Tsunami of Thought: Three Things

I’ve been inundated by insights in a tsunami of takeaways from Lux Research. Here are three things for you.

First: take this invite to register and listen in on their call this Tuesday, October 6th, Lux Research Power State of the Market: Unplugging the Hype around Electric Vehicles, from 11:00 AM - 12:00 PM EDT

Why? Because in March of this year, U.S. President Barack Obama announced, “We will put one million plug-in hybrid vehicles on America's roads by 2015,” and almost every major automaker – including Toyota, GM, Volkswagen, and BYD – plans on introducing lithium-ion-powered plug-in hybrid vehicles (PHEVs) and all-electric vehicles (EVs). For these vehicles to succeed on a large scale, however, they must make economic sense – not simply be a niche high-end product bought for altruistic reasons. The economic viability of these vehicles will depend on many factors, including the price of oil, governmental subsidies (such as the $1.5 billion over the three years the Chinese government has pledged to green vehicles), and the reduction in vehicle costs that come from increasing manufacturing volumes. Yet despite all the money invested, governmental support offered, and hype generated, the current high prices of PHEVs and EVs compared to standard hybrids (HEVs) mean that widespread adoption remains a question mark. In this webinar, we will examine this issue using a quantitative model for electric vehicle sales through 2020, answering the following questions:

How will the price of oil affect full-sized electric vehicle sales? What role will the different subsidies offered in the U.S., Japan, Western Europe, and China play in the success of electric vehicles in those regions? How much will prices drop for the lithium-ion batteries that power PH/EVs? What technologies go into electric vehicles and what distinguishes one vehicle type from another? What are the implications of the relative success or failure of electric vehicles? How will the electric vehicle market interact with other vehicle technologies – such as clean-diesel, micro-hybrids, heavy vehicles, and e-bikes?

Next, within days, they’ve also released two killer reports with shocking findings for their clients.

The first, “Alternative Power and Energy Storage Financing: Can VCs’ Good Times Last?” notes the alternative power and energy storage sector is on pace to raise a record level of venture capital (VC) in 2009, with the majority going to battery technologies. However, the mergers and acquisitions (M&A) have slowed drastically, and initial public offerings (IPOs) have dried up, limiting exit opportunities for VC-backed companies. And IPO markets are struggling and starting to weigh on VCs. Leading executives at venture capital firms indicated enthusiasm for alternative power and energy storage technologies in general, but cited real concerns over time to market, capital requirements, and exit opportunities. Their views suggest that VCs' interest in alternative power and energy storage technologies is broad but not deep. VCs are likely to desert alternative power and energy storage, forcing a rethinking of financing for emerging technologies in this field.

The second, “Finding exits for Biofuels and Biomaterials Investors” notes venture capitalists (VCs) planted $1.12 billion in 2008 into industrial and agricultural biotechnologies like biofuels, biomaterials, and enzymes, a 26-fold increase from 10 years ago and a cumulative total of $4.17 billion. But even as investors venture ever deeper into these new fields, they have not yet found a clear path to exit. To date their fixation on bioenergy companies has been a response to policy decisions and investments by leading VCs, but to see returns grow, they will need new strategies. They should seek technologies that support multiple feedstocks and products so they don’t wander into dead ends like corn ethanol, and pursue opportunities in food, water, and carbon that balance the challenges inherent in biofuels and biomaterials.