From geeks to greens  

The Economist has an article noting the migration of tech industry executives from information technology to clean energy technology.

WHEN Shai Agassi, long the heir apparent at SAP, was told in March 2007 that he would not become chief executive for at least another two years, he quit. And when the German software giant then tried to change his mind by offering to make him boss right away, he realised he was “much more excited” about the new chance that his unexpected freedom would grant him. In January Mr Agassi's new start-up, Better Place, announced its first deal, in partnership with Renault, a carmaker, and the government of Israel: to “get an entire country off its addiction to gasoline” by switching to electric cars.

Though Mr Agassi is the most senior executive so far to quit a mainstream information-technology firm for clean tech, he is far from alone. Mr Agassi (pictured right, above) joins Elon Musk (pictured left), a co-founder of PayPal who is now chairman of Tesla Motors, an electric-car start-up, and Vinod Khosla (pictured centre), a legendary venture capitalist who has switched his focus from dotcommery to greenery, among many others. “There is an unbelievable migration of talent from traditional technology to clean technology,” says Adam Grosser, a partner at Foundation Capital, a big Silicon Valley venture firm. “They have had their social conscience energised, and they believe there is a lot of money to be made. So you get to exercise your capitalist desires while feeling self-righteous at the same time.”

Many of these techies are being recruited by the same Silicon Valley venture firms that were behind successive generations of tech companies, from PC-makers to software companies to two waves of internet firms. Along with Foundation Capital, several of the leading venture firms, including Kleiner Perkins and Khosla Ventures, are now betting big on green. ...

In some cases, the leap from computing to greenery may not be all that big. Most geeks already have a science background (though Mr Musk abandoned his physics doctorate after two days). Building solar panels has much in common with building microchips. “It is all about miniaturisation and the use of silicon,” says Mr Ford. If he is right to expect a “Moore's Law for solar”, the effectiveness of the technology will increase at a predictable rate. One of the early successes in the green boom is SunPower, a solar-energy firm spun out of Cypress Semiconductor, which now has a stockmarket value of nearly $6 billion.

Similarly, energy firms operate huge distribution networks—another area in which geeks feel at home. “When I joined from Perot Systems in 2004, the last-mile technology for energy utilities had not been invented, and I saw a huge opportunity to help utilities connect more efficiently with their customers,” says Scott Lang, the chief executive of Silver Spring Networks. His firm applies internet technology to utilities' networks to improve energy efficiency and manage demand. “This is classic IT,” he says. He reckons that nearly half of the demand for new generation capacity around the world over the next 15 years could be met instead through greater efficiency.

One danger for tech executives who go green is that “they may expect things to happen too quickly,” says Mr Lang. “They are used to overnight change, but this is going to take time.” Another, at least for some green start-ups, is the amount of capital that has to be laid out at an early stage.

“The amounts of money on the line are radically different from traditional technology start-ups,” says Mitch Mandich, a 25-year veteran of Silicon Valley technology firms, including Apple, who runs Range Fuels, which is building America's first cellulosic-ethanol plant in Georgia. (The idea is that turning plant material such as switchgrass, wood or agricultural waste into biofuel will overcome the drawbacks of corn-based ethanol, which is inefficient and drives up food prices.) He has had to learn to raise money from New York investment banks and hedge funds, as well as from his venture-capital backers. Clean-tech start-ups very quickly leave the $5m-10m range, he says, and go to $50m and $100m fundraising rounds. “The stakes get very high much earlier.”

For this reason, Foundation Capital is focusing on firms that improve energy use. Attempts to design clean fuels are “not capital efficient”, says Mr Grosser, noting that “building plants costs hundreds of millions, and the margins may be low.” Mr Khosla, an investor in Range Fuels and other clean-fuel firms, disagrees. He thinks the huge market opportunity in “replacing coal and oil” justifies the huge risks.