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Wednesday, September 14, 2011

Ad hominem attacks over cleantech VC 'disaster'

At a TechCrunch conference in San Francisco, PayPal co-founder Peter Thiel said (according to VentureBeat):
“Cleantech is an increasingly large disaster that people in Silicon Valley aren’t even talking about any more. …The failure in energy and transportation points to a larger failure in clean energy — we aren’t moving any faster, literally, than we were when modern airplanes first came out.”
In response, Greentech Media’s Eric Wesoff wrote:
Peter Thiel Doesn’t Like Cleantech VC, Mankind
Eric Wesoff

Peter Thiel, known as the "Don of the PayPal Mafia," declared clean technology a “disaster” at Venture Beat's TechCrunch Disrupt 2011 conference in San Francisco.

OK, folks, go on home. Stop all this saving-the-world, green-energy stuff. It just isn't working. Thiel has spoken.

Greentech Media is talking about it. And so are plenty of Silicon Valley venture capitalists. And Thiel, evidently, hasn't driven a Tesla.

So, he isn't a fan of cleantech -- or at least the way cleantech investments have progressed.

Judging by these quotes in a Cato Institute essay, other things that Thiel doesn't like include poor people and women.

  • I no longer believe that freedom and democracy are compatible.”
  • “Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women [voting-ed.] -- two constituencies that are notoriously tough for libertarians -- have rendered the notion of ‘capitalist democracy’ into an oxymoron.”
Apparently his other disreputable choices (at least for GTM readers) include backing a libertarian for president and a Republican for California governor.

I have met and like Eric Wesoff and respect his knowledge of the industry. However, this sort of ad hominem attack is unseemly and (I would have thought) beneath Wesoff and a reputable organization like GTM. However, the green/cleantech/RE/solar press sometimes seem like they confuse their role as conveyers of accurate information with being cheerleaders for the industry.

There are thrree reasons why the attacks on Thiel are inappropriate (and unnecessary).

First, we all know that rich VCs are opinionated, have big egos and make claims supported by intuition, preferences (or self-interest) rather than facts. For every Peter “emperor has no clothes” Thiel there’s two Vinod "save the planet yesterday" Khoslas. As with any prediction, there’s no way to know which one will be correct— but eventually these investments either will or will not produce the huge returns expected by the VC limited partners.

Second, Thiel is hardly the only one making these criticisms. Respected academics and other analysts are pointing to the scale of investments and risks for cleantech that dwarf software, IT or even biotech investments — and were doing so a year ago. To me, cleantech (at least at the Solyndra level) seems to be a level even beyond Fred Wilson’s bifurcation between software and biotech. (There’s also additional analysis suggesting that VC may no longer be adequate for biotech).

Frankly, the solar industry doesn’t need a lot of new investments to start yet another me-too module company. After excess entry, the brutal price wars and associated shakeout are underway, and VCs have seen such shakeouts before in hard disks, PCs, software, dot-coms and just about anything else funded by the VC herd.

VCs that invested in capital intensive cleantech companies (also including autos and biofuels) will have to decide whether to continue to support their companies (pre-liquidity event) or pull the plug.

It may be that the near-term future for cleantech investing is smaller bets on niche players or companies that can become self-funding soon. Since VC euphoria is cyclical, that would only be a natural correction while investors wait to see how the current wave of investments play out.

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