“Be kind, for everyone you meet is fighting a hard battle” - Often attributed to Plato but likely from Ian McLaren (pseudonym of Reverend John Watson)

Monday, March 21, 2016

arpa-e 2016 notes part 1

Having spent six days traveling to, attending, and returning from arpa-e 2016, it's time to start chronicling some of my thoughts. At the broadest level, the summit was very well attended, much better than last year. As is typical, the demographic was predominately male, predominately Caucasian with a significant sprinkling of Indian (subcontinent type) as well as Asian attendees. There were extremely few African Americans and other "people of color" and a relatively small population of women.

It was stated by Katie Fehrenbacher, a senior writer at Fortune Magazine who focuses on energy and technology, that, at her first arpa-e summit attendance in 2010, there were many VCs (venture capitalists) whereas, in 2016, "not so much." The decline in funding for clean energy startup ventures that her comment implies has been well documented elsewhere.
Chart courtesy of: PwC.com

I'm not an expert investor but, as I implied in one of my posts on LightSail Energy and stated in my post regarding Bell Laboratories, today's investors' demands for quick returns on their investment are anathema to ventures that develop over periods of many years and require huge capital investments. Further there have been well-publicized failures of some large cleantech startups, e.g., Solyndra, Range Fuels, KiOR, A123, etc. Cleantech is HARD!

While at the opening session, I drew a little diagram on my Samsung Galaxy Note 4, a phone on which one can legitimately take handwritten notes and make such sketches. Here's the sketch I made: 

I'll concede that it's cryptic and hard to read but the idea is that the U.S. funds entrepreneurial innovations that lead to development in such a way that private equity of one sort or another sees the potential and ponies up sufficient funding to take the innovation to market. To date, arpa-e funded ventures have attracted $1.25B in private funding. To do so, it has provided $1.3B to some 475 projects. I'm unable, however, to find an arpa-e funded venture that has individually gone to market, though at least four have been purchased by large companies as of FY 2014.

I'll provide further input over the next few posts (perhaps interspersed with other topics) but I want to say that that $350M per year funding level for something as important as the goals of arpa-e is a pittance, especially in comparison to the scale of the problem. There are those who say government should stay out of such ventures and ask "what good has government investment ever done?" I'd point out Boulder (now Hoover) dam, Tennessee Valley Authority, Rural Electrification Administration, ARPANET, etc.