I blogged last month on this page about the importance of commercialization in the green industry. Reliance on government subsidies can be dangerous, as subsidies inevitably run out. We have seen this in wind and solar. In the public sector, I have found that a good idea backed by good science, even in the abstract, is often enough to attract seed funding and legitimate consideration from, say, the U.S. Department of Energy. And rightly so -- after all, these types of organizations help private companies develop complex scientific abstractions into commercial concepts for the marketplace.
Unlike in government, however, it is difficult to actually sell green ideas on the open market when business applications have yet to be tested, even if they are backed by good science. Solar paint is a great example (and if you don't know what I'm talking about, there's a reason,) but even solar paint is starting to take a step closer to reality: its value is being communicated with increasing clarity to the marketplace.
Running parallel to this is the notion that the success or failure of an idea lies not with the idea itself, but with the ability of its stewards to clearly communicate that idea in an environment in which returns must be realized. Audiences vary, as does the media -- the investment community, and potential customers all want to know, in concrete terms, the value proposition for the next big green innovation.
Thus, creating a successful business from one of these ideas means ensuring actionable value for a marketplace trying to go greener. In the private sector, a good idea and good science, while requisite, do not exist in a vacuum and are by themselves not enough to meet the test most investors impose.
As I continued my company's investment raise across Europe last month, one thing was consistently and abundantly clear in talking to investors and financial analysts from various firms: these days, with the uncertainty of the market, contracting budgets, and limited funding availability, investors are being increasingly choosy about where they put their money. As the (very true) saying goes, they'd rather have an "A" management team with a "B" idea, instead of the other way around.
We in the green space understand that it is our ideas and innovations that will ultimately transform our world-but we must also be reminded that a commercially-focused understanding of the marketplace is key if we want to see our ideas through to their fullest potential.
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There is still a serious shortage of adventure capital. This is the money that seeks Black Swans.
Nassim Taleb, in his brilliant book with that title says: "in some domains – such as scientific discovery and venture capital investments – there is a disproportionate payoff from the unknown, since you typically have little to lose and plenty to gain from a rare event. …The strategy for the discoverers and entrepreneurs is to rely less on top down planning and focus on maximum tinkering and recognizing opportunities when they present themselves. ..The strategy is then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.”
Having been an entrepreneur in the green energy space for many years, I could not agree more.
Fortunately, a few Black Swans are emerging. See "Cold Fusion" at www.aesopinstitute.org for one example.
There are several more in the birth canal. With 24/7 development, they can supersede fossil fuels far more rapidly than conventional ignorance would imagine is possible.
These are the real home runs in the energy ballgame. They need qualified investors with a strong appetite for high risk. Those are always in short supply and have never been as scarce as they are today.
Fortunately, there are still a few around.