Thursday, November 29, 2007

Clean Tech VC funding skyrockets

The Mercury News reports that the first three quarters of 2007 saw $2.6B in clean tech funding in 168 deals. This compares to $1.8B in 2006 and $235 million in 2003. As I discussed in my post in January 2007, clean tech funding accounted for about 9% of VC funding till late last year. It will be interesting to see what fraction it is going to be this year. The interesting comparison was with funding for software, biotechnology and biomedical devices. With the highest rate of growth for clean tech funding, we could see clean tech being the largest sector for VC funding in 2008 ! That would be massive change in just 5 years. Whether this will be in time to reverse global warming remains to be seen, but its a good start :-)

One big difference I see between clean tech funding and funding for the other areas is that the size of the deals is very large. However, one deal listed for $500M to Delta Hydrocarbon, a Dutch company, to enhance oil field production did not seem to me to be particularly clean tech. But, maybe there is a clean tech angle to it :-). If at least some of the clean tech funding sticks in the Valley, it certainly will drive the level of activity up.

On Tuesday, Google made a splash with their announcement targeting 1 GW of renewable energy at prices cheaper than coal. This is an ambitious target and they are willing to spend millions chasing it. Though there are differing views of it, I for one, hope they make it. They have the deep pockets to try and if they achieve the target it will make a significant difference. To understand how difficult this is, read my post from last month where I quote Dr. Amit Kumar's data which shows coal at 5c/kWh compared to the cost of other renewable energy sources.


Mobile Phone Operating Systems - Open or Closed ? - Part II

On Tuesday, I wrote briefly about the mobile phone panel I attended at PARC. Here are some highlights of the discussion. Andy Seybold put up a slide showing the market share for the various OSs currently. Though the space seems fragmented, Symbian does control the majority of installed mobile phone OSs with over 165M installed. ( I still have my Diamond Mako clamshell from SONICblue with the Psion OS from Symbian. :-) It was pretty cool then, but way ahead of its time. ) With over a billion phones shipping per year this is a very respectable market share. (In comparison about 200M PCs ship per year. ) Microsoft shipped over 11M mobile phone OSs in 2006 and expects to ship 20M this year. Monta Vista was one of the lesser known names on the panel, but they control over 95% of Linux OSs on mobile phones. It was interesting that they said that they are supported by many OEMs just because they are not Microsoft. :-) Google also seems to be hoping for this "not Microsoft" effect to help them. :-) Of course, they are also giving away Android with much of its open stack and hoping many developers will write to this platform. Their goal, of course, is to have a much larger playing field for advertising revenue. Rich Miner of Google commented that lots of information was accessible from the cell phone and it tied in nicely with their goal of organizing and making information accessible. In any case, with over 2.5 billion cell phones in use worldwide and growing, the market size is about 3X the number of TVs worldwide, and the opportunity is large by any reckoning.

The first question the panel considered was - why the push for an OS on mobile phones now ? The consensus seemed to be that phones have grown to become mini-PCs with many applications and power management requirements and lots of peripheral functionality, larger screens and other capabilities. With this level of sophistication and the constrained power requirements a targeted OS was required. There was some discussion on what was really open or closed. Microsoft claimed that since there were 100,000 people downloading their SDK and about 18000 apps built on their platform, they could be considered an open platform. One of the panelists pointed out that the baseband functionality in Google's Android was not open sourced for security and other reasons. Symbian pointed out that FCC regulations governing usability prevented some of the control code being open sourced. There was no closure on this discussion.

The panel talked about having the full browser or Outlook on a mobile phone and seemed to agree that it was about context and not about having the full functionality. Alan Brenner, SVP of Blackberry platforms for RIM commented that data usage was less than 10% on mobile phones today and as the usage climbed more applications would be enabled. Rich Miner's (Google) view was that today's smart phone was tomorrow's feature phone.

