The Green Divide

In the midst of the economic downturn, the New York Times says venture capital funds are shifting their investment strategies in the cleantech sector. From 2005-2007, the excitement was in new fuels and alternative energy sources. Silver Spring was a typical example of the company that was too boring to get a venture capital firm's interest during this time:

Investors in clean technology were just not excited about Silver Spring, because it makes hardware and software that utilities use to connect electric meters in a digital grid. They were more interested in companies that envisioned making energy from the sun’s rays, algae or tropical plants.

There's now a split is between companies that want to shoot for the moon (investors in alternative energy) and companies that want to improve the way we use current technology (investors in energy efficiency technologies). Many of the energy efficiency companies use networks, grids and personal energy use measurements to save consumers money. Recently, this group has gained the upper-hand because firms are looking for less capital-intensive investments.

Visionaries such as Vinod Khosla, of Khosla Ventures, aren't ready to cede the green ground to "boring" investments just yet:

“I think that’s a false generalization for people who take a very superficial view of clean technology,” said Vinod Khosla, the firm’s founder. “It’s not that hard to find ways around capital intensity. We are very active in doing that, and it involves technology or business strategy.”

Despite Khosla's optimism, in a tough fundraising environment, the article suggests that those funds that bet big on the next biofuel or solar technology might be regretting having so much money tied up in a risky bet when smaller and less capital-intensive investment opportunities were out there:

“There are a lot of people who went down that path of solar and fuels and wish they didn’t,” Mr. Grosser said. “From where we sit, we are very grateful we didn’t put a pile of money down.”