Cleanweb Companies Attract Big Data and Big Money
In 2011, venture capitalist Sunil Paul invented the word “cleanweb.” Just two years later, the burgeoning space already has gobbled up a huge share of the cleantech marketplace, attracting fully a quarter of all cleantech investments, says Nicholas Eisenberger, managing partner of Pure Energy Partners, a venture catalyst firm.
With total investment in cleanweb companies growing 55 percent since 2009, Eisenberg said, the trend shows no signs of slowing down. Cleanweb companies attracted $2 billion in investment through 2011, accounting for 25 percent of all VC investments in cleantech.
“Cleanweb, I want to argue, has arrived,” Eisenberger said at a recent panel discussion hosted by Clean Energy Connections New York City. “Cleanweb may be the most powerful technology during the course of our lifetime to address resource issues,” he said.
Cleanweb has evolved so rapidly that it even has its own industry association. Eisenberger created the Cleanweb Initiative “in last six to eight weeks” to serve as a networking and research organization serving the nascent sector. Broadly speaking, cleanweb involves any application or company that uses the internet address to humanity’s consumption of resources.
The area is hot with venture capitalists because, rather than investing in a traditional cleantech company working to create a new solar panel or wind turbine technology, cleanweb technology is already mature, as demonstrated by the fact that 80 percent of the world’s population has internet access, Eisenberger pointed out, and 60 percent own smartphones.
For VCs that makes cleanweb investments light on capital, and quick to begin generating revenue.
“These investments are notably less capital-intensive,” said Eisenberger, whose firm has catalyzed venture investments in cleanweb companies including Honest Buildings and Recyclebank. “The relevant thing is that they work today, so they’re quick to market.”
The word cleanweb encompasses many different types of businesses. As Eisenberger thinks of it, cleanweb companies fall into four broad categories:
1) Those that catalyze traditional cleantech. One example is SolarList, which uses satellite images to give homeowners fast, free estimates for how much it will cost to install solar panels on their roofs. This replaces the costly process of sending out human engineers to each house, vastly reducing customer acquisition costs, said Blake Burris, CEO of the Cleanweb Initiative, during the event’s panel discussion.
2) The resource cloud. This involves collaborative consumption, and any website or mobile app that encourages sharing over buying. Examples include Airbnb, which helps travelers use 66 percent less energy than if they stay in a hotel, Eisenberger said. It’s also skillsharing sites like TaskRabbit, and carsharing company ZipCar, which replaces 15 privately owned cars for every shared car on the road, Eisenberger said. Ridesharing company Lyft recently announced a $60-million round of funding led by venture firm Andreessen Horowitz, which also has placed bets recently on cleanweb companies including FlightCar and AirBnB,
3) Big data. These companies use big data to deliver efficiencies via the web. This includes WegoWise, which gathers information from utilities’ websites to deliver information to commercial real estate owners about water, electricity, gas and oil use. In May WegoWise won a $3-million investment from Boston Community Capital. Web-based utility data firm MyEnergy was purchased by smart thermostat maker Nest Labs, which recently partnered with NRG Energy to give financial incentives to customers who use Nest hardware to reduce electricity use.
4) New ideas nobody has thought of yet. As processing power grows exponentially more powerful and less expensive, “we can’t even imagine the impacts this will have on the way we live,” Eisenberger said. One example could be reaching beyond the cleanweb’s natural base of wealthy professionals to create applications for poor people in the U.S. and around the world, who will need $80 trillion worth of new housing built over the next 12 years. “If you can come up with opportunities” for low-income people, “the first move there is a massive move,” said panelist Ron Gonen, deputy commissioner of New York City’s sanitation department.
Venture investors see the opportunities, including “newcomers to the space who are just excited about the sheer magnitude of the problems that cleanewb seeks to solve,” Burris said. “And they’re not your traditional cleanweb investors.” He mentioned Terra Venture Partners, which announced in March that it will create its second fund with $50 million targeted directly at cleanweb companies.
One issue with many cleanweb opportunities is that they may be toocapital-light for venture capitalists, Gonen said, since it’s hard for an investor to make much money when an entrepreneur only needs $50,000 to hire a single programmer. But that doesn’t mean a small startup now can’t become a big, venture-worthy startup later. As a bridge to gaining larger scale, Gonen suggested that entrepreneurs and VCs explore nonprofit status or funding options like FundRise, which helps people invest in development projects in their own neighborhoods, and which has attracted $800 million in crowdfunding from sources including some of the largest players in the commercial real-estate market, said Riggs Kubiak, CEO of Honest Buildings.
Another big opportunity for cleanweb investors is government contracts, especially since governments at all levels have opened their vast databases to entrepreneurs with ideas for how to mine public information. But pursuing the government market means investors must be prepared to spend a lot more money upfront.
“If it’s a federal contract, you need a full-time staff just to accommodate the RFP process,” Burris said. “It takes a person who is willing to take risks.”