Global environmental challenges
Steve Jurvetson on clean tech innovation that will change the world
What venture capitalists really think and what they say aren’t always the same thing.
The man who famously invested $300,000 for a 30 percent stake in Hotmail and made $250 million for his VC firm when Microsoft bought the company two years later says there is an “explosion of possibilities” of synthetic genetics in clean tech.
In August, one of Jurvetson’s portfolio companies, Genomatica, filed an S-1 form with the U.S. Securities and Exchange Commission. The company uses computerized biotechnology modeling to design high-volume chemicals from renewable sources such as cellulosic biomass.
DFJ joined a consortium of investors including VantagePoint in raising $84 million to finance Genomatica. Tate & Lyle and Mitsubishi are among its partners.
Biofuels have bucked the downward clean tech IPO trend this year, not least because the oil incumbents have a huge interest in replacement fuels.
But apart from a scattering of clean energy plays, DFJ hasn’t done a great deal to promote itself as a VC leader in the field since 2008 -– perhaps as the economic crisis matured into the great recession. DFJ’s portfolio of “companies that are changing the world” reveals a curious lack of clean tech companies, with BrightSource, CoalTek and Tesla among the exceptions.
Furthermore, DFJ’s star clean tech venture partner, Raj Atluru, earlier this year announced his move to George Soros’s $1 billion clean energy fund, Silver Lake Kraftwerk.
Although Jurvetson’s clean tech portfolio is fairly modest: Genomatica, Tesla and synthetic biology company Gen9, he made a robust case to claim that these investments were made in “disruptive innovations.”
He said: “First let’s define innovation: by innovation, I mean things that matter. Not sustaining innovation, but disruptive innovation – what will history books be written about. Twenty years from now what will people remember as a seminal advance for the human race? And that will not be some marginal improvement buried deep in some large company. It’s always startups.”
In what sounded almost like a explanation for his scarcity of clean tech investments, he said: “If you think 20 years out, and ask what’s the most important company on the planet, it is not any company you could write down today. The most important company 20 years from now has not even been founded yet and doesn’t have a name. That’s a bit disconcerting for anyone who thinks about the trajectory of technology progress. That is always obvious in retrospective. Google, Facebook didn’t exist 20 years ago. It’s not so obvious when you plan into the future.”
He argues that large companies by their very nature are incapable of being disruptive.
“I’ll go further and say that no large companies does disruptive innovation in any sustained manner – not even Apple. If you think about the personal computer what have they done over the last 10 years in personal computing?”
Economic crises were an engine of change and could be an advantage for startups because it was cheaper to get established when markets are depressed, he said
“Two thirds of the Dow Industrial Average was formed during recession or the great depression. Companies tend… to build their business in more sustainable ways when they are formed in a down market. The odds might be in your favor. Why might this be?
“What is it about market disruptions and economic disruptions that make markets thrive? One example might there hasn’t been a car company IPO here since Henry Ford.
“But it got a little easier – Tesla was able to buy a new manufacturing plant for pennies in the dollar. Who could have predicted that 5 years ago?
“When you have debt crises and pension plan disasters in large companies within our broader portfolio even outside of clean tech it’s those startups that are focusing on automotive, financial services real estate that are thriving. Exactly the things that you read about in the headlines have been the most destructive economically.
“But if you look at electric vehicles there maybe a few people buried deep within large companies who don’t realize that every vehicle in the future will be electric. Every train, automobile, etc. Big companies wouldn’t lead that disruption. It takes a startup to lead that challenge but it is happening.
“The future will be less predictable, forecast rises will shrink, company lifetimes will shrink, new entrants will proliferate and it’s going to just get more unpredictable. If you thought financial crises came and went, just count on them – another economic collapse, it’s almost going to be like not news any more. But for startups this is great, because it’s a perpetual driver of disruption.”
However, what really excites Jurvetson, it seemed, are not flashy electric cars or sophisticated IT services to manage energy domestic demand or across smart grids, but “genetic alchemy” also known as synthetic biology.
Life sciences were entering a renaissance that would converge with clean tech thanks to computational biology, he said.
“It’s an interdisciplinary renaissance… think about ideas mating in new and interesting ways across academic disciplines to greater effect than within one.
“IT is now reaching out to fuels and chemicals, energy and clean tech, rockets, all kinds of bizarre industries that formerly didn’t face much competition.”