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Top Venture Investor Goes Green

Ecologically sensitive technology will be a vast market, says John Doerr.

April 11, 2006|From the Associated Press

SAN FRANCISCO — Silicon Valley venture capitalist John Doerr made his name and fortune with early investments in pioneering tech firms such as Sun Microsystems, Netscape and Google that went from scrappy start-ups to industry leaders.

Now, Doerr and his firm, Kleiner Perkins Caulfield & Byers, are placing big bets on an emerging sector he calls "green technology," which he believes could one day be at least as big as information technology or biotechnology.

Menlo Park-based Kleiner Perkins plans to set aside $100 million of its latest $600-million fund to technologies that help provide cleaner energy, transportation, air and water.

"This field of green tech could be the largest economic opportunity of the 21st century," Doerr said. "There's never been a better time than now to start or accelerate a green-tech venture."

As one of Silicon Valley's most respected investors, Doerr is generating buzz in the venture community with his decision to champion green technology.

"When John Doerr talks, people listen," said Mark Heesen, president of the National Venture Capital Assn. "John appears to have an innate ability to spot trends and execute a business plan that is actually able to take advantage of those trends."

Kleiner Perkins' plan to ramp up investment in green technology is just one sign of the sector's growth. Also known as clean technology, the field addresses water purification, air quality, nanotechnology, alternative fuels, manufacturing, recycling and renewable energy.

North American venture capitalists invested more than $1.6 billion in clean-tech companies last year, a 35% increase over 2004, according to the Cleantech Venture Network.

"It's a strong area for venture capital," said Craig Cuddeback, the network's senior vice president, whose group expects venture capital investment in the sector to double over the next three years. "It's no longer a choice between whether you will be clean or profitable."

As prices of more traditional energy sources continue to rise, the global market for clean energy sources such as biofuels, hydrogen fuel cells and solar and wind energy rose to $40 billion last year and is expected to increase to $167 billion by 2015, Clean Edge Inc., a Bay Area marketing firm, said in a report last month.

Past investments in renewable energy and other clean technologies often led to disappointing returns, largely because the technologies weren't effective enough and market demand wasn't strong, Heesen said. Alternative energy firms must fight for their share of a market that's tightly regulated and dominated by the oil, coal and natural gas industries.

"There are a lot of obstacles that stand in the way of creating a new way of creating energy," Heesen said.

But investors are seeing better prospects as technology advances, more seasoned entrepreneurs enter the field and clean-tech companies generate higher revenue. Successful initial public stock offerings by clean-tech companies, such as Sunnyvale, Calif.-based SunPower Corp. and China's Suntech Power, have also stoked interest.

Venture capitalists point to the global forces driving green-tech investment: the rising cost of fuel, the economic expansion of China, India and other Asian nations and growing worries about global warming.

"It's one of the most pressing global challenges we face," Doerr said. "It's causing the nations of the world to put an even higher priority than we have now on innovation."

Doerr sees another major trend: billions of people moving to cities in developing countries. Experts predict the number of people living in "megacities" with more than 10 million people will triple from 2 billion to 6 billion over the next 50 years, he said.

"This is the mother of all markets," Doerr said. "As those Asian economies rise, people will move from rural to urban settings. All those people will want the same things that you and I want: clean water, power and transportation."

In addition to investing in green-tech ventures, Doerr said, he and Kleiner Perkins plan to "advocate for polices that reduce the climate crisis and increase energy innovation."

Vinod Khosla, a Kleiner Perkins colleague who recently started his own venture capital firm, is financing a California ballot initiative that would increase taxes on oil companies to fund alternative energy.

Before it announced its latest $100-million investment, Kleiner Perkins had invested more than $50 million in seven green-tech ventures. Now, the firm plans to step up the pace of investments in biofuels, energy efficiency and renewable energy sources such as wind and solar.

"We plan to encourage green entrepreneurs and work with other venture firms to support them," Doerr said. "I think this is one of those areas where we can do good and do well."

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