Venture Capitalists: The Term “Cleanweb” Has Got to Go

Cleanweb was a term fittingly created by a venture capitalist, Sunil Paul, in 2011. It has nabbed around one-quarter of all cleantech investments, with venture capitalists providing much of the funding.

Cleanweb, in particular, is attractive to VC firms for its capital-light investing nature, its mission to drive forward the adoption of underlying hardware innovations, and ability to quickly generate revenue.

Still, Cleanweb has got to go… As in, disappear, forever.

The name, that is.

“Cleanweb” is simply not resonating—though an adequate replacement remains elusive.

That was among the takeaways from the “Cleanweb” panel held during this year’s Cleantech Innovation Summit  in Newport Beach, California, in February.

When the audience was asked how many of them actively use the word “Cleanweb” in their investment strategies, not one hand was raised. “Digital energy” fared little better, earning a single hand out of the few hundred venture capitalists in the room.

As for the panelists, Abe Yokell, Partner at VC firm RockPort Capital Partners, bluntly said: “I don’t like Cleanweb very much—not because it’s not a great term, but because I think, in my mind, it conjures an image that is somewhat limited. And when I talk about how deep this goes into our physical world, ‘web,’ to me, sounds like it’s a web brower, which is very limited.” RockPort coins their investments as “Energy, Mobility, and Sustainability” and has $850 million under management with 40 portfolio companies.

Joining Yokell were Paul Straub, Director at VC firm Claremont Creek Ventures; Allan Schurr, Vice President of Energy & Utilities at IBM; and Aharon Weiner, Senior Director of Solutions, Marketing & Customer Engagement, at soon-to-be public cleantech company, Opower.

Acknowledging that he is aware of no better option on the horizon, Yokell said that a more expansive term would certainly help. “It’s very helpful to have a nail to hang a hat on; to … coalesce an industry around a concept. … The trick is making sure [the term is] broad enough but still actually delivers real value as we go out to talk to LPs, for example. It’s helpful to have some cohesive structure [so] that you can talk about what the unifying aspects of your investment theses are.”

RockPort’s Investments Span Both the Digital and Physical Worlds

RockPort was among the top Smart Grid venture investors of 2013, with four deals, according to a Mercom Capital report. One of its deals was among the largest in the home/building space: RockPort and four other firms invested $20 million, combined, in Enlighted, a company that controls lighting, temperature and energy consumption in buildings via sensors and analytics.

There’s been “a shift in emphasis towards companies [in which] we have a pretty high confidence level, where we invest limited amounts of capital and see very specific milestones and results,” Yokell said.

RockPort has a broad portfolio based on its “long history focused on some aspects of the digital world as it intersects with the physical world,” he added.

“What we have observed, over time—the fund is now 14 years old—is that some of the investments we made in some of the materials-focused businesses have taken unexpectedly long and cost too much money, and more than we expected [to be paying] when we first budgeted.” However, he added, the firm still does focus on “physical world assets.”

He cited his firm’s recent investment in GlassPoint, which uses solar power to create steam and produce electricity for oil drilling facilities. GlassPoint received a $26 million Series B funding in Dec. 2012. In addition to RockPort, its investors included: Royal Dutch Shell, Nth Power and Chrysalix.

“We’re not backing down from these models as long as we can see a clear ramp on the funding side, and in that case [GlassPoint], it clearly appealed to a large corporate infrastructure where if we knew we’d hit certain milestones, there was a very high probability that that model would get funded,” he said.

That traditional cleantech funding model “has broken down pretty much entirely, unless you can focus in on these kinds of very specific risk-reduction movements with limited dollars,” he added.

Yokell described his firm’s investment in Ecofactor as part of a larger, long-term strategy. The company received a $10 million Series B round in October of last year with backers including Claremont Creek and Aster Capital.

Ecofactor takes data from Internet-connected, third-party thermostats and uses it to deliver energy savings in homes.

“We’re a big believer in urban mobility…some big urbanization trends that are coming over the next 40 years are going to have a very big impact on our city infrastructure, and that covers transportation and mobility.”

Another key area that Yokell is excited to invest in is the “built environment.”  Examples he cited include lighting control systems featuring digital technologies capable of “spitting out data that you can monetize, that you can create value from for the customers as well as those providing the devices and services, [that is something that] that gets very, very interesting…”

And, as prices come down for computers, as well as connectivity costs, he noted, this area of the built environment will serve as a “very rich area of feature innovation.”    

Other key RockPort investment theme buzzwords he cited include “the Internet of things,” “big data” and the “connected home.”

Energy Savings Not Always A Strong Selling Attribute

Straub of Claremont Creek Ventures, which he said has $350 million under management, noted that the firm is an early-stage venture investor seeking opportunities that apply digital solutions to what he termed as essential industries, such as healthcare, energy, transportation and resources.

