 Welcome to our afternoon parallel session on investing in clean tech. My name's John Wyant, I'm the deputy director of the pre-court institute for energy efficiency among other things that means I do whatever Jim Sweeney or George Schultz or Bill Peary tell me to do, which is a pretty good job actually. In this panel on investing clean tech, Jim I and Heather Richmond actually discussed this months ago about how to do it and so on. I had a lot of great ideas, most of which didn't work. So I'd like to first acknowledge Heather Richmond who you just saw in action in the last section for actually providing a lot of ideas that did work. Heather is the senior managing director at SNR Denton's Public Policy and Regulation Practice in Silicon Valley, although I think of her as a freelance champion of clean tech that works across the public and private sector very skillfully. Heather, where are you? There she is. So we do thanks mostly to Heather, have an incredibly all-star cast kind of a bunch of cleanup hitters on one podium. So I'll try to say as little as possible. I'd like to introduce them now and give a little bit of background and structure for the program. The goals are to get out what's new in clean tech, we think, maybe we're wrong, but you guys would know. There's a lot new in the last year in clean tech, number one, number two. We were interested in how the different segments of the clean tech financing business kind of related or didn't relate to each other. So we have the segments all represented here on this panel, mostly. And then we were interested in the role of the public sector in either helping or hindering what you guys, what all you guys do. So for our all-star cast, we're gonna start with Larry Kelly, who's a managing partner of private investment company, Kelly Ventures, but also for this purpose, co-chairs the Energy Clean Tech Special Interest Group for the band of angels. So he's gonna define entrepreneurship and then talk about what the angel investment community looks for in this space. Dave Graham is gonna describe his very interesting and innovative accelerator concept for digital clean tech companies using the model of his firm Green Start, which he started up as an example, and then we're gonna move back more towards the traditional tried and true veteran superstars of Silicon Valley. Josh Green for Mordav, Mordav at Alventures. I learned this morning that Josh is actually a mentor for some of the accelerator projects. So hopefully you guys can make that transition more smoothly than I just did. And then finally, last but not least, the cleanup hitter of the cleanup hitters, Trey Vasello, a partner at Kleiner Perkins Caulfield and Byers, I like to put in Byers because Brooks brother Tom is actually a faculty colleague of Jim Sweeney and myself. So we're really excited. I actually picked up from Trey's bio. She thrives at the intersection of great products and big markets, which sounds like a good theme. So we ought to try to get to that point and I'd like to call on Larry to start us off down this train. So we're gonna do angel investing, accelerators, kind of early to mid stage, conventional venture cap, and then later stage venture cap, although that may blend together a little bit. Thanks very much. I'm leaving it up to you. Thank you. So I have two confessions to make. One of them is nothing I have to say is original. I've stolen it from everybody else and the other is I cheated. I got, I'm the only one doing a presentation and my colleagues aren't doing that. So I thought I'd start and talk a little bit about the band. The band is the oldest professionally organized angel investment group in the country. 19 years old, we have about 140 members. Most of us have been operating executives either in large companies or in startups or in many cases, including my own and both. I started my first company when I was a sophomore in college and I've been involved in more than 20 startups actively since then, both on my own and inside larger companies, but mostly on my own. We look at about 800 deals a year and that would be, I think for more David R. Kleiner, that would be about the same, or maybe even a little bit more. We have 33 present to our greater audience. Last year of those 33 we funded 18, which is a high number for us. It was maybe 11 the year before that of those 33. We invest in life sciences and information technology and in energy and clean tech. Last year of the 33 that presented seven were in the energy and clean tech space. We would have funded all seven. We funded five. We lost one to another company, another firm, and then the seventh one, we haven't come to terms yet. We're still working with them. We invested in two water companies, two LED companies, and a solar thermal company, a transportation company. And one more I can't remember. Our earliest, one of our earliest investments in 1998 was in MBA polymers, which is now the world's largest recycler of durable plastics. And it's about a hundred million dollar company. We are hoping that they go public next year. We went through seven rounds with them. So we call that seven easy rounds to an IPO. So I mentioned some of these statistics. I won't go, so typical deal size for an angel is anywhere from 300,000 to maybe a million and a half. One of the things that separates angels from other, from VC firms is that it's our own money. As I said, we've all been operating executives. And so we're very picky, we're very precise, and we drill right in and figure out what's going on in the company. My own experience is that success comes often from being personally involved, not necessarily in management, but I am oftentimes involved in the active management of a company. But as an active director or as a board observer, is helping the company succeed. And I think that's one of the key differences about an organization like the band. We have in our interest group of, in the energy and clean tech space, there are about 40 of us who invest in companies in this space. So follow up, these are VCs that we've worked with in the past, so