"We're looking for an investment of $15 million," Barry Breen, CEO of Israeli cleantech company 3G Solar Ltd. told the 200-strong audience. "We want to raise $5 million," said Yigal Gezundhait, CEO of another cleantech company, BotanoCap, adding in the same breath, "We're aiming for $35 million in sales in 2013." "We need $2 million for our marketing needs," said David Waimann, president of water technology company Cequesta Water Ltd., looking the audience straight in the eye.
It turns out that, even in these unsettling times of financial meltdown, impassioned entrepreneurs are still standing in front of audiences of investors, and asking for millions of dollars. This means that the business world continues to move forward, despite the shrapnel from the financial bombshells all around.
This week, The California-Israel Chamber of Commerce has been hosting 12 Israeli cleantech companies at a series of meetings over four days at Silicon Valley. The goal of the meetings is to raise funding, sign collaboration agreements, network intensively, and match up US investors and conglomerates with fledgling Israeli companies.
The really encouraging news came out of the panel that ended Tuesday's presentation and panel session day at Stanford, which was also attended by representatives from the investment arms of Intel Corporation (Nasdaq: INTC), General Electric Co. (NYSE: GE), Chevron Corp. (NYSE: CVX), and Applied Materials Inc. (Nasdaq: AMAT): cleantech is still on the agenda. "We hope to make our first investment in Israel in the coming months," said Ricardo Angel, senior VP at GE Financial Services. "We're looking at two companies in Israel in the solar field," revealed Annette Finsterbusch, director corporate business development at Applied Materials' investment arm, Applied Ventures. "How is the situation affecting us?", chuckled Steve Eichenlaub, managing director of emerging platform technologies and cleantech at Intel Capital, "We intend to invest even more now. The valuations are lower, and our appetite remains big. We're open for business."
The pessimists vs the optimists
Companies attending the CICC's first ever tour also met representatives from investment companies and funds, such as Silicon Valley Bank Financial Group (Nasdaq: SIVB), Greylock Partners, Israel Cleantech Ventures, and others. The itinerary also included visits to the offices and facilities of companies such as Google Inc. (Nasdaq: GOOG), California utility company, Pacific Gas & Electric (PG&E), SunPower Corp. (Nasdaq: SPWRA), the SanJose Water Company (NYSE: SJW), and other cleantech companies.
It has emerged from the meetings at Stanford that many people believe that cleantech will be harmed less than other sectors, because cleantech companies need more mature investment - more money, and more time for maturation. The concern for the state of the planet we live in is also growing, so cleantech is obviously set to remain in the headlines. Nevertheless, the crisis has spread to the cleantech sector as well. US infrastructure companies are now scaling back their investment in alternative energy. Florida Power & Light Company (NYSE: FPL) recently announced it was cutting in investment in wind energy by 400 megawatts; another utility company in North Carolina slashed its investment in solar energy by $50 million, and there are more examples.
The pessimists claim this is just the beginning. The optimists rely on the figures for 2008 which show that global investment in cleantech reached a record level in the first three quarters of the year. According to a report by Ernst & Young, investment in US cleantech companies in the first three quarters of the year totaled $3.3 billion, 71% more than in the same period in 2007. Investment in Israeli companies also hit a new record in the first three quarters, climbing to $282 million, but that was before black September and even blacker October.
Israel Cleantech general partner Meir Ukeles noted the expansion of Israel's cleantech industry over the past three years. "In 2005, there were 120 cleantech companies in Israel, today there are more than 600," he said.
Assaf Barnea, CEO of Kinarot-Jordan Valley Technology Incubator, told "Globes", "At the moment, there's a general freeze. There a quite a few institutions that had planned to make three or four investments and will now make one or two. It won't last long, and within a few months, investors will take a deep breath, take another look at models, and start investing again. Cleantech is a field that is synonymous with efficiency, conservation, and optimization. Ultimately, investing in this field is a strategic move for enterprises."
More mature, more modest
As with any proper high-tech conference, the chat in the corridors outside was very lively. Business cards were produced from pockets, thereby achieving one of the main goals of the conference - networking. Inside the conference hall, meanwhile, the presentations by companies of the type that don't exactly leave you breathless went on. None of the companies in question are about to become the next Facebook. They spend their time harnessing wind, trapping sunlight, or recycling effluent.
Cleantech entrepreneurs too are fundamentally different from Internet entrepreneurs. The average age of those making presentations was 54-50, and the presentations were somewhat dull. But in contrast to the young Internet Turks whose main promise is to take the Internet surfer world by storm, without it costing anything, cleantech companies talk money, and plenty of it.
Jacques Benkoski, venture partner at US Venture Partners, who also helped organize the tour, says that California has gone within a short space of time from being a cleantech laggard to one of the world's leaders in the field, largely thanks to the investment floating around in the region. "Cleantech companies have what to learn here in the valley," he says.
Evan Lovell, one of the founders of the Virgin Green Fund, told the audience that "Israel is the best place in the world for investment. Investors and entrepreneurs in cleantech should take a deep breath. This is an investment for many years, there are no quick exits in this sector." There may be no quick exits, but all the companies talked in their presentations of markets worth tens of billions.
"Some of the companies we brought here are at the early stages and are learning a lot," says Eric Weiss, chairman of the CICC Cleantech program. "One may assume that they will return in a year or two, better prepared to raise funding and forge collaboration agreements. There's a good chance that companies which already have products will raise funds or agree collaborations following this tour. Israel can and should lead this field - for economic reasons, because high-tech won't carry Israel's economy forever, and also because it is an absolute must from the strategic and political perspective."
All is not lost
How does it look to the managers of the Israeli companies participating in the tour? "We're here to show our solution to as many people as possible and network as much as we can," says Erez Ella, co-founder of wind technology company Sovna Ltd. "I wasn't expecting to return home with a check, our expectations aren't high. We don't expect to raise money, at least not at this stage, but we do believe we'll be back here again to do just that." Ella also believes investors when they say the money will keep coming. "Just look, this room is completely full."
Erez Baniel, CEO of cellulose conversion technology company HCL CleanTech Ltd., came with higher expectations and greater confidence. "We did a certain amount of groundwork before we came out here and we hope to come away from the tour with an initial investment and contracts for collaborations with companies in the field," he says.
By the end of the second of the day, Baniel feels very encouraged. "Even if the price of oil does fall, and even if there is a recession, the world will eventually emerge from it, and there will be millions more Chinese with cars, millions of Indians with cars, and the situation worldwide will just keep on getting worse. This is our moment," he says of his own company and the other eleven Israeli cleantech companies seeking to make their mark on Silicon Valley this week.
Published by Globes [online], Israel business news - www.globes-online.com - on November 13, 2008
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