03/04/2009
Buzz Article: Interview with Jim Fulton, Partner, Cooley Godward Kronish. (VC Experts)
Introduction
Last month, President Obama signed The American Recovery and Reinvestment Act of 2009 into law which will invest approximately $92 billion in the clean tech industry, including about $33 billion in clean energy, nearly $27 billion in energy efficiency and approximately $19 billion in green transportation. Here to discuss the clean tech industry and the impact of the recent economic recovery bill is Jim Fulton. Jim is a partner with the national law firm, Cooley Godward Kronish. His practice focuses on the representation of emerging technology and life sciences companies and the venture capital firms that invest in those companies. Jim was named as a 2007 Northern California Super Lawyer in the category of securities and corporate finance and recognized in The Best Lawyers in America 2008 in the category of corporate law and venture capital law.
Jim, what sectors of the clean tech industry do you believe will most benefit from the passage of the recent stimulus bill?
All sectors are poised to benefit from the stimulus package. While some of the largest dollar amounts will go to utility scale type projects (including solar, wind, cellulosic ethanol, smart grid and geothermal), there is something in the package for practically any technology that enhances renewable energy, energy efficiency or greenhouse gas emissions.
Some feel that the government must move quickly to spend this $92 billion in order to save many clean tech companies from bankruptcies. Do you agree with this sentiment?
If the money is going to stimulate the economy, it must be spent quickly. The sooner companies see the money, the better. That said, if a company is in such bad shape that it cannot survive without the government money, it might find it hard to convince the government to provide them money.
What is the process for getting this recovery money into the hands of those companies that will most benefit our economy and our environment?
The process is generally still to be determined. At the DOE there are some programs, like the DOE loan program, that are up and running and now have more money to deploy. The regulations and procedures there are established, although Secretary Chu has committed to working to improve those programs to help deploy capital sooner. For other programs, we are in wait and see mode. The next 30-90 days should prove very busy for those of us tracking how the money will be deployed.
According to a recent PriceWaterhouseCoopers report, venture capital firms have increased their investment in clean tech from $271 million in 2003 to $4.1 billion in 2008. What was the impetus for this increase?
There is no one impetus for the increase in clean tech investment over the last several years. Climate change, the increase in the price of oil, a public that seems committed to sustainability all mean that the market for clean technologies is growing and expected to continue to grow. Federal and state policies like the renewable portfolio standard and the renewable fuel standard are also creating a market for advanced energy technologies. Lastly, efficiency is cost effective. If you can install your software in a data center and the energy saved will repay the cost of the technology in 6-12 months, you have a lot of customers interested in making those investments.
Clean tech companies tend to be capital-intensive and longer-term bets for producing profits and returns to investors. How has the venture capital industry gotten comfortable in investing in this type of industry?
While there are many sectors in clean tech that are capital intensive, there are many others that are far less so. Smart grid technologies may require massive capital to deploy, but a company that invents the technology to make the grid smarter may not need any more capital than a networking or software company. The utilities will be their customers. Other examples of areas that may not require "utility scale" capital invests include energy efficiency (monitoring, software, sensors, etc.), advanced materials and some energy storage innovations.
What are you seeing in your practice in terms of valuations in this economy?
The broader economic slowdown that accelerated in the latter part of 2008 had an immediate impact on emerging company finances and valuations. Valuations will continue to face pressures until the economy improves.
You recently served as moderator at a seminar called "Clean Tech BIG - Where's the Capital? A Clean Tech Perspective on What Investors Want to See." The seminar was hosted by the Silicon Valley Association of Startup Entrepreneurs (SVASE), the largest and fastest growing nonprofit association in Northern California dedicated to helping startup entrepreneurs across all technology sectors build business plans and find venture capital investors to fund their growing startups. A number of venture capitalists from firms investing in the clean tech industry were present on the panel. One of the questions discussed was "What exactly are investors willing to fund in clean tech?" Can you talk about some of the ideas presented at this seminar?
The nearly unanimous response of the panelists to the question was that the things they look for in any venture investment are the same things they look for in any venture capital investment: big markets, great teams and real technology differentiation.
Jim, thank you so much for your time and insight.
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