Prominent VC's on energy storage investments
Posted by Bob Sayre on Thu, Sep 17, 2009 @ 10:26 AM
At MIT yesterday, venture capitalists Bob Metcalfe (left) and Hemant Tenaja as well as Peter Diamandis of the X PRIZE Foundation offered interesting insights on promoting the development of energy storage breakthroughs in America.
Developing improved devices for storing energy presents a critical ongoing challenge in expanding the use of sustainable energy sources and building a "smart" electrical grid and is a field that will be subject to many more innovations and patents. Whether by batteries, capacitors, chemistry, etc., a variety of options are available depending on energy/power needs and operational contexts. Today, we see an intense push to build better batteries for laptops and other portable electronics; and local companies, such as A123 Systems (which is moving toward an IPO) and Boston Power, are among the leading American companies, though energy storage is needed in a wide variety of contexts.
Policy --> Capital --> Innovation
Hemant Teneja (managing director or General Catalyst Partners) framed the path to innovation on this front as beginning with government policy leading to investment and the flow of capital to fund innovation. Teneja indicated, however, that he believes that this cycle toward innovation will take longer than expected, given that Congress is now so focused on health care reform. Meanwhile, developing markets, such as China, are moving much faster by throwing lots of money at energy-storage R&D. America's comparative lag may threaten our competitiveness (Tom Friedman at the New York Times often writes about the criticality of establishing leadership in clean energy technology).
Path to a Smart Grid may Mirror Path to the Internet
Bob Metcalfe (founder of 3Com and now general partner at Polaris Ventures) views advances in energy storage in comparison with the development of the internet, where breakthrough developments in electronic memory paved the way to shared, distributed computing. Likewise, in the context of energy, breakthrough advances in energy storage to provide distributed storage capacity will pave the way to a "smart" distributed power grid. In particular, distributed micro-storage media (such as that provided by Polaris-backed Infinite Power Solutions) will enhance the distribution and locality of energy storage to the furthest reaches of our automated world. Metcalfe also emphasized the need to look toward a wide range of potential solutions (beyond lithium-ion storage); Metcalfe's Polaris Ventures also is an investor in MIT Professor Daniel Nocera's Sun Catalytix, which aims to store energy by splitting the hydrogen and oxygen atoms from water using solar energy.
Future for Cars
Metcalfe also boldly forecast that within his lifetime (he is 63), (a) all cars will be electric; (b) people will no longer drive the cars, as driving will be automated; and (c) we will no longer own cars (Zipcar for everyone?).
Challenges of Investing in Energy/Materials Technologies
Teneja also highlighted the challenges of investing in energy technologies, where a $300-$400 million investment may be needed to develop a new technology, which may provide a 20% improvement against a high risk of failure and against intense global competition that may present alternative leapfrog technologies at any time. In the face of these challenges, Teneja noted that General Catalyst had not yet made any investments in energy storage companies, though he indicated they are still looking for the right opportunity.
Teneja correctly noted that the challenge of energy storage is largely a materials science challenge--finding materials system with the desired power/energy storage density. When asked what level of improvement we should be targeting, Metcalfe pitched in that we could shoot as high as a million-fold improvement if we could leap beyond the energy stored in chemical bonds and instead store energy in nuclear bonds (e.g., via uranium). Might we someday see desktop cold fusion as a means for energy storage--who knows? Though Metcalfe noted that there is a researcher in Acton currently working on nuclear fusion in his garage (I hadn't heard this before, so I am not sure who this person is).
One of the issues with materials science innovations is that they often take at least a decade to develop (MIT materials science professor Gerd Ceder once told me that twenty years is a reasonable timeline for developing many innovations in materials science, which incidentally is the standard term for a patent, measured from filing date), which is at odds both with the urgent near-term focus of our government in addressing these problems and with the two-to-three-year time frame with which VC's were spoiled when sponsoring internet startups. Wheres internet startups often require comparatively little cash, may offer little risk and provide quick payback, innovations in the realm of materials science rarely offer any of these advantages. Consequently, there tyipically are fewer venture capitalysts interested in funding companies pursuing innovations in materials.
Nevertheless, Metcalfe noted that Polaris had backed American Superconductor, one of the leading companies focused on high-temperature superconductors, which may have been the biggest innovation in materials (or at least in the field of high-tech ceramics) of the 1980's. "We did American Superconductor, . . . and 20 years later, we regret it," quipped Metcalfe.
Will Energy Investment Ecosystem Mirror That for Drug Discovery?
Metcalfe noted, however, that a different model ecosystem for such high-capital, long-term investments already exists--the model for discovery, which also may have a 20-year timeline and may cost a billion dollars. The drug discovery ecosystem relies heavily on partnering, acquisitions and mergers to move from one stage to the next. Perhaps a similar model can develop for carrying far-flung approaches for improving energy storage along the long and difficult road of development.
A New Apollo Program
Starting with proper policies advanced by federal legislation, Peter Diamandis (Chairman & CEO of the X PRIZE Foundation) urged that we should adopt a long-term mission similar to the Apollo program for placing a man on the moon in terms of audicity and commitment. Diamandis asked, what if the Bush administration (in 2000) invested the money that was spent in the wars in Afghanistan and Iraq on instead developing technologies that would make America energy independent, thereby greatly improving our security and cutting off funding to enemies in the middle east? And what if the Obama administration, instead of shoveling vast sums of money to prop up our failing automakers in Detroit, allowed the American auto industry to succumb to a natural death and invested money in reeducating our workers in Detroit for next-generation technologies?
In emerging markets, Diamandis talked about the need to provide an improved solution for distributed storage stations over the use of stationery diesel generators. The basis for this forum discussion was the discussion of a new X Prize challenge to reward a breakthrough advance in energy storage. The acoustics in 54-100 were not the best and speaker volume was low, so it is possible that there may be an error or two in what I heard and transcribed.
if you wish to secure patent protection on your energy-storage or other clean-energy technology, which is a step best initiated before you seek funding.