Understanding the Tech behind the CleanTech


CleanTech has been the hot venue for new venture capital investments for a couple years now as it offers great potential returns, revolutions in innovation and immense social benefits. Energy & Fuel is the by far the largest sector and it incorporates a significant amount of technology behind it so today I am looking at it from the VC review process. How big is the industry?

"Biofuels (global production and wholesale pricing of ethanol and biodiesel)
reached $25.4 billion in 2007 and are projected to grow to $81.1 billion by
2017."
Clean Energy Trends 2008
Clean Edge Inc. 2008

After all, CleanTech, just like any other industry for investment needs to undergo comprehensive due diligence to vet the deal. Here is an overview of CleanTech with an eye towards the tech behind the energy and what to look for:
  • Energy is a focal point as it addresses alternative fuels as well as storage (batteries, etc) and it is a potential world changer. We wary of any technology that maintains an established economic paradigm, eg any fuel that seeks to become the next oil as it will also face the same threat of obscelence.
  • Intellectual Property is a critical aspect to investigate as many fuels involve processes and formula that are hard to patent. Remember, in scientific IP one company can copycat the overall outcome or effect of another simply by altering the process or formula that defines the original. A formal patent search by a reputable and knowledgeable firm is crucial here (http://www.paulreinitzlaw.com/)
  • Ideally, convergent alternative fuel technologies are very attractive. This means a process or product with multiple wins such as using corn for biofuel then using the by-product for compost / fertilizer for a secondary revenue stream.
Basically, innovative ideas that can be owned and defended are what a due diligence assessment needs to reveal. CleanTech is big and it is the future but it needs to be vetted like any other investment deal.

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