typically it's your own money and then it's friends and family and fools and then it's angels and then it's VCs after that. And so these are some of the VC firms that we've worked with in the past. And then this is our deals review process. As I said, we look at 60 to 100 deals a month. One of the things that's different with us versus other firms or other organizations is that we have at least six experts in a given field look at any proposal that comes to us. And in the energy space, I personally look at everyone and my co-chair and I try to meet with, we see 15 to 20 companies a month and we try to meet with everyone and then evaluate it personally. So that's a little bit about the band of angels. Now I volunteered to talk about entrepreneurship because my feeling is that 75 years ago everybody in our country was an entrepreneur. And somehow it's, our society and our institutions and our government are beating that out of us. And in France, 56% of the GDP is controlled by the governments. We're creeping up and I'm concerned about that. So I want to talk about entrepreneurship a little bit. Is this, does anybody know who this is? Anybody recognize, raise your hand if you recognize who this is, ah, good, okay. This is one of my heroes. This guy is Oscar Pistorius. He runs a quarter mile, which is a race that I used to run in college. I still run sometimes but I'm not nearly as fast. He was born without legs, without the lower part of his legs. And you can see that he has these blades on there. And he runs for South Africa. He's about 25 or 26 years old. He runs a quarter mile. The Olympic qualifying trials for the quarter mile is 45.8 seconds. So he does better than that. And they don't want to, they wouldn't let him compete. They said that because he had these prosthesis he was not gonna be allowed. And he went to court and fought and won. So he's now gonna have to try for the South African team. But maybe in three or four or five weeks when we see the Olympics we'll see whether he made it. But this is the kind of guy that is a hero to me because he doesn't quit. He doesn't say no. He figures out what his passion is and he's going for it. And he's not gonna be denied. He's gonna do it. So who knows what they think entrepreneurship is? So we have a, somebody wanna give a definition of entrepreneurship? Go ahead. That's cheating. The world's youngest. We have limited resources to create something that's powerful and great. Oh, great. That's really good. You're close. So here's a possible definition of entrepreneurship. It's a pursuit of an opportunity without regard to resources currently controlled. Now we're all going after opportunities. That's what Darwin's all about, right? But the key phrase here is without regard to resources currently controlled and you said limited resources. And so what an entrepreneur does is gets resources committed to his or her project that you don't get in a large corporation or in a government agency. In a large corporation or a government agency you sit around and you wait for budgets to be approved and you ask for somebody to sign a check. Entrepreneurs go out and make things happen. They go out and they borrow from their friends. They get the guy down the street. They get a former business contact to do something for them and they make things happen. So we look for that. That's one of the things we look for. Now what are the, what I would call the, so someone comes in with a proposal and I think Josh and Trey and Dave would look at this sort of the same way. But you can, you could, when you're evaluating a business proposal you might be able to, if you could at a high level, condense your analysis down to maybe 10 words. And all the words are monosyllabic, they're, you know, gut English words. They're not Latin words, Latinate words with lots of syllables. And it's 10 words and it's three questions. And these are the three questions. Is it real? Can we win? And is it worth it? And again, this isn't mine. I got this from one of the original VCs in the valley back in the 1970s. And so is it real as a vision question? That's all about your vision and strategy. You know, does the product do, the product technology do what it's said to do? Can you demonstrate that it really does what you say it's gonna do? Do you have a working prototype? How far, are you in production? By the way, of the 60 to 80 deals that we see each month more than half are already in production which really surprises me in production and in revenue or eyeballs if it's a software product. The second is the customer. What kind of traction are you getting customer? Could you have evidence that customers are gonna change their behavior from what they were doing before because they are gonna have to make a change. And that's always, almost always the largest problem is getting them to change. And are they gonna pay good money to buy your product or service? And then the last is what we used to call the HP contribution and what we often call now what's the unique, unfair, sustainable advantage that you offer. So those are all the vision parts. And then the second one is can we win? And this is all about execution. So how many people think entrepreneurs take risk? Raise your hand if you think entrepreneurs take risk. Okay, so I don't think so. I think what entrepreneurs do is they get other people to take risk and it's all in the execution. So if you go through execution, you know, it's can we craft the right message, can we get the customer to respond to the message? Can we build the product? Can we ship the product? Can we support the product after it's shipped? Can we price it correctly? Can we manufacture it with high quality? All those things involve execution risk. Now there's vision risk and strategy risk as well. So what a good entrepreneur does is sees the opportunity before other people do and then goes out and lays the risk off on other people, other parties. It's part of that getting things done without regard to resources currently controlled. Lays the risk off on other people. Then the last part is the is it worth