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Friday, March 12, 2010
MHT Exclusive: Kleiner Perkins’ Ray Lane talks clean tech’s future in Boston
By Rodney H. Brown
MHT's Galen Moore: N.E. firms target individual carbon footprints
MHT's Jackie Noblett: VC funds run short in 2009
Following the Clean Energy Council Fellows
Ray Lane, managing partner of storied West Coast investment firm Kleiner Perkins Caufield & Byers, was in town last night to speak at an MIT Enterprise Forum of Cambridge event on investing in green technology firms and the future of clean tech in the U.S. and China.
Lane, former president and COO of Oracle Corp., has invested in local clean tech plays like GreatPoint Energy Inc. of Cambridge. He talked to Mass High Tech in an exclusive interview prior to the event at a reception held at Microsoft Corp.’s NERD Center.
What do you find most attractive about investing in the New England area?
I don’t think about investing in the New England area We are really trying to find the best, most innovative, most disruptive technologies in the world — if they are in New England, great. In the IT world, in the ’80 and ’90s, I think there was a tendency of venture capitalists to stay in their regions. There was plenty of innovation going on in Boston, plenty of innovation going on in Northern California, even in Austin, Texas, and Raleigh-Durham. So you found venture capital growing up around those areas and satisfied to stay home. The amount of money invested in the pace of development was very fast — in green tech it is just the opposite. The innovation isn’t necessarily in just Boston or San Francisco, it’s not necessarily just in those regions. You have high-tech thinkers that are coming out of IT that want to do green tech, but a lot of it is coming out of the energy industry. And that can be anywhere in the world.
So certainly if you look at our green tech portfolio as opposed to our overall portfolio there is much more diversity geographically in the green tech portfolio. I’d have to guess how many of those are in New England, but I would guess maybe five out of 50. But there would be five in Germany, a couple in India, maybe 10 in China and a couple in California.
New England is a great place certainly for technological development, and it has taken a leadership position along with Northern California in energy, but it certainly is not the center of it and neither is Northern California.
What would you say are the most exciting sectors in green tech?
It tends to be cyclical. We’ve already seen some cycles, We’ve seen oil prices go to $150 a barrel and back down to $40 and up to $80. That happened in a very short period of time. So what’s hot in renewables is dependent on those oil prices and gas prices. You see those sectors change — for instance solar, for a lot of good reasons was very hot for a long period of time. As oil prices went down there was an oversupply of solar development. So there was about a $2 billion market and a $5 billion supply coming to market in solar that drove down solar prices and the solar market is not good. The same thing happened in ethanol. So you have to focus on the long term. Solar, wind, biofuels, geothermal, batteries — these are all great sectors, and they have long-term sustaining technology advantages; not a Moore’s Law, but technology advantages to get their cost down on a long-term basis.
We will see cycles that are depending upon existing prices of fossil fuels, because the U.S. has no carbon policy, we have no energy policy, we have no climate bill. So it’s going to be left up to market pricing.
That’s just pretty much idiotic of the Unites Stares to allow that to happen and just kind of sit by. There are a lot of people working on both sides of it — to try to get a carbon policy or an energy policy, But it’s just crazy to allow it to cycle like that, because all companies that are either in the fossil fuel business or the renewables business, they have no long-term predictable price to bet on. So if you say oil is going to be at $80 a barrel for 10 years, then everybody could do their planning based on that, energy companies as well. Without market signals right now, it’s chaos.
Is there the possibility that there could be a market driver to flatten out those cycles before government policy is required?
Well, there are some things going on right now; I don’t know if they are sustainable. So gas and oil have separated, the U.S. has had a lot of gas discoveries in the shale formation and that has driven down the gas prices. We have also seen gas separated on a cost-per-BTU basis from coal. Coal is really high-priced right now. Whether that’s all sustainable, I’m not sure, but it would be the first time in history that we have separated those three fossil fuels from each other, and they have to sustain their own competitive factor. Short of policy, however, the one factor I would pick would be the availability of capital right now. Everybody is fighting for a small amount of capital, so it is hard for a startup to compete against 100 years of technology in oil, gas and coal. So they don’t have any policies to depend on or incentives, so they need capital to build and that capital has to be patient.
The second would be that the U.S. just gets a competitive attitude like we had when I was a kid, like fighting the Soviets in the space race. because what I am going to talk about tonight is China. It’s about competition and China could own the green tech space like we owned IT. Think about the implications of that — it’s not pretty.
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