A Blog by Jonathan Low


Feb 21, 2015

Why Is It Harder To Stimulate Investment in Transformative Science Rather Than Apps or Social Dating?

Clean energy went down hard. If you were a venture investor with an eye for the main chance, it had all the makings of success: demand, technology, scale.

But the then there was this thing about time: as in needing lots of it to prove out, because the flip side of scale at this level was not like that required for a new phone app: sometimes, mountains would literally have to be moved, space cleared, large physical objects constructed, placed and made to operate.

That sort of thing is expensive and time-consuming and given the primacy of the net present value of future cash flows, not likely to make it on to anyone's short list.

And if we're being honest, such matters quickly become political. Not just as to whether one believes or doesn't believe - what in hardly matters - but that big ideas often attract big opponents.

So the venture dudes went elsewhere, but the demand and the need for technology and the promise of scale remain.

Universities and research laboratories are trying to raise funds on their own, as the following article explains. But challenges of this size require solutions to match. This has traditionally been the province of government funding. Ultimately governments are responsible for such things, at least that was their traditional role and purpose. But ideological opponents, frequently worried about new technologies breaking their value chain or commercial opponents who want a bigger piece of the action, nowadays stand in the way.

So need and demand will probably have to meet at the intersection called crisis before much gets done. JL

John Markoff reports in the New York Times:

V.C.s learned that investing in unproven “hard” energy technologies was not as quickly lucrative as backing social networking and smartphone apps
To halt climate change, the world desperately needs advances in clean energy. But in recent years, Silicon Valley, the nation’s engine for technical innovation, has turned its back on investments in the field.
Now, even as the world grows hotter, young scientists with fresh ideas about energy technology are finding it increasingly difficult to find venture capital to get them off the ground.
“The V.C. model isn’t working,” said Horst Simon, the deputy director of the Lawrence Berkeley National Laboratory.
But scientists at the lab may have found a better way to support entrepreneurial scientists who once depended on venture capital.
Clean energy investments were briefly a fad among Silicon Valley venture capital firms, peaking in the second quarter of 2010 at more than $820 million. But V.C.s soon learned that investing in unproven “hard” energy technologies was not as quickly lucrative as backing social networking and smartphone apps. By the third quarter of last year, venture investment in industrial energy technologies had declined to $209 million.
Many clean energy technologies require prolonged support to grow, Curt Carlson, a physicist and former president of SRI International, said, adding: “V.C.s hate that. They want to put in a slug of money and then have it scale itself, without having to put in a billion dollars.”
Solyndra, a promising maker of solar panels, was a spectacular failure, driven into bankruptcy in 2013 by Chinese competition after obtaining $536 million in Department of Energy loan guarantees. But it was hardly the only flameout: The valley’s venture capitalists backed a disappointing array of energy start-ups, including battery makers A123 and Ener1, Fisker Automotive, and Abound Solar, a maker of thin-film solar panels.
As interest cooled among V.C.s, energy entrepreneurs struggled to find support for ambitious ideas. Ilan Gur, a materials scientist at Lawrence Berkeley and veteran of several clean energy start-ups, observed the experience of two Stanford graduate students with a new idea for more efficient solar technology.
“They got laughed out of every V.C. on Sand Hill Road,” he said. “People told them: ‘Are you crazy? An early-stage materials investment in solar?’ ”
Instead of giving up, Craig Peters and Brian Hardin found a nanoscience program at the Berkeley Laboratory intended to support ideas like theirs. They formed a small company, Plant PV, and worked with the laboratory’s scientists to improve the technology.
Only then were they able to obtain funding from a private investor who was not concerned about getting an immediate return. “Maybe it’s not a billion-dollar market, but I think they can see their way to a $500-million-revenue market,” Dr. Gur said of the investors.
At the time, Dr. Gur was working at the Department of Energy’s ARPA-E research agency as a program manager looking for new ways to commercialize clean energy technologies.
It occurred to him that if he could extend the experience of the two Stanford-educated engineers using the Lawrence Berkeley Laboratory’s resources, it might be possible to create a new kind of public-private model for commercialization.
Now Dr. Gur and his colleagues at Lawrence Berkeley hope to duplicate that initial success. They have created a technology incubator program intended to support entrepreneurs from academic laboratories until their ideas are mature enough to earn financial backing from chemical or oil and gas companies, or possibly even private investors.
Dr. Gur has persuaded the lab to place a bet on his approach by investing some of its revenue from royalties. And nobody among his crop of entrepreneurs is thinking small.
The program, Cyclotron Road, has enrolled a small group of scientists who are starting research in energy-related areas like the conversion of tidal waves to electricity and the transformation of carbon dioxide emissions into liquid fuel.
One recent afternoon, Steven Kaye, a chemist, placed a bottle partly filled with a white powder on a bench at the lab. The powder resembled salt, but in fact, it is a breakthrough synthetic material known as a metal organic framework, or M.O.F.
M.O.F.s eventually may transform fields from computing to energy and gas manufacturing.
The ultraporous materials, first discovered in the late 1990s, may become miracle materials for fuel storage, chemical processing, electronics, and even for capturing carbon dioxide from power plants.
M.O.F.s are synthesized spongelike materials that are compounds of metal ions and organic molecules. They have more surface area than other materials. For example, a gram of M.O.F., about the size of a grape, might have a surface area of two and a half football fields. That vast expanse makes the materials ideal for storing gases because they contain a huge number of molecular-scale pockets where molecules can stick to a M.O.F. surface.
Dr. Kaye has chosen one target application for his research. He hopes that his M.O.F.s will reduce — by as much as 60 percent — the energy costs involved in manufacturing such chemicals as ethylene, propylene, hydrogen and ammonia.
If he succeeds, there is a potential commercial payoff. Chemical-separation processes require a vast amount of energy, accounting for roughly 10 percent of all global energy consumption.
Dr. Gur acknowledges that Cyclotron Road is still an “experiment,” but he believes that it is one that is badly needed. “A lot of people are saying this is a big issue because we need an innovation pipeline for energy technologies,” he said.


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