Tis the season for the final flurry of business conferences before the Christmas holiday. Last week I attended a Venture Capital Summit and an event focused on Emobility. Emobility covers electric vehicles (EVs) and electrified transportation for individual or mass use.
There were two common messages within these conferences:
- People are emotional about their car purchases and about how they invest their money.
- A lack of experience holds back full embrace of new technologies and can build a FUD (fear, uncertainty, and doubt) factor. The lack of consumer experience with EVs is holding back rapid consumer adoption. The lack of venture capitalists’ (VCs) experience with some technology sectors may be doing the same in investment decisions.
An EV buyer has to install charging equipment at home and learn the location of charging stations – something that internal combustion engine owners don’t worry about (although at one time, gas stations were not commonplace either). An EV buyer has to learn a different maintenance schedule and pattern, and be comfortable with the safety record of EV batteries and future resale value of their used EV. In contrast, a VC being asked to commit millions of dollars has to consider the projected future value of a new company that may have a disruptive technology. The VC has to weigh the pros and cons of that technology, the alternatives to it, the market space, and whether or not the company’s management team has the right skill set to build and execute a winning strategy.
The Emobility conference discussed consumer attitudes towards EVs. One recent study revealed that 66% of respondents support investment by utilities in EV charging infrastructure, and 52% want utilities to take leadership in a consumer shift to EVs. That’s good news for electric utilities – consumers look to them to reduce that FUD factor. However, they may have their hands full. At the VC Summit, Tim Draper, of Draper Fisher Jurvetson, said that good investing opportunities lie within monopoly industries because they get “sloppy”. Utilities are monopolies in most of the USA, and there’s certainly a significant amount of disruptive Smart Grid technology swirling in that sector. Will existing utilities execute Smart Grid strategies effectively and efficiently? New Smart Grid technologies can put distributed generation in the hands of new electricity producers; new energy service providers may disrupt the utility/ratepayer relationships; and new entrants might deliver energy provisioning and management services – including services for EVs – that could dramatically alter the composition of the electricity market and introduce competition in unexpected places.
Todd Chaffee of Institutional Venture Partners identified three top investment areas for his company -communications and wireless technologies; enterprise IT solutions; and Internet and digital media. These technology categories will be disruptive to the existing grid ecosystem. These areas also reflect the comfort levels of a large number of VC firms in the USA – they know software and communications networks and the Internet. They don’t know as much about battery chemistry or materials science outside of microprocessors, but the successful IPO of A123 has gotten their attention. Clean technologies will be a big investment area for VC firms, however most of them will be focused in their comfort zones. Start-ups in different Smart Grid technologies outside of these areas that are seeking capital will have to work doubly hard to build VC knowledge and eliminate the emotional FUD factor.