it question? And that's all about the return. The Bands IRR going back over 19 years is 53%. So the two functions. So in evaluating a company when a team comes in, now this is me, the two things I look for on the team. Well, let me turn around the other way. What's the most important thing? What's the last thing a company wants to give up? We got control, but I mean, if you had things, yeah, equity, yeah, yeah, yeah. The most important thing a company has is a customer. That's the most important thing, right? So the two functions, and we're here in the Valley, we're doing technology stuff. So the two most important traits that we look for or functions are sales and product development. So if you haven't sold, get somebody on your team who's carried quota and managed sales people. This is really important. My friends who are deans at the Sloan School and the Harvard Business School and the Business School here and elsewhere, if you talk to them and you say, why don't you have sales in the MBA curriculum? And they say, well, it's vocational. And that's a mistake. Sales and sales are really, really crucial to a startup company. So I would recommend that you get somebody with good sales skills on your team. The last is the five traits. So how many in here are entrepreneurs? Raise your hand if you're an entrepreneur. Great, okay, so we got a good bunch. So these are the, it's almost always the CEO. You can take a really great idea and have a mediocre team and they'll screw it up. You can have a really great CEO and a really great team and a mediocre product and they'll build a good business. So the things we look for in a CEO are ability, motivation and character and all those are Warren Buffett's favorite three, experience, Dave helped me with that one and then resourcefulness. And that goes back to defining entrepreneurship. Thanks. Thanks Larry for a very perspicacious introduction to this session and now I'd like to call on Dave Graham for a green start. Move the ball on down. You can sit there if you want, it's fine. All right, let's see if I can do it here actually. See if I can do it in three minutes or less, someone tie me. So green start, what we fundamentally believe is that the world's dependence on fossil fuel is the defining challenge of our generation. And so the best way to tackle it we believe is through innovation and with entrepreneurs. We also believe that starting companies is really hard. We don't just believe that we know that firsthand. And so we're here to help and we're here to help digital clean tech companies have a better shot at success and what I mean by digital clean tech companies are companies that have business models that are primarily software based and either reduce the use of dirty energy or promote the use of clean energy. What we do and how we work with companies is really as follows, we're essentially a design studio combined with an accelerator. We believe that design and design thinking can give the company a competitive advantage. And what we do then is find these companies, invest seed capital, and then we bring them into our office, we bring them out to San Francisco for 12 weeks. And we work with them in four practice areas. First customer development, second UX, third brand design, and then fourth fundraising. It's really hard to get in. We receive hundreds upon hundreds of applications and do about 12 investments a year. We are really bullish on or in about with the clean tech space, but in particular digital clean tech. And we kind of break energy into two segments. One is energy 1.0 and the way we look at it is energy 1.0 was about energy generation. It is about the development, the creation of technologies such as solar, LED, wind. And we believe that the energy 1.0 nut has been cracked. It's working. We see the technology working. We see the price points coming down. We see the efficiency curves going in the right direction. And so we're really excited about energy 2.0 and how we look at energy 2.0 is as we look at it as being smart energy and making energy smart. The internet enabled us to move bits and bytes around and we think that energy 2.0 is about moving electrons around. It's about using software to make energy more efficient, more storable, more usable. We are really seeing some interesting companies come out of this space, look no further than Nest, Opower, a couple of Kleiner companies. We've got some really good companies, Scoot, Ridepal, Growing Energy Labs, Kilowatt Hours that we're really excited about. They can make money and will make money, but their business models actually enable the world to change. And those are things that we really like about what is happening in this digital clean tech space. And so I'll close with what we're looking for and the help that we need. We need help in three areas really. One is with mentorship. And what I mean by that is that we need guys like Larry, like Josh. Josh is actually a mentor at Green Start that can sit down and work with entrepreneurs to help them avoid the pitfalls that if you've been an entrepreneur you most likely fell into. We need not only to bridge that knowledge gap but to bridge that funding gap. And so we need more people like Trey and Josh and Larry at the band that really are willing to put money into to clean tech and the digital clean tech space because we need to be able to attract the right entrepreneurs into this space. And it really ends up being all about the entrepreneur. And so the third thing is just that, entrepreneurs. We need to really create a movement, inspire if you will educate these, our current group, this current generation of entrepreneurs that if they want to make a boatload of money, they have to solve a big problem. And there is no bigger problem out there than the world's dependence on energy or dirty energy. And so inspiring them to, instead of perhaps starting the next Facebook to start the next Airbnb or the next zip car or the next relay rides because those companies are making money. But the difference being is that they're changing the world. And so that's what we're