The Next Energy Innovators

(page 3 of 3)

Executives such as Perricone, a veteran of three previous Silicon Valley startups, know cynics have good reason to doubt bullish claims. In the past decade alone, investors have been burned by the hype over dot-coms and biotech. Many more will surely lose bets on green energy. But Perricone says he is being careful not to oversell the technology before the first commercial projects have been tested in the field. "Many of us remember the wild claims of the Internet," Perricone says. "There are terrific opportunities in this industry for those who execute, but before we go for more funding, we want the data to prove our technology works."

For now, many executives at the 25 startups say their chief worry is the broader economy. With venture funds tapped out, raising capital to develop products or simply keep operating can be tough. Bank financing to build power projects or ramp up production remains frozen, too. The sharp drop in oil prices from $147 per barrel last summer has also cooled enthusiasm for renewables. Numerous companies with promising technology already have gone dark for lack of funds. More will shut if the downturn persists.

The funding drought is especially frustrating for startups that struggled to overcome technical challenges. In 2007, Verdant Power installed prototype turbines to generate electricity from currents in New York's East River. But the river was more turbulent than Verdant expected, and the fiberglass turbine blades fractured. A new design with stronger blades made of an aluminum-magnesium alloy has generated power for the past year. Now Verdant is ready to install 30 more near U.N. headquarters. The recession "slowed us down," says Verdant President Trey Taylor. "We could do a lot more a lot faster if we had more money."

It is always risky to predict the fate of tiny startups in a fast-changing industry. That is true for all 25 companies on the BusinessWeek/GreenBiz list. But together they showcase both the potential breakthroughs and business models needed to make green energy viable.

With John Carey