“People are not always buying just for energy savings,” he said. Typically there is some other attribute that caught their attention, whether it’s a corporation or an individual consumer.

He cited as an example one company that his firm recently funded in the transportation sector, Ridepal, which runs a software platform that “aggregates demand and helps corporations deliver [the service of subsidized-commuting to their employees],” he said.

“They take cars off the road, but people care about the fact that they’re offering an employee benefit that they don’t have to spend a lot on or think about to manager. Commuters love it.”

Another company that Claremont Creek “loves” is Building Robotics, Straub added. It “empowers” occupants of a residential building to alert management as to whether they are too hot or too cold.

“You save the facility managers a ton of time, you save energy too, but that’s never what the company talks about. It talks about giving people the power—through their mobile apps, through the web—to say: ‘I’m too hot or too cold,” and [includes] a single integration layer with a building management system.”

“We’re looking for opportunities where there’s an energy element, but something else that drives a decision.”

Opower Offers Insight on Data and Utilities

Opower Inc. is among a number of companies that use a capital efficient model of web-based data gathering to build analytic tools, has filed paperwork for an IPO, as reported.

“Our mission is very simple,” said Weiner during the panel. “We try to get everyone on the planet to save more energy. We take all the technologies, such as social data, and apply onto it behavioral science—what motivates us to save energy…”

“We focus on the consumer; people are our biggest resource.”

Part of Opower’s job is to help utility companies better engage the consumer. “There is a big chasm,” he said. “Every device spits different amounts of information. Our greatest opportunity is what do you do with all that information [to help utilities better engage with their consumers].”

He noted consumers, generally, spend six minutes per year “thinking about their utility bill. As consumers, all we care about is, are the lights on and is our bill too high?”

One way that Opower sets about helping utility companies better engage with the consumer is by understanding the consumer; it’s not a matter of trying to convince them to change their behavior, he said.

“We want to make sure that the engagement is exactly right, that the message is right, for the one second that the consumer spends looking at [their utility bill or whatever form of communication is before them, such as an email].”

The way to do this is to mine all available data and use it to craft a personal message, something that hits on the consumer in a way that causes them to react, Weiner said. “If I know everything about you, I can put something special for the consumer so that [he or she] will feel like someone is listening to them.”

“Utility companies are starting to understand that we’re not all the same,” he said.

In fact, some advanced, forward-thinking utilities have taken the step of hiring quite skilled and experienced marketing teams—from consumer products companies, he says.

“[These marketers] are coming from The Gaps and The Nikes and from all those great brands that know how to touch our hearts,” Weiner noted.

In addition to applying data to energy efficiency, OPower is also using data for “behavioral demand-response” to get customers to reduce energy consumption during days of “peak demand“— when energy use is at its highest.

He added that Opower, to date, has saved 3.5 terawatt hours (TWh’s) of energy (or 5 billion pounds of CO2.)

Enterprise Space Focusing on Energy Data—Finally

For the past five to 10 years, companies in the enterprise space have been collecting and storing tremendous amounts of data—and doing nothing else with it.

However, as IBM’s Schurr pointed out, this is now starting to change.

“For the first time, enterprises are adopting an analytics, informational-driven view of how to run their businesses,” he said.

Asset-intensive companies, such as the Grid and power plants, are the forerunners here, he added.

“These are old-school operators and they’re starting to realize that breakthrough,” he said, adding that, driven by data, breakthroughs will soon be seen in terms of operating cost profiles and reliability.

“I don’t see energy leading this movement, though,” he added.

Shurr said he’s noticed faster adoption in other sectors, such as security and healthcare, with emphasis on the latter. He noticed that home health monitoring—in other words, the monitoring of people while they are in their home with, for example, Internet-connected medical devices—will, in turn, “lead to much more digitization inside the residential premises.”

“If energy can be a part of that movement, it’ll go faster than if [energy] leads on its own,” he said.

IT-Based Resource Solutions Deliver Impact from Breakthroughs

One key remaining problem is that many consumers are still confused by energy efficiency, in the broad strokes.

And, breakthroughs in technology are not the huge, mainstream attention-grabber, as many companies and service providers have come to realize.

Claremont Creek’s Straub touched on this point, and offered as an example what happened in the solar business. As pricing and capacity were improved, there was also a strong online element as well. He points out that its taken innovations in software and finance platforms “to drive the ultimate adoption.”

“You need to have the underlying enablers from a technology hardware standpoint, but the software and [browser-based] applications that get built ultimately deliver the big impact.”

Straub pointed out that, as utilities embrace distributed generation and new storage technologies are deployed, digital technologies will play a critical role in enabling them to function in an intelligent way. “Over the next 10 years business models in industries that haven’t changed in a long time are going to start to shift, and digital will be part of that.”

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