There was heated debate among the panelists on the cost of the mobile phone OS. One view was that it was insignificant with relation to the overall cost of the device. Rich Miner of Google pointed out that some phones which are available to service provider customers for $100 typically cost about $50 and Microsoft was charging between $10-$12 for the operating system with the Opera browser, which was not insignificant. Microsoft's Gerardo Dada responded that Microsoft provided value for the cost and that they spent significantly on R&D compared to the rest of the industry. Microsoft did acknowledge that the trend of giving away software and generating revenue from service was something that they see and have ways of addressing. Symbian's VP of US Operations, Jerry Panagrossi pointed out that free code was not necessarily good, especially if it was poorly tested. Alan Brenner quotes the CEO of Verizon saying that the return rate on open devices was over 40%, while the return rate on Blackberries was only 3%. In all, a fairly lively debate :-)

The panel deplored the lack of control of the features and settings on mobile phones today and attributed it to control of the ecosystem by the carriers and mobile phone OEMs. This was expected to reduce over time. Alan Brenner mentioned the availability of the Blackberry Unite(?) next month which would allow changing settings. Nokia's Victor Brilon mentioned that you can do this on some Nokia smart phones today by downloading software and using a USB connection. He pointed out that some of the difficulty with opening up the settings was the cost of the ensuing support requirements.

The panel seemed to agree that much of the increase of rate of growth in mobile phones would come in emerging markets in Asia and Africa with data services growing in India, China and Africa. Today with 250M phones in the US, the market was 80% penetrated. However, Andy Seybold said that could go to 300% with users having multiple devices. This is certainly true of many people I know. Though, there is the possibility of integration as with the iPhone. People certainly do not like carrying more devices than they have to.

The panel discussed the opportunity for application developers. Most of the panelist companies have active developer programs. However, Rich Miner of Google pointed out the lack of return for many application developers for mobile phones. Very few companies which were funded to do mobile phone apps generated successful exits. Part of the reason for this was the considerable fragmentation in the market and lack of opportunities for sales to end customers. (However, ring tones did generate significant revenue for some people, mostly in Asia. ) Google is giving away $10M to applications developers to write apps for Android, though ! I am sure there will be some interest in that :-)

In any case, a very interesting panel which made it clear that all the major software players were going to give of their best to control a large fragmented market.


Tuesday, November 27, 2007

Mobile Phone Operating Systems - Open or Closed ? - Part I

Today I attended a great panel session at PARC hosted by the Wireless Communication Alliance (WCA). I have been going to WCA events for many years, especially when they were closer to home at HP in Cupertino. This was clearly one of the best WCA meetings I have attended. The PARC Pake auditorium was almost packed to capacity. Andy Seybold was the moderator and the panel consisted of the top players in mobile operating systems - Symbian, Microsoft, Monta Vista, Nokia, Research in Motion (RIM) and the latest entrant, Google. RIM and Symbian were represented at the VP level ! For a complete list of the panelists, check the WCA link above.

It was a very lively panel, as was to be expected with some strong competitors in close proximity and Andy as a moderator. I was on a panel he moderated a few years back at UC Berkeley and there clearly was no lack of strong opinions :-) The Valley mobile phone company conspicuous by their absence was Apple. That was a pity, but they rarely show up for events except their own. Though, you could almost sense the industry responding to the challenge of the iPhone. Nokia explicitly mentioned that they had been beefing up their presence in the Valley. So, the Mercury News column on Sunday was close to the mark. The Valley is seen as a center of innovation and every major player wants a piece of the action. The panel discussion did touch upon this as well as the impact of emerging markets and globalization.

There were a range of interesting topics covered during the session and I want to mention the highlights, at least. However, I will save this for my next post later in the week. Stay tuned.


Sunday, November 25, 2007

Silicon Valley and Globalization

Today's Mercury News has front page coverage on Silicon Valley's gains from globalization. The article discusses the gains for Cisco, HP and other major multinationals based in Silicon Valley from global growth. The article also discusses the return of VC money flow to the Valley and points out that the valley is at the crossroads of venture capital with money flowing into the valley from all over the world and being invested worldwide.

