Essential cleantech(2)

Yesterday’s Library House conference in London highlighted the need for VCs to identify the most promising sectors in cleantech investment and not get caught up in the hype. Dave Keating reports.

“This is fantastic, we’ve got so many tree huggers and so many investors in one room!”

These words were exclaimed by one enthusiastic entrepreneur who couldn’t contain his excitement at yesterday’s Essential Cleantech conference hosted by the Cambridge, UK-based venture research group Library House. The event brought together some of the most significant players in the European and global clean technology investment sector, including investors, entrepreneurs, companies and journalists.

BFI Imax Theatre

The choice of venue may have been a bit intimidating for the speakers. Hosted at the BFI IMAX theatre in London, the event featured gigantic images of the panelists projected on the larger-than-life screen behind them. The speakers included Uwe Albrecht, managing partner at Siemens Venture Capital; Richard Barrington, head of British and Irish public policy for Sun Microsystems; Ken Carter, energy manager for Tesco; and Ziad Tassabehji, a director with the Abu Dhabi Future Energy Company. The consensus among the participants seemed to be that although the sector is awash in cash at the moment, a lot of it is going to the wrong areas. The most promising areas, many thought, were having a tough time getting funding.

“After [US President] Bush mentioned biofuels in his state of the union, within a week there was a huge rush of deals,” Ziad Tassabehji told the audience. “Now that sector is very overheated with ridiculous valuations. But other sectors, like water treatment, have a strong need but little business appetite for them.”

Many of the speakers echoed this sentiment. Neil Rimer of Index Ventures noted that another such underfunded area with huge potential is the world’ dilapidated and inefficient electrical grids, which could be drastically improved with some minor technological developments.

There is undoubtedly a large amount of money being raised for cleantech, even though past cleantech funds have seen little success. A report released by Library House to accompany the event shows that cleantech venture capital in Europe has grown dramatically since 2000 against a backdrop of falling activity in other sectors. The US has seen an even more dramatic rise in investment, leaving many to fear that a “cleantech bubble” could be forming. In fact, the report concludes that the US is far surpassing Europe in cleantech investing, with US investors participating in more cleantech deals in Europe itself than investors from any European country except the UK.

Ziad Tassabehji

Both Library House and the conference participants saw the greatest potential in areas such as water treatment, energy-efficient lighting (specifically LED lightbulbs, according to Library House CEO Doug Richard) and information technology. Richard Barrington of Sun Microsystems stressed this last point especially hard, reminding the audience that IT accounts for four to five percent of global carbon emissions, which is more than the contribution of air travel. The personal computer, Barrington argued, is going to have to be replaced by a more energy efficient model, and this is a huge potential area for investment.

There was a view at the conference, shared by both the entrepreneurs and investors, that venture capital has a huge role to play in the fostering of new technologies to tackle the climate change problem, and that these technologies are the world’s best hope.

“In my view business is taking this more seriously than government,” said Jeremy Leggett, founder of environmental group Solarcentury. If this is the case, investors are going to have to work together to identify the most promising technologies being developed. Events like Essential Cleantech are probably a good place to start.