looking for and that's why we're here to help. Thanks very much, Dave. Next to carry the ball further down the field, I'd like to call on Josh Green for more David Howe Ventures, Josh. Thanks, thanks very much, John. More David Howe is a traditional venture capital firm. We're currently in our ninth fund. It's a $700 million vehicle. We've been around for 28 years and we're investing in IT, life sciences and clean technology. Now clean technology's a relatively recent category for us and frankly for everybody. And I'm gonna provide you some observations at least from the venture capital perspective is that what that category looks like. It is following the classic Gartner hype cycle. And the era, for those of you who know that cycle, it is the era of irrational exuberance is over. We are now firmly in the valley of despair and slowly climbing our way out of that. Now what's interesting is that there are investment opportunities at every one of these spots on the cycle. This is not to leave you with an awful terrible message about the future of clean tech. In fact, just the opposite. You need to go through these elements of an investment cycle in order to get to ultimately something that's really valuable and long term and the rest. Now those oscillations tend to be much more severe in nascent investment value chains and clean tech is one of those early investment value chains that's early in its history. And so as a result, it's not surprising to see us where we are right now. A venture capitalist was recently asked, tell me about all the clean tech success stories and on a panel and he provided a blank stare in answer to that question. And you know, my answer to it, if I had sat up there, it would have been to say the categories existed for only about seven years. The average startup that's venture capital back today is nine years to liquidity. So everything you hear about the classical three to five years and all the rest of it, the facts are it's nine years to liquidity. So what do you want from clean tech? Do you want it to be two years early on what the average is? So everything's doing just fine. We do have our failures and we will continue to have failures and that is a necessary and important actually part of the entire process of investing and it's inherent in venture capital in and of itself. So the question becomes given that current status on a macro level, where are we looking at investments today? We're looking much more towards the nexus of clean tech and IT. Right where Green Start has planted itself and I think these guys are doing a terrific job and I'll make another comment about that in just a moment about how venture capital works with an entity like Green Start in looking at investments. But basically it's that nexus of IT and clean tech and that takes two forms. It takes one, a company that's doing great like Opower that's a classical IT company that's planted in the clean technology space and the other are what I would call applied technologies. Companies that look very much like classical Silicon Valley technology companies, hardware based typically and the like we're investors in a company called Cicado which is a LED module, reasonably low capital requirements in revenue, they ship 600,000 LED modules using remote phosphors to create really high quality light. That is very much like classical startups in the 1980s sense of the word in Silicon Valley. So what does the ecosystem look like today? Strategics and large corporations are more important than they've ever been. Understanding their agendas is absolutely a critical insight for us to not only understand where new market entrants and small companies can make a stake but also create accessibility to these markets. These markets look extremely tantalizing because they're tremendous, they're huge, they're multi, multi tens of billions of dollars but the key question that we look at is accessibility for a startup and how can they succeed in that environment? The other is the other side of the equation which is Green Start and accelerators, well there aren't really too many folks like you but basically I would like to suggest that it's the separating the wheat from the chaff and providing us a leg up in areas where we don't really have the resources to do what they're doing and so working closely with folks like that is very important. I wanna end on one other note which is policy. The classical Silicon Valley formulation is to Heisman pose all government, okay? And that has certainly been the case in IT investing. It has not been the case in life sciences and it can't be and I would suggest even less so can it be in energy, in other words, it's an absolute must to be working hand in hand with policy matters. And to be frank about it, I'm really tired of playing defense for the last year or two on clean tech policy. I'm actually the incoming chairman of the National Venture Capital Association and we have worked up a bill called an energy innovation tax credit. Now this looks at energy generation and a lot of our existing portfolio is in energy generation. But what it says is government doesn't pick any winners. This is by the way, I don't know you know this but the energy industry as a whole spends four tenths of one percent of their revenues on R&D, okay? Absolutely remarkable, lowest of any meaningful industry in the United States by a long shot. So this is to encourage more R&D both by startups and by big companies. And the concept would be you get a tax credit for doing so and therefore an incentive until so many electrons have been produced by that commercialized technology or until so many gallons have been produced and the like and then it would trail off. And it doesn't and frankly it is independent of the issue of fossil and or renewables. And the reason for that is that we actually have bipartisan and bicameral support for this bill which is in just in the drafting stages but it allows us an opportunity to now go on offense. Again, I don't know that you saw this but the final epitaph for the Cylindra situation was written yesterday. That