Podcast

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At the 2006 investment summit: Energy venture capital fund general partners panel. From left: Nancy Floyd, Ira Ehrenpreis, Martin Tobias, Chuck McDermott, Kirk Washington and John Rockwell. Other speakers at last year's conference included Congressman Jay Inslee and former CIA director James Woolsey. (EP photo)

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Nancy Floyd: Thank you very much, Denis. It’s great to be here.

Denis Du Bois: You're leading a panel of venture capitalists in a discussion about best practices in getting cleantech companies funded. VCs seem to be flocking to cleantech. What do entrepreneurs really need to know, other than how to deposit checks?

Nancy Floyd: I founded Nth Power before anybody really was interested in investing in clean technology companies. And while one out of every ten dollars invested last year by venture capitalists went into a clean technology company, there still is the issue of finding the right investment partner. That can make a big difference for of a company in terms of the ultimate success of that company.

Denis: Your panelists span the range of investors -- Jonathan Bonanno of Keiretsu Forum, Brad Zenger with the Sustainability Investment Fund, Matt Horton from @Ventures, and Dave Chen from Equilibrium Capital.

They all have something in common -- they all came out of the computer technology industry in the last few years to become investors in cleantech. Obviously you expect a lot of the lessons to apply in this industry; but what do you think are some of the major differences?

Nancy Floyd: Energy markets globally are very complex. There are very complex dynamics. So I think it really is a very unique marketplace. What’s wonderful about this crop of entrepreneurs moving over from the true technology industry to cleantech is they come with proven track records. They’ve taken companies public, they’ve sold them. The cautionary note is, the energy market is different than any other market.

Denis: Credit Suisse vice chairman John Cavalier is speaking later in the day. If you were trying to get your own cleantech company funded, would you locate the company in the U.S., or somewhere else -- maybe not Switzerland, but Germany, Spain, or Japan?

Nancy Floyd: Well, I guess I’d have to look. Statistically, 80 to 85 percent of the venture capital going into clean technology is going into U.S. companies. However, the stronger markets for these new technologies are markets outside of the U.S. -- which includes Canada, Europe and Asia. So it’s interesting that a lot of the innovation and the funding for the innovation seem statistically to be here in the U.S., but the markets appear to be outside of the U.S. So it’s a difficult question to answer.

Denis: What about capital markets? Would you confine your capital search to the U.S., or look abroad?

Nancy Floyd: It’s important if you’re a young company to have a local investor. If you choose the right investment partner, they’re going to bring a lot more than just money. As a venture capital investor, I don’t just write a check. I hopefully bring a lot more to the table than that, including my experience as an entrepreneur and having a broad network of potential customers for my portfolio companies. So it is important to have a local investor who can essentially be there to help, both during good times and bad times. So, depending on where the company was located, I would at least want to have one investor that was geographically close.

Denis: Michael Eckhart of ACORE is speaking after your session, at lunch, about American renewable energy policy. The same core set of factors are driving innovation in every region of the developed world. In fact, a lot of cleantech innovation seems to be happening outside the U.S. Are there policy directions you think we should take with regard to encouraging innovation in the U.S.?

Nancy Floyd: Well, there are, and in fact I just spent three and half hours testifying in Congress on this very issue. Without having a lengthy discussion around policy in the U.S., I think it’s fair to say that in the early 80’s when I was one of the country’s first wind developers, I knew this country had the lead in wind and in solar in terms of technology and in terms of actual installed megawatts. (Actually it probably wasn’t even megawatts back then it was probably less than a megawatt!)

What I do know today, what we all know, is that we’ve lost that lead in wind and solar to other parts of the world. Specifically because in Germany, Spain and Japan, they have set up a stable policy framework which causes companies to then invest in manufacturing. We have not had that stable policy framework in the U.S.

So without going into specifics around which policies I would like to see Congress address and pass, I would just say more generically that I would like to see a predictable policy framework that’s going to create a stable market in this country, so a policy that outlasts administrations and that outlasts mid-term elections. Policies that span eight to ten years.

Denis: Having a panel talk about getting companies funded is predicated on the assumption that companies will continue to get funded, and recent trends seem to indicate that's a foregone conclusion. Is it? Will we continue to see this influx of capital in this industry?

Nancy Floyd: We will -- and first, it’s not a foregone conclusion that companies will get funded. Obviously they have to have the right element. There has to be management and they have to have a differentiated value proposition. We don’t have to worry about big market opportunity, because you don’t really see any market opportunities bigger than energy; but obviously they have to reach the bar. We are seeing the amount of venture capital going into this sector increasing over last year. Last year represented over 10 percent of all venture capital. Interest is not waiting, but companies still have to meet the benchmarks that the venture community sets out.

Denis: What was VC investment in cleantech last year? 2007 is almost over; what do you think it will reach this year?

Nancy Floyd: In 2006 it was $2.4 billion. It is well on its way to, I believe, being close to but not exceeding 3 billion in 2007.

Denis: Do you have a prediction for 2008?

Nancy Floyd: No -- but if we get a good strong energy bill out of Congress I guess I’d expect that number to continue to grow.

Denis: Let's cross our fingers.

Articles from the 2006 conference:

"Conference on Investing in Clean Energy Will Focus on Pacific Northwest as Hub"

"What do VCs Look for in Clean Energy Companies?"