Innovation is risky business. For companies pursuing sustainable innovations, these risks take on the scale of the effort and the context of the problems, the politics, and the markets involved. The most important aspect of this challenge to sustainable innovation is understanding the nature of risk at work. Without this understanding, innovation efforts are paralyzed and innovation policies—especially those intending to promote new investments—stifle them instead.
Pick up any list of “most innovative companies” (there are dozens published each year) and three things become immediately apparent. First, there is no shortage of role models for innovation. In fact, outside the crowd favorites (Apple, Google, and Facebook) there is not much overlap between lists. Second, there is no singular definition of innovation that fits all of these companies—some of behemoth multinationals employing hundreds of thousands while others are startups with less than hundred; some are in heavy industries and others are iPhone apps; some in the US and others in developing countries. Finally, there are very few—no more than 2 or 3 on most lists—that are there because they’ve developed and launched sustainable solutions. Should we really treat the best practices of innovation as if they applied equally to all companies?
Is it time to revisit (or visit for the first time) some of the central challenges of developing and launching sustainable innovations? With the demise of Solyndra and Beacon Power still recent memories; with Ener1 entering bankruptcy; and the recent disclosures that EV makers Fisker Automotive and Tesla are troubled, it may be long overdue.
How can companies make the right decisions—for their communities, for their people, and for the environment—when governance laws force a (relatively) narrow focus on maximizing shareholder value?
The Solyndra debacle raises significant questions about how to best pursue a clean tech revolution. As I argued before, most of these questions will go ignored in the scramble for political advantage but several others are raising the same questions (E.G., Real Solyndra Scandal). A good post by Bruce Krasting actually brings testimony from an engineer with Solyndra that makes the company look very much like any other venture-capital backed business—consuming cash as fast as possible to grow as quickly as possible to meet a rapidly closing window of opportunity.
In particular, the Department of Energy’s recent loan guarantee program, through which Solyndra received its loan guarantees. has backstopped roughly $2 billion to venture-capital backed clean tech startups with the honorable motive of fostering a clean tech revolution. In a search for means to foster a clean tech revolution, the Obama Administration made venture capital a cornerstone of its energy policy. Yet, despite venture capital’s leading role in clean technology this past decade, we don’t really know when it works well and, as importantly, when it doesn’t.
Last spring, my colleague Martin Kenney and I completed a research paper that looked at the boundary conditions underlying venture capital’s success and its appropriateness in pursuing a clean tech revolution: “Misguided Policy: Following Venture Capital into Clean Technology.” The paper looked directly at the funding of Solyndra, Tesla, and other new ventures. It is forthcoming in California Management Review but, given the circumstance, wanted to introduce it here.
In the great rush to politicize the bankruptcy of Solyndra, potentially valuable lessons are being ignored. I’ve argued before (investing the wrong way, VCs and Green Tech, and More VCs in Green Tech) about the folly of public investing in Solyndra and similar new ventures, but now fear the scramble of politics will wash away valuable lessons in pursuing innovations in clean technology.
Climate change—and efforts to mitigate it—are creating an increasingly uncertain future for businesses. The long-term effects of a warming climate are enormously difficult to predict. In the near term, however, new policies, technologies, and market preferences are already altering the competitive landscape of entire industries. That is creating opportunities for companies that effectively produce and manage low-carbon innovations in their markets—and threatening those that, by choice or circumstance, do not.
Some recent (bad) news from VC investments in greentech raise more questions about whether this is the best model for pursuing innovation. Despite its glory days in the halls of the Obama administration in general and the DOE in particular, venture capital is not the cure for all ills. In particular, the factors that make venture capital successful are not always those that make new ventures successful. Understanding the difference is critical for national policy makers, venture capitalists, and scientist-entrepreneurs alike.
The Role of Venture Capital in Green Tech Innovation
Everyone is calling for a revolution in the ways we produce and consume energy and for the past year policy makers have been investing billions in this pursuit. But, if their investment models are wrong for the green tech sector, their actions will cause more harm than good. For the Obama Administration and the U.S. Department of Energy (DOE), venture capital financing has become one of the leading models.
Venture capitalists work closely with start-ups to bring new technologies to market. Google, Genentech, Intel, Cisco and others were funded this way, so it seems natural for the federal government to follow venture capital’s lead in identifying and investing in new green tech ventures on hopes these new ventures will have similar impacts.
UC Davis Green Technology Entrepreneurship Academy Accelerating Successful Start-Ups in Sustainability
Center for Entrepreneurship’s Five-Day Academy Invites 50 Researchers From 20 Universities Worldwide
DAVIS, Calif.–(BUSINESS WIRE)–At the invitation of the UC Davis Center for Entrepreneurship, nearly 50 scientists, researchers and engineers from more than 20 universities have gathered this week for a series of seminars and workshops on how to launch a successful green-tech company. All of the sessions at the Tahoe Center for Environmental Research in Incline Village are open to the media. <<more>>