is now officially off of Congress's agenda. So thank goodness. And now we can hopefully move forward. Great, thanks very much Josh. Okay Tray, so now we have the bases loaded with three speed demons on the backs but no pressure at all. I actually forgot to mention Tray has three degrees from Stanford which is a lot better than my three degrees from Berkeley. He stole my lead I was gonna say. So I use every excuse to get back on campus because I clearly spent a lot of years here so. Excellent. Great, so I've been a climber for about eight years and was fortunate to be part of the founding team of our green tech strategy. We've been around for 40 years. Like Josh's team we've historically invested in life science information technology and now we have a burgeoning green tech practice. We in the process of doing that just discovered what we thought to be an amazing opportunity in front of us and so we also added a growth portfolio in addition to our main fund which is a billion dollar fund focusing on scaling up green technology. So you can think of Kleiner as almost stage agnostic. Historically we've been very early stage so we will seed companies not as much as these guys do so we're excited about Green Start. We typically do A's and B's and now we'll do growth investments as well. Our green tech portfolio is well underway. We have over 60 companies to date in this portfolio very broad from energy to sort of my sector where I spend most of my time which is really in what I've been calling digital energy. So I'm an IT person at heart we're in the middle of Silicon Valley so my passion is really taking this great information technology and using that to change the way we interact with our environment. Another theme that I often talk about is now that we have everyone online let's get everything online and once we have everything online it totally changes the dynamic. And so how that has I guess guided my investment philosophy. You know I have four companies that I tend to talk about in green tech which are Opower which has already been alluded to this is a really exciting software company who knew that social benchmarking and customer engagement for utilities actually was a good thing. It's a very basic notion but they have started this wonderful idea and now they're essentially customer engagement for utilities and as energy gets more complex and as customers demand more control of their energy this is an absolute must have trend. That gave us some insight as well as sort of my desire for finding ways to bring the rest of our environment online. Nest was an opportunity that for us was a really really exciting one that just quickly I had been looking at a lot of initiatives to drive efficiency in the home because I'm a big believer in disruption at the edges. You're not gonna be able to disrupt through utility like you can through the customer. The problem however was that all the products out there for customers sucked they're crappy. No one actually wants them maybe the utility wants you to use them but I certainly don't want them in my home. And so how can we get great teams who really understand great product design to design something that a consumer actually wants? And in process of building something a consumer wants it also does great for society. And so for me that embodiment is Nest. This is a team of folks from Apple who said we're gonna take a detour for a while and we're gonna go reinvent consumer products and they reinvented the thermostat. And so that's a whole other thing we can talk about maybe more of that theme later. Another company in my portfolio in fact one of the guys is here and on panel next is Enlighted. And for me Enlighted is the Nest concept but for commercial buildings. Take the low hanging fruit in commercial buildings lighting make it a very smart distributed system and use that to bring our buildings online. And then the last company is Recycle Bank which is really incentives and rewards for getting consumers aligned with doing the right thing for society. So that's sort of a smattering of the area I'm spending my time and I think I'm looking for anything again really in this theme around how can I bring the rest of the world online and using mobile. We've got mobile taking off everywhere else. It's now our interface to the world. So how can we take some of this great thinking that's going on in green and really make it more mobile and more with people on a daily basis. So anyway, I will stop there and let us get into the questions. Okay, thanks very much. Right. So since we're almost right on schedule funding do you guys have any questions for each other or you're all talked out? You wanna go straight to the audience? It's up to you. Whatever you want. It's your call. Let's go to the audience. Well, maybe can interface with each other during the responses to the questions. Okay, let's go for questions then. I hope people have some queued up. We have one way on the back there and we have one up here. Yeah, my question, Tom Faust. My question is for Josh Green. You say you're working on introducing a bill that would have tax incentives for new manufacturing plants. Is that correct? Well, it would be actually more in the R&D stages all the way to commercialization at a certain level. So it would include early manufacturing plants. Okay, in other words, the first manufacturing plant. No, there used to be a 30% ITC and then it was stripped. I really urge you to get that 30% ITC. It'd make it a lot easier to raise funds and capitalize if the investors had less at risk. So I salute your efforts and I really hope you're successful in getting that 30% ITC. And if you could make it so that the funds are paid up front rather than having to wait for them. There used to be that program and then it died, so. Yeah, well, thank you. And for those who don't know, both the ITC, the investment tax credit and the PTC, the production tax credit are both short term, highly politicized credits that come up for mostly wind and solar every year or two years and the rest. The intent of this would be to be