Thursday, April 21, 2016

On Earth Day, let's all pat ourselves on the buck.

Unicorns aren't real, everybody knows that.  However, there are 146 private companies listed at the Wall Street Journal as being valued at more than 1 billion dollars each. At the top of the list is Uber, valued at $51 billion and at the bottom is a cluster of companies each valued at a mere 1 billion. That 1 billion mark is symbolised by the unicorn. Altogether the companies are valued at $537 billion.

It reminds me of something...like 2008 all over again, when everyone knew mortgage backed securities were real and as safe as houses, until they weren't. Uber, the alpha unicorn, is still courting investors, even though it is valued at $51 billion. Obviously it's more about using investments to leverage new investors and less about running a healthy business. Sort of like a Ponzi scheme.

But what's troubling me is the nature of their game. Or perhaps the lack of nature. The business categories of these unicorns are:

  • Hardware, 6 companies, 
  • Consumer internet, 34, 
  • Software, 41, 
  • Aerospace and Defense, 1, 
  • E-Commerce 27, 
  • Healthcare, 11, 
  • Real estate, 1, 
  • Financial Services, 16, 
  • Entertainment and Games, 2, 
  • Energy, 1, 
  • Education and Media, 3. 

There is no Environment category.

Only one of the 146 unicorns could be described as having a 'green' objective. It's Bloom Energy Inc. The WSJ describes them thus:
"Bloom makes large stationary power devices that take natural gas as input and convert it into electricity without burning... In 2010, Mr. Sridhar appeared on '60 Minutes' and said he expected a Bloom box in every home in five to 10 years, but Bloom Energy is nowhere near that goal. The company has also raised far more capital -- at least $1.2 billion -- than the $100 million that Mr. Sridhar originally expected would be required."

Lesotho                            photo by Tom Philpott
The vast majority of the other unicorns are software/internet/e-commerce based. Why do investors like that? Because they need minimal human resources and infrastructure to scale up and go global. Consequently they are able to offer investors a much larger return than the stock market. Institutional investors such as city pension fund managers probably flock to companies like Uber. Maybe that's why city administrations all over the world are in a rush to enable such services. No-one even has to bribe them. Bernie Madoff must be having a good chuckle.

With all the green funds available from investors looking for a big return since COP21, we should be delighted. However 'green' might not mean the same thing to everyone, and some might not even see survival as a 'big return'.

Disclosure: I am the developer of a portable device that combines wind and solar electrical energy and stores it in rechargeable batteries. Project information can be seen at gensolaria.com and yes, funding is being sought.

Sunday, April 10, 2016

Alternative energy innovation, investment and the Valley of Death

With the Paris Conference COP21 behind us, one welcomes the flowering of new funding, financing and investment opportunities aimed at developers of solutions for problems wrought by climate change.

According to Reuters (11 Mar 2016) :
The Green Climate Fund (GCF), set up by the U.N. climate change negotiations, has so far allocated just $168 million to eight projects, in a decision made before December's Paris climate summit.
    Another 22 proposals for private and public-sector projects are now in the fund's pipeline. They will ask for $1.5 billion from the fund, to back activities worth more than $5 billion.
They include efforts to improve energy efficiency, strengthen disaster risk management and boost agricultural resilience in Latin America, Africa and Asia-Pacific, as well as to help small island developing states adapt to climate change.
The new Green initiatives include the Breakthrough Energy Coalition, among whose members are Bill Gates, Ratan Tata, George Soros, Jack Ma, Mark Zuckerberg and many more. Their opening statement makes a telling point:
Experience indicates that even the most promising ideas face daunting commercialization challenges and a nearly impassable Valley of Death between promising concept and viable product, which neither government funding nor conventional private investment can bridge... These investors will certainly be motivated partly by the possibility of making big returns over the long-term, but also by the criticality of an energy transition. Success will provide the economic proof points necessary for the mainstream market-driven clean energy economy required for our planetary future.
However, the likelihood of large investment funds actually reaching small innovators seems low. While those who have money to invest do acknowledge the 'valley of death', they still set the rules, and the participants in Bill Gates' Breakthrough Energy Coalition are not exactly folks who have made careers of risking everything to save the planet. For all their talk of risk, the very statement "Success will provide the economic proof points necessary for the mainstream market-driven clean energy economy required for our planetary future" makes it clear that they expect proof of no risk before making investments in innovation. And that their prime objective is making money, not saving the environment.

I hope I am wrong.

In the interest of full disclosure, I am the developer of a portable device that combines wind and solar electrical energy and stores it in rechargeable batteries. Project information can be seen at gensolaria.com and yes, funding is being sought from the UN. 


Daniel B. O'Leary   April 2016