What do lucrative investors look for when deciding to fund a clean tech start-up? Two prominent clean tech investors shared important insight on this topic on a panel stage at yesterday’s TechCrunch Disrupt conference in San Francisco.
Vinod Khosla, one of the world’s leading clean tech investors (of Khosla Ventures), was joined by General Electric’s Kevin Skillern, who heads up GE’s venture capital investments in clean energy. Both shared their secrets for success in clean tech investing.
1- Look for “truly disruptive businesses” that solve the world’s problems over firms with products that merely have “nice features.” Both Khosla and Skillern agree that clean tech that has the potential to dramatically improve living conditions should be favored over those technologies that offer incremental benefits.
2-Be prepared to help companies find the most compelling business case for the technology they bring to the table. Khosla believes in playing an active role in helping entrepreneurs incubate their best ideas for the marketplace. For example, Khosla worked with Amyris (a maker of non-petroleum fuels and chemicals) to move from producing anti-malarial drugs with the company’s biotechnology to producing jet fuels. The company recently raised $85 million through an IPO and is now worth far more than the $15 million investment Khosla initially put down.
3-Investments in energy efficiency technology is just as important as clean tech built on a new platform. Skillern mentioned to TechCrunch that GE is putting forth an equal amount of energy towards improving legacy energy systems as it is towards commercializing new technology. This is especially important for GE, since GE equipment produces 1/3 of the globe’s energy. The majority of this equipment will be in use for more than a decade into the future.
4- Choose to invest in technologies that have the potential for radical self-reliance. Khosla believes that it is imperative to choose companies that are not dependent on government subsidies over time. He says, “I don’t invest in anything that can’t achieve market competitiveness in five years. You should be able to achieve the price for a good that will sell in India or China without a subsidy in that time.”
As a point for discussion for 3p readers, I ask: What criteria do you think are most important for clean tech investment decisions? What are your experiences investing in clean tech?
Shannon Arvizu, Ph.D., is a clean-tech educator and marketing specialist. Learn more at MissElectric.com.