Bill Gates, Energy & Integral Venture Capital

Bill Gates' Breakthrough Energy Coalition (BEC), launched during the recent Paris climate change proceedings, is a globally disseminated public statement that the classic Silicon Valley venture capital investment model has failed to adequately address scalable clean energy solutions in terms of quality, timeliness and global impact.

The Current BEC Proposal: Changing the World By Maintaining the Status Quo

The Gates proposal is a public-private partnership, whereby additional and substantial taxpayer (otherwise known as government) money will be allocated to turbo-charge a number of existing and new government sponsored deal flow pipelines, which in turn will be invested by BEC's private sector investors, to fill an investment gap across the so-called Valley of Death (that period of time when new founding teams of entrepreneurs are cash-strapped, still pre-proof of concept and with little or no market validation and/or revenue).

At this Valley of Death inflection point, the marketplace has long told us that startups that can't make it through this phase of growth are not worth saving.

What Gates is saying is that the current global marketplace for startups focused on scalable clean energy ideas is structured so that good ideas, even game-changing ideas, never see the light of day, because traditional VCs and other potential investors are risk averse at exactly the point where capital is needed most - at startup inception and at the entrance to the Valley of Death.

The BEC's intention is to partner globally with dozens of governments, collectively known as Mission Innovation (MI).

Is the BEC About Disruption?

In the context of climate change, if time is truly an enemy and if the global carbon based energy paradigm needs to be substituted as soon as possible (both assumptions seem fair based on the consensus reached in Paris), we have to assume that disruption is not only part of the picture, it is a core principle.

If this is the case, then only Freud can explain why in the BEC's Investing Principles the word disruption is not mentioned even once.

VCs, who pride themselves on disruption, generally invest in three industry verticals: digital, life sciences and greentech.

With a strong historical and statistical basis, we can say that the real monetization impact; that is, the ability to generate outsized returns on investment (ROI), has been demonstrated over the past 20 years, repeatedly and increasingly in digital (e.g., consumer Internet, mobile, social media, enterprise software, etc.), with life sciences and greentech, in that order, lagging considerably behind from an ROI perspective.

Put another way, it takes much longer and costs much more to develop a startup idea in clean energy, get it to market and generate a great ROI.

In fact, from a global perspective, a lot more money has been invested in clean energy than has been returned to investors.

Part of this is due to the Valley of Death investment gap Gates wants to fill. But the bigger picture that explains why it is more difficult to make money in greentech is more complicated.

Greentech Investing is Difficult

First, from a scientific and technological perspective, greentech and life sciences are more demanding that digital. There may be entrepreneurial exceptions, but all in all, you won't find a Bill Gates or a Mark Zuckerberg dropping out of Harvard to start a clean energy company that is going to change the world. The reason is simple. An 18 year old simply doesn't know enough. Staying in school for that B.S., M.S. or Ph.D. and beyond, is usually a precondition to having meaningful impact in the lab, in the field, in the workplace and in the market.

While clean energy entrepreneurs are much more sophisticated from the standpoint of academics, lab and field work and the marketplace, they are also mature and may tend toward risk aversion, depending on their station in life.

This is particularly true for the global disruption of carbon-based energy (although the cause generally trumps the risk).

Second, as already mentioned, is the issue of time and money. Clean energy projects take years (as opposed to months with digital) to get to proof of concept and much more money to fine-tune a physics, chemistry and/or biological approach to a clean energy problem that reaches a sustainable scalable monetization trigger.

Third, are the carbon-driven incumbents. While no one wants to directly address this issue, the incumbents will not sit idly by and watch their market share diminish. This carries serious implications for clean energy innovation.

Carbon incumbents (CIs) and their supporting dirty energy matrix partners (from oil & gas, plastics, steel, concrete, construction, raw resource extraction, transportation, agri-business, etc.) have several options:

-- They can acquire new disruptive innovative ideas in clean energy. Once acquired, the CI can choose to incorporate the innovation into its product mix or it can shelve the innovation with the intention of simply removing the threat from the market.

-- In the alternative, CIs can use pricing, supply networks and other tools to compete head-to-head with startups, in an attempt to put the upstart company out of business or weaken it, thereby limiting the options to scalability.

-- CIs can also put political pressure on governments to block, slow down or otherwise undermine a new clean energy sector, product or service via legislation and policy.

-- CIs can resort to extra-legal means (broadly defined) to guarantee their existing market share and continued growth.

