The similarity in the two charts above is unmissable (no points for guessing the second chart, timeframe gives it away). The renewable energy sector that started out with immense promise and enormous market opportunity is now in a shambles. But this is in no way an attempt to dismiss the huge potential that exists and continues to be untapped. This is a point of view and should be taken as such. I will find time to write a separate follow-up on this topic.
Cleantech startups made the following judgement errors per the contrarian czar:
- markets & competition – problem with huge markets is that you can’t protect yourself from whatever monsters are out there, ready to eat you up
- secrets – Solar costs fell slowly over a number of years. Wind power came down a bit quicker, but there was still no real step function to it. Improvements in battery technology have been fairly incremental as well. No real secrets.
- durability – What are the odds that your incremental solar cell technology is going to be durable over that kind of timespan? When there’s an identifiable pattern of incremental progress, it is very unlikely that you’ll have the last mover advantage when you make a marginal addition
- distribution – companies literally couldn’t distribute the power they would generate. Even if you build a huge, efficient solar farm in Southern California, how do you build power lines to get the energy to L.A.? In practice, people tended to ignore the difficulty of connecting with the grid. It was assumed not to be a very interesting or major problem.
- timing – Where you are on the timing curve is incredibly important. The usual timing argument in cleantech goes like this: cleantech is inevitable because it’s really important. The big wave will come 4 or 5 years from now. So we should start now and we’ll catch that wave when it comes.
- financing – Solyndra for instance, took $1.65 billion in late stage venture financing. When investors put in that kind of money into a company, it has to grow phenomenally large for things to work out. A good, broad rule of thumb is to never invest in companies who are looking for less than $1 million or more than $1 billion.
Moving on now to the future of human progress. This chart is pretty self explanatory and no points for guessing where a tech optimist will land.
Finally, to wrap up this series on zero to one, my favorite chart:
Let us all move vertically, intensively, from zero to one, by doing new things that don’t necessarily scale!