You mentioned mainstream VCs. Energy is a big, broad field. Is there a lot of money going into specifically 'clean' energy-related technologies?
Is it a category? It is not yet, but it is on the verge of becoming one. There are leading institutional vendors like CalPERS (California Public Employees' Retirement System), who now say, "Yes, we put 'X' into software, 'Y' into biotech, and now we're going to put 'Z' into clean tech. We're going to allocate money like that. Who are the best managers?"
If it's not yet a category, what's holding it back?
Up until a little while ago, venture capitalists, quite understandably, focused on other areas. But I think there's a good analogy to biotech. Genentech went public in 1979. That was the Netscape of biotech. It took another 13 years before biotech garnered even 10 percent of overall venture dollars. It takes time.
People have to go up learning curves. Experienced entrepreneurs have to start coming through. Technology has to start maturing out of the labs. Partnership models between big companies and small companies have to get developed. These things take time. You and I live in a world that works at warp speed. Sometimes, we think a decade is forever. But not in the greater scheme of things.
In clean tech, we're definitely at a tipping point, where things are happening, and there are many reasons for that, whether it's 55 bucks [per gallon of oil] or people beavering away with increasingly robust computing technology to be increasingly cost-effective. There are operating hours on demo plants -- all kinds of thing are happening. Basically, we're getting to the breakthrough point. And then [we're] getting experienced entrepreneurs who come into this space, or make their first million dollars. It becomes a virtuous circle. That's what we're seeing in clean tech. And the returns are way better than people think they are.
Better than traditional technology-related investments?
We released a research note around a broader study that has looked at returns in this space. It's not definitive, but the data we've assembled suggest that investors have been able to achieve venture-grade returns consistent with the overall venture capital average returns over the past decade, taking into account the dot-com boom. For a lot of people, that's a very astonishing piece of data. But it's there.
How do you define clean technology, and how is it different from alternative energy?
We basically see it as products and services derived from technology that optimise the use of natural resources -- typically energy -- and economic value, and in doing so, reduce ecological impact.
If you want to characterise, it takes clean energy. Clean energy is more than just alternative energy; it's algorithms and other stuff in there. If you have all distributed renewable energy, (you) still have to connect it up to the grid and control it.
Can some of the ideas of the Internet be applied to distributed energy generation?
Yeah, it becomes an energy Web rather than energy grid. Sound familiar? I had a meeting with guys from Cisco Systems about this. They said, "As soon as the market gives the right signals, we're ready to go. We just did it for the telecom industry." So it's more than just alternative energy. It's everything around that has to happen.
Secondly, it's water. Water is a very a critical issue. Take the semiconductor industry, which uses gargantuan quantities of water. Intel -- where are all its manufacturing plants? They're in dry places, like the southwest United States and Israel, and so forth. Well, water is becoming a critical resource. You can't get enough of it. So Intel Capital has invested in water purification and recycling technology. It's mission-critical.
The third area would be advanced materials
