Clean Tech is Just Tech

Earlier this week there was a panel discussion on Clean Tech that was sponsored by Deloitte and LaBarge Weinstein. Clean tech isn't the tech that directly interests me, however I thought it would provide me with some perspective on how the venture capital firms see the space. So I went, hoping to learn something. What I learned is that the funding and market situation is no different there than for the types of technology in I which I am involved.

The crowd was large and the subject matter timely, so I expected a dynamic discussion. I was to be disappointed. The moderator, Duncan Stewart, tried to inject some life in the proceeding, as did a couple of the panelists. Yet there was, ultimately, little animation. Two of the panelists, Rob Koturbash from Maple Leaft Angels and the speaker (whose name I didn't catch) from Growthworks were so down beat they put a damper on the proceedings. Despite their investments in companies in clean tech they were entirely unenthusiastic. The fellow from Growthworks couldn't remember the companies in their portfolio without reading from his "cheat sheet", a tiny scrap of paper.

Better were Antoine Paquin and Tom Astle, respresenting late stage venture capital and public markets, respectively. Even with their lively attitude they did little to encourage the audience. I expected more, even to see them go so far as trying to entice entrepreneurs into the space. Didn't happen.

What I did hear loud and clear were apologetics for how difficult it was to get any ROI (return on investment). How they framed this could be summarized by this statement (not quite verbatim):

Cycle times in clean tech are longer than other tech.

I don't believe it. Sure there are companies researching new technologies, such as iogen and Group IV, but most companies are just applying regular technology to a new vertical. In contrast, Ottawa cut its teeth on a different vertical - telecom. Remember, we're not talking about developing alternative fuels in most of these companies, but stuff like LED lighting, smart meters, and software-driven control systems. Nothing here is trivial but there is no justification for the long cycle times.

The message about longer cycle times was therefore lost on me. When they used that line I instead heard something along the lines of the following:

There are no public market exits or acquisitions happening for the forseeable future.

This is my caricature of the situation though I believe it's accurate enough of a characterization. That is, the situation is no different for clean tech than for any other tech that requires outside investment. There are no exits; and, if there are no exits there is no investment. The problem is the overall market and macro-economic, which are all bad and affect all sectors.

Out of curiosity I made a conjecture that I believed to be true and quickly pulled together some US ticker symbols of currently-trading stocks in the clean tech space. I plotted them against USO, an ETF that is a pretty good proxy for crude oil futures. I expected a correlation and that's what I saw, though not a perfect correlation. This is not a proof of anything; it is possible the result could be quite different with other selections, or even better had I taken some additional care in my choices. These were just the names that came to mind as I entered them into Google Finance.

Clean tech, including alternative fuels, tracks oil. If oil is expensive there is interest in clean tech. With oil way down, the interest is gone, as is the money to invest in new ventures. When it comes to the financial realities, clean tech is just tech, and they share the same fate.