There are some interesting statistics on the flow of venture capital to and from the rest of the world in the print edition. The charts don't show up in the link above for some reason. Perhaps, this is the most striking change from the '90s, when money flowed into the valley and stayed here. This led to the tech boom and the bust, of course. The Valley has recovered somewhat, but its far from the affluence of 2000. Perhaps, the return to glory for the valley will be in the form of the clean tech boom.

The Valley however, is still very attractive to the rest of the world. One other trend the Mercury News discusses is the ramping of the Valley presence of big tech companies like Nokia and Microsoft who seek to be closer to ideas, partners, investors and customers. As the column says, it appears the world is flat and Silicon Valley is at the center of it and the next wave appears to be clean technology. I will root for that.


Thursday, November 22, 2007

Thankful in the Valley

Its another beautiful day in Silicon Valley with blue skies and sunshine and we have a lot to be thankful for this Thanksgiving. I was thinking of such things when I read Dean Takahashi's column in the Mercury News. He says it all. The Valley cycle of boom and bust has contributed much to making it what it is. Though, I must say it was not much fun being on the bust side of it :-)

Then again, I would much rather be in Silicon Valley, than in say, Bangladesh, where people are fighting to stay alive. The poor country continually faces severe calamities such as this and struggles to get back on track. The World Bank and the rest of the world are pitching in with their help, but for those going through the ordeal life must be tough indeed. Yes, we in Silicon Valley and the U.S.A. have a lot to be thankful for.


Saturday, November 17, 2007

Hybrid Chevy Tahoe is Green Car of the Year ?

The Chevy Tahoe has apparently won Green Car of the Year ! That too at 21 mpg ! What's next, the Hummer ? I think this is where Phoenix Motorcars and Dan Elliott have sensed the market sentiment perfectly. As I wrote yesterday, Phoenix is targeting this market with their trucks and SUVs. The Green Car Journal seems to have done some thinking before giving the award. A third of the cars sold are large SUVs according to the link above, though, I am sure that number will drop if gas prices stay high. But, certainly this proves a large addressable market for Phoenix.


Thursday, November 15, 2007

Green Hummers and Zero emission SUVs ?

Green trucks, Hummers and SUVs ? Zero emission trucks ? Oxymoron, you say ? Phoenix Motorcars does not think so :-) . I had the good fortune to be invited to a talk by Daniel Elliott, CEO of Phoenix Motorcars. The talk was hosted by Fast Company , publishers of the magazine of the same name, at the Hilton Garden Inn, Cupertino. I didn't even have to drive that far for a great lunch and to hear about a great company and product idea.

Phoenix is targeting that niche space of truck and SUV owners who also want to be green. Clearly, these are not your typical Prius owners :-) . But, I was rather impressed as the story unfolded. Phoenix is an Ontario, California company. Their zero emission trucks have a range of about 130 miles on a full charge and take about 10 minutes to recharge ! They can get up to speeds of about 95 mph with a full payload and go 0 to 60 in 10 seconds. ! Not your average Prius :-) To achieve this they have a special combination of motor, battery technology and a few other innovations. The Nanosafe battery from Altair Nanotechnologies is a key component. These Li-Titanate batteries take only 10 minutes to charge from an offboard charger. They take about 6 hours to charge from an onboard charger hooked up to a 220V supply. The infrastructure deployment to make these off-board chargers available widely is an issue which will take time to overcome. Altair Nano's battery technology appears to be impressive, in that it overcomes the slow charge time problem. Apparently, they are targeting other applications such as a 4MW storage facility for windpower.

Phoenix buys the chassis from a Korean supplier and outfits it with their technology. There are two 35kWh battery packs on board to give the 130 mile range. The batteries can outlast the vehicle itself and can be recycled. They require a special connector to enable the 10 min charge. Otherwise they can hookup to the same chargers that other electric cars use. A typical charge costs about $3.70 and to get a range similar to a diesel truck probably around $7.40, compared to a full tank of gas at about $60. Very impressive economics. Even if gas prices were to fall this vehicle would be economical ! The truck costs about $50, 000, so more expensive than other trucks. But, Phoenix claims lifetime cost is about 76c/mile which is comparable to other trucks.