much longer term and therefore depoliticize it and to work well with an ITC, PTC and how that works and making sure that everybody's incentivizing all the rest of it. We're still in the details of all that sort of stuff because we want to get the support of those functions as well. But what we're really looking for is the innovation side. So if you look at solar and wind, those are pretty mature technologies now and that would be fine for PTCs and ITCs but this would be at an earlier stage for new stuff. Question for Josh. Josh, you mentioned that a certain unnamed VC, Iron Price had come up blank for success stories in clean tech. Can you give us a couple of examples of success stories in clean tech? It's a softball, it's a cream puff question that have served customers, society and shareholders. Sure. Solarzyme and Tesla, how about that? Good. Thank you. And MBA polymers. Yeah, MBA polymers as well, yeah. I guess I would just add there's a pipeline of companies that are with strong growth sitting behind them that haven't necessarily gone public but are certainly changing the lives of a lot of people. Oh, power saving a gigawatt hour a day. That one up here, one back there and then one up here. Adam. John. Sounds to me like a lot of the investments that you're all involved in fall more or less into the category of perhaps domestic or residential IT related but as you know and I know a lot of the energy being used, most of the energy being used is industrial, commercial in China. There's the global issues of massive amounts of energy being used and will be used. I'm curious if you think the angel model, venture model as much to say about that aspect of energy less the Silicon Valley side. Let me try first. So I think what I heard you say was domestic versus international first and then second, IT versus everything else in energy and clean tech. So on domestic versus international, it's really hard to, as I said earlier, one of the success factors for us is being involved in a company and when a company's more than 60 miles away, you can't drive there. Building a company is in between in terms of complexity and time and resources and skill required more complicated than building a house, less complicated than raising a family and crises happen all the time and if you gotta drive more than an hour, you can't do it, you can't participate. So for us, it's not true for my buddies over here, but for us, more than 60 miles away, forget it. It's just not gonna work, I never mind that. So and then on the IT space, everybody to the left of me, to the right of me said that IT was important, but you know that isn't for us. So as I said, we made seven investments last year and I don't think that the information content was that high in at least four of them and maybe five. What was more important was having an unfair, sustainable advantage and that's really difficult if you're not writing software. You know, you have to have, it's hard to get that unfair advantage if you don't have some software in it and so we'd look for that. We look at our business as a startup. And one of the rules of starting a startup is to brutally prioritize and brutally prioritize on the right things. And so when we look at companies while we would like to solve bigger problems outside of the U.S. perhaps, it's not really an option because A, we need to be with those companies and to surround those companies and to help those companies fill the gaps that they have, first identify those gaps and then bridge those gaps and fill those gaps. Number two is they're gonna need follow on capital and therefore they're going to need to be incorporated in the U.S. Ideally they're U.S. facing and it makes it less difficult but still difficult to get follow on financing for them. Three is that the opportunity here to actually impact, think about energy efficiency and the commercial space. 40% of the consumption of our nation's energy is within the energy efficiency space in commercial buildings. Solve that problem and you're solving a big piece of the problem. So I've got two quick answers. One, we actually have a team in China and they're dramatically ramping up green tech investing in Asia. One of our partners actually is moving over there to help them do that and take sort of our green tech base and focus it there. And then my second answer to that is we're actually, the U.S. is exporting technology to China. One of our companies that we were frankly really excited about in the U.S. that had corporate excitement around it, great point energy. China basically just invested in it and they're gonna scale up the technology over there. So, yes, distances and all those things can make it more complicated but in more ways than one, innovation is happening globally. And if I could just add and take a different angle on this. I think that we're in an era right now and one of the focuses on, you're seeing a very IT centric talk around all this but that's the part of the cycle that we're in right now and what that cycle is that we're reasonably capital light on looking at startups as well. It would be really hard to get the billion dollar plus venture through my partnership right now and this current environment that we're in. That doesn't mean that that's not gonna change two years from now because it was two different than this two years ago, vastly different and the like but that's where we are today. It's really important as entrepreneurs for those who are, I saw a lot of hands go up about entrepreneurs in the audience to just understand that, that the financing environment has as one of its criteria these days, capital light and that means tens of millions of dollars to get to cash flow positive, not hundreds and hundreds of millions of dollars to get there but stay tuned because like I say, that'll change over time and therefore the nature of the projects we work on is gonna change over time as well with inevitably we will go back to energy generation which tend to be the more capital intensive types of companies that we work with. I had a follow up question on that and