Some venture capitalists think it may be no coincidence that money and the environment share a certain shade of green.
A panel of three venture capitalists discussed environmental opportunities for maximizing investment during a discussion at the Yale School of Forestry and Environmental Studies Wednesday as the third and final installment of the 2006 Industrial Environmental Management spring lecture series on Corporate Risk Management and the Environment. Attended by about 30 students, professors and New Haven residents, the event, sponsored by the Yale IEM Program, addressed the question of whether and how cleantech, or environmentally friendly, businesses can make venture capitalist returns for their investors.
The discussion, “Is Green, Green? Venture Capital, Environmental Risk and Opportunity” featured venture capitalists George McNamee of FA Technology Ventures, Paul Repetto of Greenmont Capital Partners, and Liddy Karter of Karter Capital Advisors LLC. Focusing on the relationship between business and the environment, the panel discussed insights from each of the speakers’ companies and participated in a question-and-answer period at the end with the attendees.
Marian Chertow, director of the IEM Program at FES, said the idea for the lecture series on risk management and the environment stemmed from thinking about the impact of Hurricane Katrina.
“We want to look at the future and where technology is going,” Chertow said. Chertow served as the mediator for Wednesday’s discussion.
After discussing their companies, the panel shared their viewpoints on what some of the biggest opportunities are right now for venture capitalists, and where they plan to make most of their investments. Although all three agreed on the importance of promoting increased energy efficiency, they had differing views on what the most important sectors are.
Karter, who focuses on small businesses and emerging technologies, said the biggest opportunities are in solar and wind development and especially in oil replacement, such as biodiesel, ethol and hydrogen.
“I see so many hydrogen deals, and I think that’s a terrific opportunity,” she said.
McNamee agreed with Karter on the issue of solar energy, emphasizing it as one of the hottest sectors right now, along with designing materials at the molecular level and higher efficiency. His biggest investment right now, though, is robotics.
“Machine awareness is a big opportunity,” McNamee said. “Ten years from now, when you walk in your kitchen, you will expect that every device will have a pretty good idea of who you are and what you are probably likely to want it to do next.”
Repetto said he thinks the health reform movement is huge, citing healthy foods as a very large area for investment. But he said one of the major risks for the majority of companies is that they are being too slow to react to the notion of sustainability.
The panelists also discussed the common negative conception of venture capitalists as sharks that eat up a company after the hard groundwork has already been accomplished. They agreed that this image is true to some extent, although they stressed that it is not simply about eating a company up. They said it takes a lot of consideration to decide which company to invest in because they do not want to replace the company, but rather build upon its foundations.
“The kinds of people who start businesses have a drive and vision that is very hard to replace with professional ventures,” McNamee said. “If we don’t like the CEO, we don’t do it. We consider it a failure if we have to replace the CEO; we consider it a mistake.”
Repetto also said the character of the company’s founder is important, stressing the energy and dedication that being an entrepreneur requires.
“The thing that I personally look for most is passion,” he said. “I think all of us would much rather back a founder who believes totally in the rightness of his or her idea and is willing to commit every fiber of his or her body to making it happen.”
The panelists discussed a range of topics in the question-and-answer period, including governmental subsidies, the development of a new internal combustion engine, biofuel opportunities and environmental technologies.
“I thought it was very informative,” Bailey McCallun FES ’07 said. “It was encouraging that cleantech is so important and forefront in the minds of venture capitalists.”
Others, however, felt the discussion was not as helpful as they had hoped because it focused too narrowly on the panelists’ personal experiences with their companies.
“I wish they had talked less about their companies and more about general environmental risk issues,” said Grace Zahn, who is applying to the Yale School of Forestry next year.