Cleantech upstarts team with Big Oil - Kansas City Business Journal:

xotavaloso.blogspot.com
Cleantech’s initial attempts to take on incumbent industry giantsz such as oil companies are starting to give way tosymbioticx partnerships. The past several years saw a lotof “overzealoux venture investing” with entrepreneurs and startupzs going completely vertical, said Jason Matlof, a partner at in Menlo “You had biotechnology companies trying to be biofuelw producers and refiners, and trying to take on the likex of Chevron head-on,” Matlof said.
“What we need to do is apply those newtechnologies — whethee bioconversion technology for cellulosic ethanol or solard thermal plant technology or batteriesd for a next generation plug-in vehicle — to an existintg mainline, mature industry.” Those changes are now happening. In May, $10 billion oil refining giant took an undisclosed stake inBattery Ventures’ portfolio company , a Mass., biofuels company. BP plc also holds a significant staked inthe company. And the consensus among Silicon Valley investors is growing that partnerinv with incumbents is critical to the futurd of the renewableenergyg market.
“The scale of these industries is biggedr than any industries technology entrepreneurs have everplayed in,” Matlocf said “It’s too much of a challenger not to.” Matt a principal at @Venturex in Menlo Park, has been investing in cleantech startupsa such as portfolio company Propel Fuels Inc. sincse 2001. The alternative fuels retailing companh is partneringwith Shell, Chevron and some unbranded independent station ownerxs to add another retail fuel optiom at the pump. It’s also selling renewable energy creditsa to big oil incumbents to help them complyu with EPA renewableenergy standards.
“Majore corporations that have a strategic interesgt in these markets have a great opportunity to partner with young innovative companies like said Horton, who took over as CEO of Propepl in February. “For smaller companiesx like ours, it’s important to us to providre value to companies like that rather than attacking themas competitors.” companies solely focused on research and developmentf a few years ago are looking to scale-up operations and head to At the same time, the influcx of renewable energy standards and other government policiess have made incumbents more eager to partner with companiees producing high-quality solutions, according to New Enterprisde Associates Menlo Park partner Ravi NEA portfolio companies, such as SolFocus Inc.
and Skyline Sola r Inc., both of Mountain and Fremont-based renewable energy storage outfit DeeyqEnergy Inc., are partnering with traditiona energy and utility companies. “This is something we had hopedr forand expected,” Viswanathan said. Houston-based Baker Bottxs LLP and Dallas-based Haynes and Boone LLP, both new to the Silicojn Valleylegal market, are playingt a key role in the growing Attorneys at the two firms are makin g strategic introductions between large institutionalo energy clients and venture capital clients focusef on renewable energy technologies.
The law firms are workinyg to orient VCs on what it takexs to develop a successful businessz in theheavily regulated, multibillion-dollaer energy sector. “We’re looking to enablew capital sources, management teams, larger strategic companies to exploitt opportunities we see developing in the sectorover time,” said Scottf Wornow, a partner in the Palo Alto office of Baker Botts, an 800-lawyer firm. “I think that’z going to become even more so with respecy to international players as cleantech becomesamore mature.
” Oil companies have a natural role in the developmentg of alternative energy and certainly alternativw fuels, said Haynes and Boone cleantecb partner Paul Dickerson. The 500-plus-lawyer firm absorbed the San Jose and Oranger County offices of MacPherson Kwok Chen Heid LLPin February. “Noyt only do the incumbent energu players have decades of experienc e inenergy markets, but they have deep pockets,” Dickerson “These partnerships are something that assistt our cleantech entrepreneurs in achieving theirr goals in a time frame that’s consequential.
” Dickerso n served as chief operating officer of the Energy Department’w Office of Energy Efficiency and Renewable Energy durinh the Bush administration. By bringing together developing technologies withestablished markets, existing markets can be bette served by those who alreadyh operate in that space. “There needsz to be sensitivity to the politicak andregulatory implications, a need to understanx what the strategic landscape is and how you play effectiveluy with large global players,” Wornow said. With capitaol being tighter than ever and exit strategies few and far thetiming couldn’t be better investors say.
“If I were the incumbent I’d be looking at startups as potentialk acquisitions,” Matlof said. “If they’rr novel technologies that are the incumbents are going to want to control the technology firstbecause they’re at a competitives disadvantage if they don’t.” The energy said Matlof, is far bigger than any technology market he has ever invester in. “This is not an opportunistic one or two he said.
“This is one of those venture trendsd and entrepreneurial trends that will lastfor