Currently, they are targeting fleet sales only and have customers like PG&E and NASA lined up. They plan to open up to consumers by 2009. With 17M automobiles sold in the US and 39M worldwide they have a large addressable market. Even if they sell in the 100,000 units only they expect to be profitable in 18 months. They have raised over $100 M so far. No big name VCs shown on the web page, though. They are partnering with others for nationwide distribution.

Clearly, they are playing in a high stakes game. Today's Mercury News reports on a court rejection of Bush's truck fuel standards. Schwarzenegger's shown as applauding the decision. As Dan Elliott pointed out, both gasoline based automobile and electric car camps have their own lobbies. The electric car lobby does seem to be gaining some strength recently. I remember electric car designs at MIT as early as the '80s sponsored by GM and other major car manufacturers. But, they never went far in the market :-) . Both their mileage and market clout have increased in recent years with major manufacturers introducing electric cars and hybrids and the public showing an increasing tendency to buy and drive them. Interestingly, this month's Fast Company magazine has an article on Jonathan Goodwin who claims he can get 100 mpg out of a Lincoln Continental and cut emissions by 80%. Yes, he works on Hummers too. See, the title of this blog was not all fake :-) He claims he can get 60 MPG on a H3. So, what are the major car manufacturers missing ?

The automobile industry requires deep pockets. Its not every day you see a new automobile company, Tesla notwithstanding. The last one was DeLorean and we know how that ended. But, I must say that I am impressed by Phoenix's approach of applying their innovation where it matters, and not trying to reinvent the wheels (literally) :-) Even if they do not have the muscle to set up their independent manufacturing, distribution and financing networks, they appear to be able to ship trucks and collect revenue on them. Their careful choices in product and market strategy seem viable. I hope they are successful, because it will drive the rest of the auto industry to follow. I'll wait to buy my Hummer :-)


Monday, November 12, 2007

Wild markets, tech companies and solar tax credits

The last few days have seen wild gyrations in the stock market. While there was no single day with 1000 point drops, a few successive days of heavy selling especially in tech stocks have left most Valley companies with significantly reduced market caps. Here's an assessment on day 4 of the tech wreck. Within the 15 miles from Mountain View to Milpitas we lost a market cap of at least $100B in the space of four days. Just Apple, Google and Cisco lost $30B each and there are many other big names on that stretch. Of course, there is a lot more market cap left in these tech titans and I am sure they will come roaring back. But, exactly when remains unclear at this time.

The emerging clean tech hot companies like First Solar and SunPower were hit big time losing over 14% each just today. First Solar went up over $50 on Thursday, Nov. 8th and has almost given up all the gains by today. These and other clean tech related stocks were particularly hard hit because of the rumor that Solar investment tax credits would expire in 2008 because of a pending energy bill without provision for these. Of course, these could bounce back just as rapidly should the reports prove false. But for now, the bad news just keeps piling up on an already jittery market. It would be interesting to see when all this hits bottom and starts climbing back.


Sunday, November 11, 2007

Bionic Bodies ?

The MIT Club of Northern California held an interesting panel on Semiconductor and Systems Opportunities in Biomedical Technology. The panel was comprised of folks from the semiconductor and biomedical industries and was moderated by Dr. Sudhi Gautam a surgeon turned biomedical engineer. Panelists included Stanford Professor Dr. Atul Butte, Ron Koo from Maxim Technologies, Steve Sapiro from Emotiv, a thought sensor startup and Dr. Rich Withers from Varian Inc. In the interests of full disclosure, I helped set up the panel. My motivation was to understand why the economics of semiconductor companies was not showing up in biomedical devices. The panel discussed this along with many other interesting questions.

