA Capital told the audience that cleantech business models must be much more capital efficient to succeed in the future and those who have grown accustomed to grants and subsidies must learn to stand on their own without expecting “green premiums”. Customers increasingly were expecting products to be green and were unwilling to pay premiums for them.
  • The US is Exported some of our Best Trained Minds. One of the more profound observations came from Dr. Yet-Ming Chiang, Founder of A123 Systems and Professor of Materials Science and Engineering at MIT who urged the White House to fast-track green cards for promising talent to retain the skills the US needs for its competitive advantage.  He said over the past 5 years, 86% of foreign graduate students at MIT wanted to stay in the U.S., but only 56% were able to stay – and the 44% that left did so because the immigration rules prevented them from staying longer.  Think of all that brain-power we trained and then let get away.

So what?

Retaining America’s strategic competitive advantage in technology, innovation and commercializing research should not be taken for granted.  At times it seems our policies actually work against our strategic interests in areas like immigration and retaining talent, rewarding investors for risky venture, and depending too much on government to fund and do the heavy lifting in research.

So whether the White House liked the answer it got, the Energy Innovation “bull session” avoiding stepping in a lot of it to get to some interesting conclusions.