Obviously and realistically, using a combination of these strategies is available to all CIs. See Climate Change: The Need for Pro-Inventor Legislation (PIL) for more on this theme.

Fourth, Paris and global public sentiment are forcing governments to face a new stark reality. Namely, that after decades and even centuries, of entrenched governmental support for carbon incumbents, particularly oil & gas, loyalties are under pressure.

Traditional pro-carbon government support has ranged from legislatively enacted and executive branch policies (in response to powerful pro-carbon lobbies), to using the intelligence apparatus and military in support of carbon-driven market share. In non-democratic regimes this is an even more complicated issue, particularly from the standpoint of global coordination, a key BEC premise.

Given that nations are notoriously inefficient and reactive, as opposed to efficient and pro-active, and taking into account the volatile mix of carbon incumbents and what will be several dozen competing definitions of what is in the national interest, is it reasonable to assume that the BEC and IM can work together?

Can Bill Gates and his supporters buy their way into (or out of) the political side of the global energy game?

Energy is Different

Software is increasingly viewed as a disruptive force in the digital world. Entire industry verticals are being impacted by software with massive disruptive implications.

The global carbon based energy paradigm, however, is not even close to disruption. Despite changes at the margin (e.g., smart grids, energy efficiency, solar, wind, etc.), and an increasingly aware public about the perils of climate change, the energy sector has not found or been exposed to the disruptive equivalent of software.

To disrupt what has been called the mother of all industry sectors, energy; will require a different approach. That new approach begins with Integral Venture Capital.

Integral Venture Capital (IVC)

IVC is informed by three philosophies, which together create a new approach and a new set of values for venture capital investing.

Steve Jobs & The Importance of Design

The first philosophical principle is based on design aesthetics.

A profound lesson about the importance of design aesthetics can be learned from Steve Jobs. Beauty and functionality, when melded together, attract us. That attraction can be monetized. However, design thinking cuts more deeply than producing aesthetically and functionally pleasing products that consumers will buy. Design aesthetics moves towards the essence of sustainability.

This Jobsian notion of aesthetic design leads us to Cradle-to-Cradle (C2C) design thinking -- the second philosophical principle that feeds into the concept of IVC.

The Role of C2C Design

C2C takes biomimetic approaches to the design of products and expands them to include how we live and work together, and how we treat the planet. We can and must create a new design thinking architecture for both the creation of our exterior material world and our interior consciousness, and apply it to all we do.

Integral Theory

The third philosophical framework is Integral Theory, and this is arguably the most all-encompassing of the three philosophies.

Integral Theory is a philosophy that deals with the very structures of consciousness itself. It is a lens through which we can see the world and ourselves in both full depth and breadth, and because it provides tools for dealing with often conflicting and overlapping levels of consciousness (at the individual and group level), it naturally provides (digs up one might say) creative approaches to the Grand Challenges facing humanity and the planet, and in this case, for clean reliable affordable energy.

In addition, Integral thinking and analysis provides insights into how we are evolving as a species, how that evolution dove-tails with our planet's evolution, and finally, how we collectively (in the broadest sense) begin to realize that each one of us is an agent of evolution.

The evolutionary impulse passes through us. In that passing it brings not only consciousness, but responsibility, and just as importantly, true freedom and the energy that that freedom brings, to create and innovate - all the while pushing the evolutionary process forward.

These three philosophies together define a core set of new alternative investment values and serve as the foundation for Integral Venture Capital.

Adopting IVC will morph the VC investment strategy, reorient priorities, alter the notion of due diligence and naturally craft a more viable investment pipeline structured for global disruption.

Energy and Consciousness

It was Einstein who said that no problem can be solved from the same level of consciousness that created it.

The current global carbon based energy matrix represents a problem at a particular level of consciousness. We cannot explore the depth and breadth of that energy paradigm here, to better understand the consciousness it represents, but we can be sure, based on the BEC's current investment proposal, that the BEC's current set of values and its investment strategy do not represent a higher level of consciousness.

In essence, the BEC proposal is a more robust version of the existing Silicon Valley VC paradigm -- the very paradigm that the BEC has already identified as part of the problem in finding new solutions for climate change.

The BEC must embrace IVC in order to make a sustainable globally impactful disruptive difference in the energy sector. Raising consciousness literally impacts perception. If the BEC doesn't do it, someone else will.

Without an IVC approach to the global energy challenge, not only will we (as a species) be wasting valuable time, but billions of dollars will be applied below the threshold of that capital's optimal use and ROI.