Dr. Gautam opened the session with some statistics on the biomedical industry. 50% of all biomedical companies worldwide are in the US and over 2500 of them are in California. The Bay Area including Silicon Valley has over 700 and Sunnyvale is one of the hotspots for biomedical devices ! This is probably logical since the proximity of Silicon Valley's semiconductor industry, the medical research from Stanford, UCSF and other universities coupled with access to venture capital must make for an interesting combination. The panelists gave their view of what the next hot thing was. Dr. Butte suggested that perhaps there was more value in understanding the impact of genetic analysis than in having the analysis itself widely available with lower cost chips. The solutions which used the chips in end applications to improve a particular problem were likely to be more popular. Today this knowledge is limited. The panel considered the question of body reactions to implanted silicon sensors. The view was that much like stents have been designed with coatings which make them less susceptible to rejection, new technologies would be developed to overcome this problem.

The panel considered the question of the best mechanism to foster transfer of technologies between the biomedical and semiconductor industries. Semiconductor companies which target the biomedical space hire experts in the field to understand the space and define products. Similarly biomedical companies also sometimes hire semiconductor experts or acquire teams with this expertise, especially when developing biochips or arrays. However, they pointed to the inability to have access to specific semiconductor process technology to optimize biochips. Not many biomedical companies have the luxury of owning a fab :-)

The panel considered the impact of outsourcing technology in the biomedical industry. Today diagnosis assistance such as reading X-rays is sometimes outsourced, but its far from a perfect situation. There are also regulatory hurdles to such practice. The question of which device areas would be impacted by MEMS was answered by Alissa Fitzgerald and MIT Club officer and MEMS expert, from the audience. The primary areas seem to be in cardiac or cardio-thoracic devices.

The panel did consider the issue of cost of biomedical devices and why they are not impacted by cheaply available technology. The semiconductor component cost of many of these devices is a small fraction of the total cost. The fact that the medical device industry is not an open, competitive space is part of the issue. After the lengthy regulatory approval process, the devices are supplied to patients and are paid by a small group of insurers. The cost is added up among the many layers in the system. So, even if technology scaling of cost and performance were to be applied to these devices there would be no quick reduction in cost. This is partly the reason for the high cost of health care in the US without the commensurate benefit. Strange how a capitalistic society is not so capitalistic in some critical areas :-)

However, with access to technology much better health care is possible. The panel talked about many new advances such as robotic surgery devices which could perform much more complicated surgeries than humans could perform, with far more success. This will drive the growth of a whole new way of praticing medicine, with doctors being trained to use these devices to achieve very high levels of surgical sophistication. Intuitive Surgical and Accuray are two Valley companies which provide such devices today. Clearly, Silicon Valley is going to be at the center of such exciting innovation in the years to come.


Thursday, November 8, 2007

First Solar heats up

Solar is surely heating up. First Solar announced Q3 results of 58c EPS versus an expectation of 19c and the stock is up 30+% and over $50+. That too on a down day ! I should have listened to Gunther and loaded up on FSLR. Clearly there is demand for solar electric modules and whoever can supply it in volume is benefitting. First Solar is an Arizona based company selling primarily to Germany. It will be good to see which of the valley companies puts up competition first.


Monday, November 5, 2007

Ausra contract from PG&E - Milestone for solar thermal power

Today's San Jose Mercury News website announces a a PG&E plan to buy 177 MW of solar thermal power from Ausra's planned facility in San Luis Obispo County. I did not see this in the print edition today. So, clearly this will be big news tomorrow. The column also mentions Brightsource's planned 400 MW plant. The Governor cites the Ausra PG&E deal as an example of the power of California's AB 32 legislation. If that is the case, there will be a repeat of the late 90's Internet boom in clean tech. When some large entity such as PG&E primes the pump with such large deals the whole ecosystem responds. Getting 20% of PG&E's power from renewable sources by 2010 is a tall order.

