Green technology spurs venture capital funding in LI

Long Island Business News, Feb 22, 2008 by Laura Glasser

After years of missing the mark for venture capital investing, experts say Long Island could be in for a jolt from the green technology sector.

Venture capitalists are increasingly focusing their efforts on the green and clean energy industries as more and more start-up and middle-market businesses focus on technology that's supposed to help preserve the planet.

A recent survey of investors, entrepreneurs and analysts by accounting firm KPMG found 24 percent of respondents said clean energy technology would receive the most investment money in the next two years, the highest percentage for any sector.

Nationally $2.2 billion in venture capital flowed into the clean technology industry in 2007, up 47 percent from the year prior, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

"Investment capital in green energy is about where investment in [information technology] was in the 1980s," said Rep. Steve Israel, D-Huntington. "I think green energy represents the next huge investment boom in our economy, similar to the laptop computer, cell phone and Google."

And local investors and technology experts say Long Island has a lot to offer in the field of green.

With Stony Brook University's Advanced Energy Research and Technology Center - expected to be a focal point of green research and technology commercialization - under construction, and some advanced energy companies already in operation, experts are hopeful the Island is on the verge of a transformation.

"I believe Long Island could economically reinvent itself by focusing on energy technologies," said Jeff Bass, chairman of the Long Island Capital Alliance.

Other local green advocates share Bass's view, including Israel, who said the Island has the skilled individuals, engineering infrastructure, university base and existing small high-tech businesses to be the green capital of America.

"Venture capital on Long Island will get a huge boost if it's directed toward the advanced energy markets. It's just waiting to be ignited," Israel said, adding that the region needs a strategic blueprint of each company's green technology to get the ball rolling.

But some venture capitalists question the staying power of the green sector and the returns such companies would provide.

Bob Brill, president of venture capital firm Newlight Management in Jericho, said clean technology companies tend to be capital intensive, requiring larger sums than, say, the software sector to get to a major liquidity event - an initial public offering or acquisition.

Brill said he's looked at companies with technology for reducing emissions and found they require "a lot of dollars to build facilities and perform trials and verifications."

Along with being a money-hungry industry, green technology has an added risk factor associated with federal regulation, according to Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire.

National standards for environmentally friendly emissions and energy consumption can change without warning as new research helps deem what is "green," Sohl said.

For example, when the federal government started regulating emissions in 1978, the standard called for passenger cars to get 18 miles per gallon of gas. Standards now require cars to get 27.5 miles per gallon and regulations are expected to tighten severely by 2020.

Any existing technology that helps vehicles meet current emissions standards - and the start-up that developed it - could be obsolete in the next 10 years.

"And no one has any control over that," Sohl said.

Despite the skeptics, many investors are moving down the green path. More than 200 clean technology companies received venture dollars in 2007, and New York City-based Everpower Renewables Corp., a wind energy developer, received the biggest investment of any New York metro area company - netting $55 million - in the fourth quarter, according to the MoneyTree Report.

Locally, Bass said he will be working with a "significant player in the green-tech arena," though he couldn't give specifics, and Stony Brook Water Purification received two rounds of venture funding last year.

But Israel said private investors need to put forth more funds to catapult growth in the green sector. Next month, he will unveil a green investment legislative agenda, using federal incentives to encourage investments in alternative fuels and advanced energies.

"When I think about (alternative) energy, the missing piece has always been investment, and that's the most important piece," Israel said.