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Evaluation of Private Equity in Energy Start Ups

Glimpsing the future of energy through the eyes of Surge, STV, Austin Ventures and Houston Ventures is an unconventional way to spend lunch. Bob Metcalf, noted VC and UT’s innovation asset, is moderating a panel that seeks to tackle the capital intensity and capital efficiency issues of energy startups. Interesting to hear this from three distinct vantage points: incubator, strategic, and VC. Surge seeks to help prove the tech, make it viable and establish processes that are sustainable and have a lower cost of failure. A common dream for companies from the accelerator/incubator pipeline is for a corporate venture shop to take interest. This interest means that the technology has near term value, that it is closes to commercialization, and that it has the potential to change the game.  Though the corporate venture model is not a new one, it will be interesting to see how the practice of investing in early stage companies plays out across industries.  The energy sector has Chevron Technology Ventures, Shell Technology Ventures and Total seeking value and new ways to improve efficiency.  Waste Management leads the way in its eponymous industry, investing in technologies with the aim of improving sustainability efforts and creating new revenue streams.  Treating these small, strategic investments as essentially a portfolio of options allows the companies to keep tabs on new technologies and take a stronger role where they see value and taking a back seat where commercialization seems less promising.

Additionally, the panel touted solar as the future leader of the clean energy industry, a sentiment far from that of Bob Ingles who decried much of what companies in that space had accomplished.  The safe place is somewhere in the middle.  Solar certainly has a (potentially critical) role and it will continue to improve as new technologies are refined and engineers learn from existing projects.  But we can’t fall into the trap of seeing the recent 50% improvement in production cost as a sustainable trend in technology development.  Moore’s Law does not apply to mechanical systems.  There are physical limits to what solar panels, wind turbines, and tradition engines can accomplish that cannot be bent.

Lastly, it was emphasized that we need to find a way to produce energy clean and affordable while being cognizant in the world of startups that capital efficiency is king.  It is important to think big, but scalability isn’t bad either.

 

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About Doug

"Our ignorance is not so vast as our failure to use what we know." - Dr. M. King Hubbert

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