As I discussed in my blog a couple of weeks back, the cost/kWh of most alternative energy sources, especially solar, is unattractive compared to current grid rates. However, legislative requirements for utilities provide a powerful incentive for renewable energy. Ausra is well positioned, because solar thermal power is reasonably cost effective and the company has powerful Silicon Valley backers such as Vinod Khosla, Kleiner Perkins and others. With paying customers such as PG&E and the end users such as you and I, the VCs will clearly see return on their investment. This might very well start the alternative energy Gold Rush ;-)


Extending Moore's Law to Genetic Mapping

This week the San Jose Mercury News had a very interesting article on how genetic mapping was following the exponential growth associated with the transistor density in semiconductor technology. In fact, an Applied Biosystems executive is quoted as predicting that all the genes associated with cancer would be mapped in five years. That would be an impressive achievement, especially if that led to cures for at least some of the major diseases. The computational requirements for genetic mapping, drug design and related computational biology are immense. I was fortunate enough to attend a talk by Professor Adam Arkin at an MIT club event where he touched upon some of the possibilities in this vast field. Its truly fascinating.

Talking of MIT club events and biomedical technology, I strongly encourage you to attend this event on Semiconductor and systems opportunities in biomedical technology on Nov 8th in Palo Alto. :-) An eminent group of panelists from the semiconductor and biomedical industries will discuss potential opportunities of common interest to both. Will write more about this after the event.


California Clean Tech Open Awards 2007

Its a bit late to be writing about the California Clean Tech Awards ceremony which was held at the Palace of Fine Arts on Monday, Oct 29th at the Palace of Fine Arts in San Francisco. But, better late than never. I had a vested interest in attending this event, since Ed Gunther of Gunther Portfolio and I had submitted an entry under the Smart Power category. We wanted to check out the teams which won. I must say I was impressed with the winning teams. The full list of winners and finalists can be found on the CCTO website. Lucid Design Group won in the Smart Power category and Federspiel Controls were runners up. Lucid had a web based environmental performance monitoring system for buildings and individuals aimed at energy conservation. Federspiel controls entered a wireless control system for HVAC systems.

There were six categories - Smart Power, Air Water and Waste, Green building, Renewables, Transportation and Energy efficiency. Each of the winners got $50,ooo in cash and $50,000 in services from the sponsors. The awards in each of the categories were handed out by the respective sponsors.

There was an impressive list of speakers from the US DOE, California Energy Commission, NRDC and Nth Power (a Clean Tech VC). Dave Rodgers from the US DOE stole a march by inviting the winners to Washington DC (at the DOE's expense) to present their entries before the DOE for potential sponsorship. I was also impressed by the winners acceptance speeches. They had honed their pitching skills during the summer with the CCTO's series of events preparing the finalist teams to refine their business plans for the final submission. This was one of the main attractions for us when we entered the event. The results of the process were impressive. Each of the winners were able to articulate their value proposition succinctly. From years of experience I have learnt that this is a very valuable skill to have when pitching to VCs.:-) You have them in the first few minutes or you don't :-)

From that perspective all of the finalists for the CCTO were winners. They have gained valuable insight into the process of taking their companies to the next step. The awards event also had a showcase for the finalists. The companies represented were impressive and I am sure many of these will make it even without the CCTO prizes. There was strong VC representation in the audience. The networking opportunity was great. Met Google's energy Czar, Bill Weihl who handed out the Google green building prize. Nice title to have :-) Met several folks from the MIT Clean Tech Entrepreneurship series who were volunteering to put on the CCTO. The number of volunteers for the event was impressive - well over 350. Shows the level of interest in clean technology. If some of the companies participating in the CCTO succeed, they will serve to put California in a leadership position in the clean energy movement. Even without the CCTO prizes these companies are also likely to attract much VC interest. In fact, I ran into at least one VC looking for a good clean tech opportunity and was able to introduce one of the finalists to an energy company representative. My little contribution to the clean tech crusade :-)

© 2007, 2008 Madan Venugopal    All rights reserved.