I get slightly annoyed when articles come out bemoaning how Silicon Valley hasn’t been tackling hard problems. I’ve written a variety of “get off my lawn” rebuttals a couple times on Gigaom before, but these articles still keep coming out. Most of them, while partly true, ignore that venture capitalists spent tens and even hundreds of millions of dollars investing in the “cleantech” wave between mid-2000 to 2012 and were trying to tackle hard problems. Many of them ended up losing a good deal of money.
The about face and the cleantech reversal was a totally reasonable response from a group of people who were losing other people’s money, jeopardizing their firms’ chances of raising future funds, getting pressure from limited partners, and watching easy, fast money being made in the internet.
But guess what? For some of the Valley’s most cutting edge VCs, tackling hard problems and investing in these scientific and energy innovations is once again starting to be new and cool again. But make no mistake: it’s not going to be called “cleantech” this time around, and here’s hoping it won’t be bogged down by the type of subtle “righteous” mindset that characterized the first cleantech wave.
Valley investors are now starting to embrace the term “science” as an overarching rubric for energy innovation, but they are also including things like materials science, health startups, and space exploration projects. And this move is not just because we at Gigaom finally changed our cleantech channel to the broader moniker Science & Energy.
Science is now hip everywhere these days, as you can see by the re-emergence of the show Cosmos, the excitement over big science breakthroughs in recent years like the God particle and Mars Rover, and the cult popularity of science nerd figures like Bill Nye. I would guess that job applications by young people to work at NASA are up significantly.
This week Recode reported that the Founders Fund plans to launch “FF Science,” which will use a portion of its $1 billion fifth fund for seed-stage investments in energy, life science, nanotech, and space. Founders Fund has backed some of the more successful internet companies like Facebook, Airbnb and Spotify, but also has supported science-heavy companies like Elon Musk’s rocket company SpaceX and satellite startup Planet Labs.
Before you get too excited about Founders Fund’s commitment, the article noted that the combined spending of FF Science and another seed allocation called FF Angel will probably be around $50 million. Together. Such a small commitment means the fund has to find startups super early and also tend toward more capital efficient companies.
Lux Capital is a firm that has long embraced this type of science investing. It has backed nuclear waste cleanup firm Kurion, electronics startup Transphorm, solid state transformer company Gridco, as well as Planet Labs. Last year it closed on its third fund to invest in what Bloomberg described back then as “unpopular science startups.”
That was in February of 2013. These are not unpopular opportunities anymore. Everyone wants to be in a SpaceX or a Tesla (hint, maybe just back Elon Musk).
But startups like these are as hard to fund as many of the cleantech companies were and are (solar makers, electric car companies, battery breakthroughs). The pharmaceutical industry, and drug development, are like the energy industry in that they take a long time to get to market and are highly regulated. Space and aeronautics are like that, too. These types of innovations can also take significantly more capital to get to market.
Science is just hard, particularly compared to investing in internet companies. Yo might be ridiculous but it didn’t take long to create as well as make its creator money.
But now that science is becoming hot in the Valley again, a lot of the lessons from cleantech should be remembered. One of the main ones is the lesson of righteous investing.
Investor passion is a good thing, and passion for doing something good, for helping fight global warming and for saving the planet is also good. But I think the drive to be known as an investor that made the world a better place actually distorted the barometer those cleantech investors used to find and fund successful startups. Investors now looking to back science startups should keep that in mind.
Another thing to remember is that Moore’s Law has spoiled us for the rate of progress. Other sectors outside of digital — in energy, materials, health and space — aren’t necessarily delivering the type of predicted, rapid progress that computing, chips, connectivity and the internet have delivered. You can take a graph and reasonably plot how much chips, sensors, broadband, and on-demand computing will cost you in a certain year. Try doing that for the cost reduction of batteries (well, Elon Musk is also trying to do this).
And of course, science is a much bigger bucket than cleantech was. Cleantech has been relegated to innovations that fought global warming and made resources like energy, food and water cleaner and more efficient. That’s still awesome, and it’s something that I will continue to be dedicated to covering.
But climate change has always been a contentious topic, particularly in the U.S. That’s one of the reasons cleantech became a sort of dirty and politicized word. I know there’s a variety of groups that are embracing new terms like digital energy, cleantech 2.0, cleanweb, and the like to try to bring back cleantech in some way. Yet the umbrella term doesn’t really matter if we’re all focused on the same thing: breakthrough innovations for tough science problems that can disrupt industries, and maybe if we’re lucky, change the world.