a great integration of renewables but let's go to the audience first. Yeah, John Massey, question for all of you and actually follow on for that about differences between the IT type startups and some of the other ones in terms of working with big companies and how you manage the distribution chain support and all that sort of stuff and then there's a specific one for Trey, talk some about Nest. Okay, so I guess I'll start a little bit more on Nest. You know, it's funny because when we originally started working with the team and I was sort of pitching this to my partners and to folks, there was very much this, well, what's wrong with the thermostat? No one's gonna buy an expensive thermostat and my point that I kept pushing to folks was you can't take a VCR, connect it to the internet and go look at this great product when TiVo is right here, right? And so basically what people have been doing kind of in consumer efficiency is kind of stacking some new technology concepts on top of 40 year old technology and so what was clear to me is it was ripe for a platform change. The beauty is you've got Apple who's completely changed the mobile industry. Mobile phones are so explosive right now that that has essentially made this kind of technology affordable, doable. You know, if you took a part and there is a great breakdown of the Nest thermostat, looks remarkably like an iPhone and it's because you need a team that understands all of that network connectivity, the cloud intelligence, all of that stuff in order to create a consumer experience that today's consumers are gonna come to expect from that kind of consumer product. So that's been a lot of fun to work with those guys. Was there a specific sort of insight or observation that you were looking to hear more about? Well, I think it was the general thing of how you got into it because the fact that thermostats were born. Okay, so actually it came from a couple different angles. One is, as you heard before, what we do is really about investing in people. In this particular team, Tony Fidel is an industry legend in and of himself. He started iPod, grew the iPhone group under Jobs and he's one of those kinds of people at you back no matter what he does, right? And so he came into our office and said, I'm gonna do this thing and some of my partners were like, really? And fortunately there was me and some other partners who had actually been looking at this area and said, no, really. This is exciting if we can get someone like Tony to focus on something as perceived and boring as a thermostat actually is. And that's the perfect sort of combination of things to create true disruption. So I could comment on the strategic element a bit a little bit. So the classical way in Silicon Valley to work is you stay away from strategic as long as you possibly can and then when you have an overwhelming advantage that they seek from you, then you've got somewhat of an even playing field and now you can get into a negotiation with them. And I think in the clean energy area that's evolving quite a bit. First of all, I don't think that actually that scenario ever was true but I think it's evolving even further than that. So starting about, I'd say three or four years ago, it was very clear that for financial investors they needed validation from strategics in order to create a true presence for that startup and an endorsement for that startup in the form of partnerships and the like. And this didn't mean for those of you who are involved in life sciences at all, just racking up a bunch of partnerships like old life sciences companies did and a bunch of memorandums of understanding and things along those lines. These were really meaningful partnerships and people really looked at them as whether they would help assist the company to really become a presence and a real player in the marketplace. And that's true today. And it's true with I'm sure a bunch of our portfolio companies that we look for them and their partnering activity to be a major milestone in their advancement and the like. The thing that I think is emerging now is that that's coming earlier and earlier in the process. Typically that's been seen, strategics being involved for example, near the founding of a new corporation has been seen as a suffocating event that an entrepreneur wants no part of it all and all the rest of it. But the truth is we're going into an existing marketplace with huge incumbents who have specific agendas and if you can get to a point where you can understand those agendas then and understand that everybody's bringing something to the table which is the startup brings off balance sheet development of whatever that product or service might be. The strategic brings the agenda plus potentially capital associated with that. Then you can see how a symbiosis can start to exist where everybody can live together pretty well. Whether we'll get there or not, I don't know but I see signs that we're marching towards that being the case. I don't know if you agree. That well said. Definitely. I mean, these are huge ecosystems that have existed for a long time. So to be strategic and aggressive about partnering where appropriate makes a lot of sense. Yeah. I would say what I would agree with Josh but just amplify that to say that what a strategic brings is customer validation. And often times distribution and distribution. Yeah, distribution customer validation. So now you know this goes back is it real? You have some customer traction. I would agree. I would agree. I mean, one thing we do see though is that there is quite a bit of aggressiveness on the part of certain strategic now coming to startups at an early stage to begin to build relationships with them and they're looking at these startups as incremental opportunities to bring in more customers and to add to their both top and bottom line. And so we're really focused on helping the startups navigate that world because it is complicated and it's not the same with every strategic. Working with Intel is very different and versus perhaps working with a St. Cobain or a