Hopefully this will turn out to be what it says it is, venture capitalism, but the record of the players is not good.
REVIEW & OUTLOOK
Global Warming, Inc.
Al Gore, Silicon Valley, and venture politics.
Tuesday, November 20, 2007 12:01 a.m. EST
Al Gore no longer needs to make claims about creating the Internet, because the former Vice President deserves much of the credit for creating an entire new industry--the global warming business.
And like the energy barons of an earlier age, Mr. Gore has the chance to achieve enormous wealth after being named last week as a new partner at the famously successful venture capital firm Kleiner Perkins. No fewer than three of his new colleagues sit on the Forbes list of wealthiest Americans. If Mr. Gore can develop market-based solutions to environmental challenges, we will cheer the well-deserved riches flowing his way. On the other hand, if he monetizes his Nobel Peace Prize by securing permanent government subsidies for nonmarket science projects, he'll have earned a different judgment.
There's no shortage of new capital pouring into alternative energy projects these days. According to the National Venture Capital Association, "clean tech" start-ups attracted more than $800 million in venture capital last quarter, a new record.
What's not clear is whether these are fundamentally energy ventures or political ventures. The Manhattan Institute's Peter Huber, a former engineering professor at MIT, exaggerates only slightly when he says that "Basically, 'alternative' means stuff that nobody actually uses." If that turns out to be true, then alternative energy companies could struggle for market share without government assistance.
Those doubts exist even for the companies backed by Kleiner Perkins. After making more than a dozen "green tech" investments, Kleiner is still waiting for its first exit. According to a Kleiner spokeswoman, many companies in its portfolio are "in stealth mode." The firm will "neither name nor comment on them." So it's impossible to determine precisely how much the Kleiner-backed firms will benefit from either current federal subsidies, or new provisions that are part of the House and Senate versions of the stalled energy bill. But we do have some hints.
Of the portfolio companies acknowledged publicly by Kleiner, at least two, Altra and Mascoma, are involved in the production of ethanol, which is already heavily subsidized and would get more subsidies in the House bill and higher mandates in the Senate version. A third firm in the portfolio, Amyris Biotechnologies, is developing a biofuel that will provide "more energy than ethanol," according to its Web site, and should be just as eligible for government set-asides.
