Cleantech: Selfishness Sells

To reverse a decline in cleantech investing and deals, entrepreneurs need to cater to our desires for savings, convenience, performance, and being cool

By Sarah Lacy

So you bought An Inconvenient Truth on DVD. You drive a Prius. You offset your carbon footprint by seeding rainforests in the tropics. You even very seriously considered putting solar panels on your roof.

Congratulations. You've helped make saving the planet—once the domain of a sandals-and-granola fringe—a trendy preoccupation of the mainstream middle class. And let's face it. You did it not so much because you're worried about global warming but because you're, well, selfish.

When oil prices were soaring, you eschewed gas guzzlers to save a buck. When the economy tanked, energy-sipping solar suddenly got sexy. And, let's face it, going green made really good cocktail party conversation.

Wake up and smell the recovery, tree huggers. Stock markets are rebounding, growth is on the upswing, and saving the polar bears is so 2008. Nowhere is the impact being felt more clearly than in venture capital. The number of cleantech deals is down roughly 30% this year, and the amount invested is off 60%, according to recent figures from Dow Jones VentureSource. The biggest drubbing is in solar. This year, there have been just nine solar deals done. There were 24 solar deals done in the first half of 2008 alone.

In the Fast Lane: Tesla, Better Place

Cleantech would do well to remember what made it finally resonate with the broader public. The cleantech companies that emerge in the best shape from the current trough will be those that learn to play not only to our collective conscience but to our self-serving instincts—specifically, our predilection for what's cool, convenient, money-saving, or superior in performance.

Some will get bonus points for appealing to more than one of those qualities, but aiming for all four at once is a fool's errand. Companies that do rarely do any one well.

Here are a few who handle one or two criteria ably. The poster child for cool and performance is Tesla Motors, maker of ultrahip electric cars. They're not cheap; the Roadster is $100,000, and the "mass market" Model S in development is $50,000. But the cars are so sexy and powerful they don't need to be cheap or convenient. There are few Tesla showrooms, you have to put down a sizable deposit to get a spot on the waiting list, and Bank of America (BAC) only just started offering Roadster financing.

Sticking with cars for a moment, there's also Better Place, the company started by Shai Agassi, former CEO-in-waiting at German software powerhouse SAP (SAP). Better Place aims to build networks of charging and battery replacement stations while getting Renault (RENA.PA) to build electric cars that would be sold on the cheap. It's even willing to subsidize sales when buyers commit to a "subscription" to Better Place electricity. Not exactly high on the cool or superior performance axis, but done right, the idea will excel in the affordable (especially if you factor in the cost of gasoline) and possibly in the convenience categories—assuming Agassi gets those electricity stations built.

Here are four other areas crying out for cleantech innovation:

Battery life: Whether it's ultralight laptops and netbooks, the Amazon (AMZN) Kindle, or Apple's (AAPL) iPhone, there's a renaissance of gadgets that leave us more connected, more entertained, and less tethered to the PC than ever before. Unfortunately, the battery life doesn't let us stay that way for very long. To realize their potential, these devices need to stay on for a while—say, the length of a cross-country flight.

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