A network of entrepreneurs will solve the energy crisis.
That’s the belief of Bob Metcalfe, professor of innovation at the University of Texas at Austin, founder of 3Com and co-inventor of Ethernet, a networking standard which links computers.
“The biggest lesson of the Internet that applies to energy is it was not built by incumbents but by startups fiercely competing,” Metcalfe told 400 people attending the Clean Energy Venture Summit 2011 Thursday afternoon.
“We have an ecology in which startups live,” Metcalfe said.
He dubs the current environment, the Doriot ecology, after the late George F. Doriot, a Harvard business school professor and one the first American venture capitalists.
The startup Doriot ecology contains six “major species,” including research professors, students, scaling entrepreneurs, venture capitalists, strategic partners and early adopters, Metcalfe said.
This semester, Metcalfe started a new program at the University of Texas called One-Semester Startup with 70 undergraduate students launching 20 companies. He is teaching them “how to use the machinery of free enterprise.” Out of the 20 companies, three of them are energy companies. One is Zilkermotors, which wants to create a 100 mile per gallon automobile.
“We’re not going to change venture capital to suit the requirements of energy,” Metcalfe said. “But we can change energy to meet the requirements of venture capital.”
Startup companies need to play within “this Doriot ecology,” he said.
One of the problems is that the energy startups are at the mercy of the turbulent energy marketplace.
“These poor startups in energy get slaughtered when the price of oil or solar goes down,” Metcalfe said. “In the last five years, the energy market has been disrupted by the discovery of vast amounts of natural gas. It’s cheap. It continues the de-carbonization of energy. So gas could damage startup innovation in energy.”
Also, the collapse and bankruptcy of Solyndra is a catastrophe for the “taxpayers and the government officers and the solar companies that are getting guilt by association,” Metcalfe said. In 2009, Solyndra received a $535 million loan guarantee from the Federal government to build a plant to make its solar photovoltaic panels. The company received millions more from venture capitalists and other investors.
“But it’s an inevitable catastrophe,” Metcalfe said. “I’m afraid we are learning the wrong lessons from Solyndra.”
Some people are saying that it is a really bad idea to manufacture anything in the U.S. in the wake of the Solyndra collapse. But that is “a bad lesson for us to learn from Solyndra,” Metcalfe said. The U.S. should be manufacturing solar panels, he said. Unfortunately, Solyndra’s bankruptcy has led to “the criminalization of entrepreneurial failure,” Metcalfe said. “That is a blow to our innovation system.”
The core lesson from Solyndra is “premature scaling,” Metcalfe said. The company faced enormous pressure to expand quickly and solve the environmental crisis and create jobs, he said. So it expanded its operations too quickly.
“Startups face lots of pressures to scale,” Metcalfe said. “You need to resist those pressures.”
Metcalfe has put his money in several clean tech companies. He has invested in five energy startups including Zigbee, which makes software for smart meters for the home. He also invested in Infinite Power Solutions, which makes the world’s smallest batteries and Sun Catalytix, an energy storage and renewable fuels technology company. Silicon wafer manufacturer, 1366 Technologies, another of his investments, has also received a $150 million loan guarantee from the Federal government. It is building a 10 megawatt plant to make sure the company’s technology can scale properly, Metcalfe said. The company has been damaged by the failure of Solyndra, he said. He also invests in SiOnyx, which makes black silicon used to enhance the response of photovoltaic cells.