Executing on Cleantech

Executing on Cleantech
Print All Articles Letter to the editor on 15 August 2007, 11:24by Red Herring Staff
When Mitch Mandich left his job as head of worldwide sales at Apple, he thought he was going to retire. Seven years later, he’s building a cellulosic ethanol plant that pumps out 100 million gallons per year.
“I really wanted to do something to make a material difference in the world. I wanted to apply my skills to combat global warming,” says Mr. Mandich, now CEO of Range Fuels, a biofuels startup in Broomfield, Colorado.
He’s hardly alone. Drawn by idealistic notions—and the opportunity to hit the jackpot—business veterans like Mr. Mandich are joining cleantech startups in droves. The nascent sector, considered too risky just a few years ago, has become the hottest area for venture capital investment almost overnight. Several companies have hit the market with successful IPOs, and some are even making money.
“I would describe it as a dramatic change,” says Ira Ehrenpreis, general partner and head of cleantech investing at Technology Partners, a venture firm in Palo Alto, California. “Some of the world’s best entrepreneurs and executives are now focused on trying to be part of the cleantech revolution.”
Until recently, most battery, fuel cell, solar, and biofuels startups were headed by scientists or idealistic save-the-earth types who weren’t that interested in making money from the technologies. David Pearce, CEO of Miasolé, a Santa Clara, California-based thin-film solar manufacturer, says the “tree huggers” he’s used to seeing at solar conferences are now outnumbered by top talent from the semiconductor industry and other tech fields.
He says the expertise he developed at OptCom, a startup devoted to precision thin-film optical filters, is applicable to the photovoltaic solar cells Miasolé now produces. His story is not at all unusual. “You have (cleantech) founders like myself who have been in the IT industry for a long time,” he notes.
A common, and idealistic, refrain heard in cleantech circles is that the people behind the startups want to make a difference in the world. That’s no doubt true, but in terms of getting hard-driving entrepreneurs and executives involved, it certainly helps that they can make a bundle in the process.
That’s because venture capitalists have been sinking billions of dollars into the sector. Last year, venture capital investments in cleantech in the United States totaled $2.4 billion—more than triple the $739 million invested in 2004, according to the Cleantech Venture Group consultancy. To boot, renowned VCs like John Doerr and Vinod Khosla have become cleantech boosters, giving the sector added credibility.
Tangible signs of progress have made the sector all the more attractive. Shares in energy management systems provider Comverge, which reported $34 million in revenue in 2006, have shot up about 55 percent since they began trading in April. Shares in Chinese solar cell makers LDK Solar and SunTech Power have been volatile in recent months, but they continue to rise as the two companies post profits. VeraSun stock has fallen since the company went public, but unlike many of the dotcom startups, the ethanol producer can point to real revenues and earnings.
“There has been an awakening of the sheer magnitude of the cleantech opportunity,” Mr. Ehrenpreis says. “This is now a real business with real revenues and real profits.”
It’s not known exactly how many veteran executives have joined the sector, but a couple of industry observers suggest that about one-third of cleantech startups can now point to an experienced management team. That’s a far cry from even just a few years ago, when cleantech managers were largely scientists and environmentalists who were ill-prepared to run a company of any size.
The influx of executive talent is creating a reservoir of business experience in the sector. Whether it be market knowledge, understanding of industrial production, or simple business basics, seasoned veterans have the skills to help cleantech startups boost their output and bring down costs. They also use their connections to recruit other executives and board members.
And the list of candidates is not limited to Silicon Valley entrepreneurs. High level executives from companies like General Motors, 3M, and General Electric are also getting in on the game, says veteran cleantech investor Maurice Gunderson, senior partner with CMEA Ventures. “The quality of candidates is the highest I have ever seen,” Mr. Gunderson says.
Cleantech is even attracting oil industry executives such as John Melo, who used to run British Petroleum’s U.S. fuels operation. He took over in January as CEO at Amyris Biotechnologies in Emeryville, California, a fast-growing startup that uses engineered microbes to produce a drug for malaria as well as new biofuels. The chance to help the environment as well as build a big company is exciting, says Mr. Melo.
“For me it’s an opportunity to create a whole new industry and to do it in a way that can make a difference in the world from a climate change perspective,” he says. “There are not that many places where you can do both.”
But for all the excitement about clean technologies, there are still many cleantech startups, and their backers, looking for seasoned executives. Mr. Gunderson says the sector still lags other Silicon Valley industries, in which new companies are inevitably launched and run by serial entrepreneurs with several successful startups under their belt.
“Cleantech is not quite there yet,” he says, “but it’s catching up fast.”
Related Topics: Cleantech, Vinod Khosla, Miasolé, Comverge, Technology Partners, John Doerr, Suntech Power, CMEA Ventures, Range Fuels, Amyris Biotechnologies, Cleantech Venture Group, LDK Solar