I've been warning about a massive mispricing of risk in cleantech investing for years.
That certainly doesn't mean that cleantech investing is bad. On the contrary, I'm very very bullish on cleantech. The question is which cleantech investors are following my rules on what's good about investing in cleantech, and which ones are just following the old style IT rules of venture capital and taking that mispriced risk for their LPs.
In the cattle business, a bad rancher judges the cow by the quality of cow, a good rancher judges the cow by the quality of the calf. That’s how this Power 5 Ranking and Big 5 Question Mark Ranking of cleantech investors was constructed. Quality of the calf.
The Cleantech Blog Power 5
- GFI Energy – The top private equity shop in cleantech in my opinion. Caminus, Noreseco, Xantrex (OTC:XARXF), et al. Been doing it quietly for over a decade and creating great companies. A shop that doesn’t miss often, and doesn’t bother to show up at the cleantech conference circuit. Maybe they don't need to.
- MissionPoint Capital Management – SunEdison, Ecosecurities (OTC:ECGUF), APX et al. Great discipline, great picks. They actually seem to know something about the areas they invest in.
- Clean Pacific Ventures – Early stage, see things others are going to see about 4 months before they do. Backed one of my companies. Show the love.
- Acorn Energy (OTCQB:ACFN)– The place where Comverge (NASDAQ:COMV) was born. Publicly traded, now investing in cleantech. I love this portfolio. John Moore has a nose for deals. His card says "CEO and Evangelist". Most people will ignore him because he's publicly traded. But if it works, so what?
- Goldman Sachs (NYSE:GS) – Their name is on or in half of the marquee deals in the sector from First Solar (NASDAQ:FSLR) to SunEdison, Horizon Wind, Suntech (NYSE:STP). Hard to leave them out.
Honorable mention goes to the AIM market. The whole market. It's better for founders, better for investors, took HUGE market share from the venture capital community in cleantech. All around eating VC lunch for breakfast. And yes, there is liquidity. Stop saying there's none in the same breath that you ask me to sell you preferred stock with cosale rights. It's obnoxious.
And the Big 5 Question Marks
- KPCB – Bloom Energy? EEStor? 5 different stealth thin film plays? Et al. How many stealth science projects in cleantech can dance on the head of a pin? Let’s work on a very mixed metaphor / cliché of sorts - you shall not crucify this crown of venture upon a cross of cleantech. Too many of the technologies in Kleiner deals are only sexy because Kleiner's name is attached. Come on guys, you're better than this.
- Google.org (NASDAQ:GOOG)– The world is rooting for you to succeed. And Silicon Valley needs a poster child for cleantech. How about articulating a strategy that the market understands? Maybe "sustainably energizing the web" or such? When people ask me what does Google.org invest in and why, there should be a clear answer.
- Khosla Ventures - How many odd ways are there to invest in ethanol? Do we really think being in refining is a good business? And no, it’s not cheaper than gasoline. Can we lobby our way out of it? There are some gems in here, but the weighting may catch him. Kudos though for doing it with large chunks of his own money instead of my grandmother's pension fund's money.
- VantagePoint Venture Partners – The anti Kleiner? Lots of strategics involved, and taking very, very large, very, very risky bets. Perhaps they better hope Vinod’s lobbying comes through. But it only takes one, right? If they can find the discipline of the Power 5, this could be good.
- Nth Power – Where’d you go? You were the acknowledged market leader when cleantech started in the first part of this decade. At one time virtually every strategic that mattered was an LP. The cleantech market needs you to be bigger than you are today.
So yes, invest in cleantech. But pay attention to the risk, not just the management fees when it's OPM.
Disclosure: No positions