Google Ventures, which isn't really a strategic but most people think of them as a strategic. Other questions? Actually I was struck that both Larry and Bill Peary used this exact kind of built up the numbers to the three or four percent of sales devoted to R&D and the energy space. That was Josh, it was Josh. Yeah. It's actually four-tenths of one percent. Three-tenths of one percent, yeah. So this is sort of a government role in this. That's right. So obviously you think more money should be put in to maybe pre-competitive R&D and the energy space. You mean from the government? Yeah. Actually, I don't think government does such a good job of direct investing in startups and I think we've gone through a few years of that and the vagaries of it and all the rest of it are such that I'd much rather the government be involved in policy setting. Helping demand not to fly. Exactly, that's right. That's exactly right. Yeah, I'd say in research, funding research, funding basic research, that's probably where the biggest holes are especially in storage, for example. And, but on, you know, libertarian, you know, no mandates, right? So on the smart grid, you hear a lot about smart grid. Jim Sweeney Center and others are doing these smart meter things, which sort of California seems like that's, people are figuring out what to do with that. What's the next step in that? Do you go, once you go on the other side of the meter, is there a business model there that you've seen and like? Are you trying to find saying, so this would be, to me, if you look at the big energy system transition we need, we need, it's all about grid integration of renewables and other internet and sources and so on. So maybe there's not enough of those to worry about it yet, but what's the next step in that evolution? Well, there's getting the data, first of all. Right now, we're just outfitting, you know, this old web of stuff so that we can actually get the data, but then we need an infrastructure to be able to hold that data, analyze that data, and then turn it into actionable information. And so, you know, I'd say right now we're in the very early, early innings of, you know, no one's been able to access the data, it's been an entirely black box, so we're just now starting to get it exposed. And once it's exposed, and there's a true app ecosystem of like I'm a homeowner or I'm a business owner and here's my data, then there's a lot of exciting stuff that can go on, but that data needs to be freed and delivered to folks in a secure way. And, you know, and there's a problem because utilities have never been built to be infrastructure companies. And so, you know, all of that makes for exciting new forward-looking opportunity. So who do you need? Is it state regulations, local stuff, company initiatives? I tell you what we really need is to end the monopoly by the utilities. Yeah, we need competition. For those of you who may know the telecommunications history, there needs to be a judge-green order, okay? That would be a true game changer. So in the absence of that, at least for the near term, what we look at is the other side of the meter, is building management systems, for example. So you're dealing with enterprises and business to business, and you're fundamentally unregulated. This is the innovation at the customer side. Build a great product that the customer can pull in and then force it back into the utility organization. Right. So we're gonna come back. If you're counting on the appliances on the customer side of the meter to be sprung up to send the data back, you're probably gonna have to wait for all of them to be replaced. You know, you're looking at 20, 30 years for all of those to be, you know, in the manufacturers. So there, we see about that. It's actually pretty concentrated in just a few things though, right? Yeah, right. Yeah, but so there, we see about once a month somebody coming in with the data disaggregation. Yeah, right, exactly. All right, and so with that on the other side, you know, there's an opportunity there, but there are so many companies doing it that none of them seem to be taking a big enough step, you know, to make a real dent. It will probably happen in the commercial and industrial space first. Well, I think one of the keys to it, and I try, you guys have done a great job of investing in the concept, but you have to have something more than just energy savings. I mean, you can't just say to somebody, hey, I've got, you know, I'm gonna sell you a nothing. Yeah, exactly, right. You're gonna have less of something. Right, and your bill will go down and all the rest. That in and of itself is not gonna create a big company. Agreed, absolutely. Yeah, it's gotta be social interaction, it's gotta be. It's gotta make your life easier. In a business context, it's gotta drive revenues, okay? That's a really tough one. I've really challenged a lot of people is that how are you going to make that enterprise that you're addressing your problem to, you know, your solution to, you're gonna make it more successful and grow. That's amazing to me, is that there are great solutions out there that cut costs, and so I think part of what has to happen is just education and standards and some trust being built. And, you know, a great example, and, you know, again, I mentioned this company in Lighted that's on a panel next. You know, it's lighting controls, intelligent, distributed lighting controls. 65% energy savings on average in lighting, right? I mean, it's a sub-2 year ROI. It's kind of no brainer things to do. The problem is you're selling to facilities, there's, you know, it's complicated, there's technology, and so these sorts of things take a little while to create change and trust. But, you know, we're right at the beginning of these new types of folks taking these new kinds of risks that ultimately, hopefully, we can help turn them into heroes instead of the last line of defense. Yeah, exactly. Great. And that, unless there's any burning questions, I'd like to thank the panel for coming through is just a fascinating tour de force.