Are we there yet?

Depends who you ask.

According to the Saudis, Oil will be the primary source of energy for many years to come (see the interview with Ali Al-Naimi, the Saudi oil minister, in CBS "60 minutes"). In the segment, the reporter shows the new petroleum facilities being developed in Saudi Arabia. They claim they will find DOUBLE the amount of oil they already have in the near future. It makes you wonder weather we are overreacting to the "end of times" for the oil sources.

In addition to the oil conundrum we are facing a challenge in the renewable energy front, and according to the NY Times here in the US we are not doing too good (read "Energy Goals a Moving Target for States").

A mere 10 to 15% goal of renewable sources of energy is an uphill battle for many states to achieve. According to the article: "Nationwide, the hard numbers provide a sobering counterpoint to the green-energy enthusiasm sweeping Washington".

On the other hand

The US will soon have a new president. The general expectation (based on his own words) is that the "Green Economy" will be a priority. This effort towards renewable energy and clean technologies is one of the tools Mr. Obama proposed as a strategy to overcome the current financial crisis (see Obama’s entire plan at Elections and Greentech, are they related?)

Additionally, the same NY Times, did a whole section on the "Business of Green" in September (featured in one of our entries "NY Times Week-in-review"). I believe they were responding to a trend, therefore being optimistic about the growth of the Green Business.

So which one is it? Are we reading too far into the energy and pollution crisis, or are we in the verge of major changes towards the "Green Wave".

Until next week, SHALOM!

This will make it happen!... will it?

I was listening to the radio and they were talking about a controversial law in Norway that mandates all companies to have at least 40% women in their executive board. Then I realized this could be the solution to better legislation for a green world.

If you have read my past entries you would have noticed that I am for free market and against too much regulation. Well, this simple law they introduced in Norway has accomplished what many other laws in other countries have failed to do. It has given women equal rights in the workplace. Whereas you are pro or against women's equal rights, you would have to acknowledge that implementing a single law to modify a trend as strong as that is remarkable.

The key element of this law (and what I think is applicable to greentech legislation) is that it modifies only the ultimate consequence of a desired trend, leaving the process to sort itself out. In other words, the law only regulates percentage of women in executive boards, the law forces companies to create their own process to groom women into the board room and to ensure that 40% of their employees that will be eligible for board positions are women. The law does not bother with employment or compensation factors.

If we translate this type of legislation into greentech we may start thinking about the ultimate consequence of living in harmony with our environment. Then we may suggest the following legislation to be applied:

• All companies and all households should become progressively carbon neutral every year until reaching 100% neutral by 2020.
• Water recycling should have a similar goal. 75% recycled water usage by 2020.

Then we should start talking about the consequences of non-compliance.

What if the company or the individual does not comply? Then we shall be as drastic as the Norwegians: they shut down the company. We may want to say: "pay us for the cost and installation of the best technology available, plus a penalty and we will install it for you"

What do you think? Will this work? Will it create the mindset to have a greener world? Will it promote the right technologies to the consumers? Intriguing questions!

Until next week, SHALOM!

An Ideal Greentech Portfolio - Part II

Following last week's post (An Ideal Greentech Portfolio - Part I), we will continue to explore the basis for an Ideal Greentech Investment Portfolio.

Last week we mentioned three criteria to ensure a balanced portfolio: Technological innovation, Business maturity and Market. What now?

First of all, let’s talk about dollar amount of investment. It is always preferable to be either a strong investor (owning substantial equity and voting rights) or to be in good company (i.e. follow the big investors). The saying: "money attracts money" is very applicable in this kind of investments, if investors start joining in a particular technology; then results are bound to improve.

By now we have taken a holistic approach to our portfolio. We know we need to look into diverse enough opportunities. We need to have a money strategy. We should have diverse stages of maturity in our companies. Now, let’s assume we are face to face with the CEO of one of our investment targets. What are the things we should look into?

First of all we need to understand the product. What is it for? How does it work? For this step it would be wise to freshen up on basic physics and chemistry knowledge (mostly in thermodynamics principles). Many companies out there are offering the "perpetual motion" machine. Be aware of false promises and the pot of gold at the end of the rainbow.

Next, we need to understand the Competitive Advantage:

(a) Is the product competitive? What is the advantage of this technology? Who would be interested in this product and why? What are the potential savings for end users?

(b) Are there barriers to entry for competitors? What is the cost of production? How complex is the technology to produce? How difficult is it to imitate? Are there any bigger players that may become our competitor?

(c) How does the product fit within the Green spectrum? Is it a technology that is ready for the public? Do we need to wait for further advancements in a specific field to have a market? Is this product an application for the short term or for the long run?

Finally, and certainly not of least importance we need to asses if the company has Strong Management. When you are seating at the table with any member of this company, do they know the basic numbers up and down? Are they well organized? Do they have a positive attitude? Are they open to your questions? Do they seem too enamored with their product to take criticism?

It is important to have “the gut feeling” for the company and for their product. If you feel the product is not good enough, but the management gives you a “good vibe”, then perhaps you should go for it. I always refer to the example of a company in Silicon Valley that set up with a weak product, but their attitude was “we are here to succeed”. They ended up becoming a great success with a different product (I believe it was Hotmail)

I know there are several books out there that talk about investment strategy and about VC investment. I am sure in these couple of entries I have only scratched the surface of this subject. The idea is to keep me and whoever reads this Blog on our toes and to be able to generate a conversation. Its always good to keep these concepts fresh. Feel free to add or comment on the available space.

Until next week, SHALOM!