TechPulse 360

Venture capitalists may not fully understand how much money they need to nurture a generation of clean technology companies.

Power plants take years to site and billions in capital, says Bechtel's Ian Copeland

This was the message Wednesday from Ian Copeland, president of renewables and new technology at Bechtel.

Many VCs, such as Vinod Khosla, founder of Khosla Ventures and a leading green tech investor, believe capital requirements will be similar to the past, when VCs funded waves of information-technology and healthcare companies.

Twenty percent of startups need small amounts of money, 50 percent will demand between $30 million and $75 million and the remaining 40 percent will spend, well, more, says Khosla.

“Certain things take a lot of money, like biotech drug (startups) did.” But “you’ll see a distribution (of investments) that looks pretty typical of venture capital.”

Not so, Copeland said Wednesday at the AlwaysOn GoingGreen conference in Sausalito. Capital needs will be far greater than what venture capitalists experienced with high tech. That’s because “it’s on a risk profile, it’s on a scale, that’s different than software,” says Copeland.

The explanation is that energy plants take years and big bucks to site and build – a business Bechtel specializes in. And supplying the plants is a complex process with an intricate supply chain that VCs don’t have experience creating.

“Balance sheet requirements are quite large,” he said. “You are talking about billions of dollars.”

Copeland estimates $21 trillion will be invested over 20 years to remake the world’s energy infrastructure. Venture capitalists are likely to contribute only a small share of it. Either that, or the industry will need 40 times the money it has today, he said.

If he is right, venture capitalists may have few alternatives to providing the seed funds for a company and then getting out of the way – selling their portfolios early and moving on.