Insights from a Green Tech VC

January 9, 2013
By

Paul Holland of Foundation Capital in front of his green home, Tah.Mah.Lah.

Paul Holland is a sustainability-minded venture capitalist with VC firm Foundation Capital, which has invested in Netflix and demand-response company EnerNoc, among many others. He’s also the owner of perhaps the greenest house in America, built with his wife Linda Yates in Portola Valley, Calif., and profiled here.

The house is chock-full of green tech and energy-efficiency technologies, several of which Foundation Capital has invested in, such as CalStar Products, Control4 home control systems, Silver Spring Networks, Serious Energy and Sun Run solar service.

Clean tech represents only about 15 percent of Foundation Capital’s investments, and the firm focuses that on demand-side rather than supply-side technologies, Holland says. That means energy efficiency. “We’ve never funded a solar panel. We’ve never done a biodiesel refinery or an algae project,” he says. “We look at the challenge with energy as the analogy of either putting more water in the top of the bucket or fixing the leak.”

GreenTech Advocates recently caught up with Holland and quizzed him about his vision for green tech and energy efficiency in homes, the smart grid, and what he looks for in green and clean tech companies today.

The interview has been edited slightly for clarity.

What role can technology play to help to be green and energy-efficient in a home?

Holland Yates iPad

A Control4 home control system allows most of Holland's home systems to be controlled via an iPad. Photo by Erin Scholl

The goal for our house is to be energy-positive and environmentally regenerative, so it produces more energy than it uses. But for that to happen, you need a more accurate way to measure and analyze, and to use the power in the house more efficiently. With Control4, we have a holistic home control system that can control the lights, the video, the audio and the computer environment from a single point of view. That’s the type of thing we think will be standard for houses in the future.

We’re also going to get to where we have analytics outfits and have data that show how we use energy in the home, and that’s going to be really different than how we used energy 20 years ago.

What technologies do you like best in your home?

There are several startups represented in the house. Control4 is one, Serious Energy for the windows, CalStar Products for bricks and blocks made out of cold fly ash for part of our driveway. Xicato provides LED lighting, which is really beautiful. Our solar is from SunRun, which invented the solar service model. Inverters are from Tigo, another company that works in that arena. Silver Spring Networks provides the technology for the smart grid meters. A lot of these things will become standard in houses in general going forward, and some of them are becoming a standard part of the ecosystem in the infrastructure, like Silver Spring for smart grid technology.

What characteristics should green tech companies have these days?

Right now the most functional thing for green tech companies is to find a way to get the cash flow even, as quickly as possible. The fundraising environment is very difficult right now, where it was actually pretty easy three years ago. With all the things that happened in the last couple of years, it has become a lot harder. You need companies like SunRun, which just had a very healthy round of financing. They don’t need $400 million, they can get there with a more normal amount of money. The top criteria for a green tech startup now is that they have the ability to get their cash flow even so they’re not always on the road looking for the next infusion of capital.

Can green and clean technologies be marketed and presented better to people?

Holland-Yates ceiling

Xicato LED lamps on the ceiling of Holland's home cast a warm glow.

It can always be marketed better. We never invest in something just because it’s green. We’ve always had a double bottom line notion: Is it environmentally sustainable to be attractive to consumers, but also economically sustainable? We invested in the smart grid because we knew that utilities will have to upgrade their infrastructure in the course of the next decade. They have to start all over again. They have these analog meters, and the average age of a service technician at utilities is 52 years old. You have people who are going into retirement in the next 10 years. The better we can automate that, the better and more efficiently they can serve their customers.

In Control4, we see more and more automation coming into the home. It’s complicated. It’s the kind of thing that makes people frustrated, because [some] products don’t work well. We like Control4’s thesis to be more cost-effective and making the home more attractive by automating it.

Can automation have a big effect on energy efficiency in the home?

I think it can. I think that’s not going to happen in the next five years. That’s going to be in the 10-to 15-year horizon. You’re going to start to integrate some control systems with the smart grid. We’re going to be in a situation where about five years from now your utility is to going to go to you as a consumer and say, “Would you like to participate in these various programs that allow the utility to save energy, which allows you to save money?” The consumer will to choose to opt in or opt out, and allow the utility if it has power problems [to load-shed] power on a real hot day. They can’t do that today because they don’t have the smart grid, but that’s coming to where utilities are going to have the digital backbone to be a lot smarter about energy. And they’re going to make energy go a lot further.

Is the slow pace of the smart grid rollout holding up more automation in the home?

I don’t think most people are looking for automation for an energy perspective. I think that’s a small minority. People are looking for automation to make the explosion of devices and services available a lot easier to consume. That’s the primary value of a control system: to control all your sources like audio and video and then lighting. And once you control lighting and these other things, you can start to control most of the power systems in the house. Then you start to integrate with the smart grid. But that’s not going to be a next-year thing with most people.

What’s held up automation is the new home marketplace, which has been in the dumps for four years, going on five. The next generation of cutting edge home projects has yet to happen. Now 100 percent of homes have color TV, virtually 100 percent have DVD, virtually 100 percent have cell phones. Over time, virtually 100 percent of homes will have a control system. It’s going to happen. It’s just a question of when.

Holland-Yates dining room

Dining with a view at Holland's home.

How important is energy monitoring to you and how do you see it evolving?

For us it’s important because we have the highest LEED points for a custom home, and it’s our strategy to have this very green house. Other people might get by with more simple temperature control. They can use the Nest thermostat, for example, and other things to make it easier.

The energy monitoring component is very important in our house, because our house is a demonstration project for green living. We want to really know what we’re doing in terms of energy usage and how efficient we are. We want the house to power not just our house, but our cars. That’s still a work in progress, but it’s a model for how we all can live.

What else in green tech excites you?

With solar costs having gone down to about a third of what they were, it’s created a fast-growing industry. You can imagine a scenario where you can power your car off of your house. If you could snap your fingers and do that tomorrow—and technologically we can do it now but we just don’t have the supply chains to make it happen—the United States can create virtually all its own power.

If you live in one of the states where you can get solar [on a lease or PPA] on your house, and the next car you buy is electric, either a plug-in hybrid or full electric, you can fundamentally change the paradigm. You can get us out of the oil business.

Exciting times.

Yes, it’s happening slowly, but it’s happening. You’ll be able to power your car off of your house, and that becomes a powerful paradigm. If the technology exists to do it tomorrow, imagine the impact and the green impact.

You may also like:

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One Response to Insights from a Green Tech VC

  1. Kelle on May 11, 2013 at 8:02 am

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