Tuesday, November 27, 2007

Conversation with Ullas Naik from Globespan Capital

Executive Green: How does Globespan approach investing across a theme as broad as CleanTech?

Ullas Naik: It is challenging to look across so many distinct business categories. Our approach is to look at the value chain within a category and place strategic investments in the leaders in each area.

For example with the Solar market, we have invested in three phases of the value chain:

At the raw material stage, Calisolar innovation focuses on addressing the global shortage in silicon. The company has introduced innovation in the area of “dirty silicon” in order to achieve competitive advantages in feedstock costs, wafer yields and solar cell efficiency.

Globespan’s investment in Advent Solar is focused on increasing the performance of photovoltaic (PV) cells and modules. Bringing PV efficiency to a price point that is competitive with traditional forms of energy production (Coal and Nuclear) is crucial to building a sustainable solar market.

Solar Power Partners is a leader in driving the adoption of solar energy by reducing the initial capital costs required for a business to deploy solar by offering a power purchase agreement (PPA). The company focuses on deploying solar energy facilities that add real value to commercial businesses, institutions, and government facilities.

EG: Why did you invest in SPP?

UN: We are excited by SPP’s current customer base, and the company has a great pipeline of business. SPP has the third-highest number of PPAs in the solar market (behind MMA Renewable Ventures and SunEdison) and the company is closing the gap.

PPA companies are currently mostly aimed at the commercial sector and could emerge as the key driver for the adoption of renewable energy. The underlying providers are thinking creatively about how to accelerate and scale the growth of the solar market. PPA companies are reducing the financial barriers for businesses to enter the solar market, and increased amount of purchasing creates greater efficiencies downstream. For example SunEdison placed a billion dollar order with First Solar.

EG: How important are subsidies to the success of the solar market?

UN: Innovation will drive the price point of solar and other renewable energy sources down over time. However, for the next 3-5 years, subsidies are critical in order to let a new market grow.

The enormous uptake and positive impact in Spain and Germany are good examples of the benefits of subsidies and feed-in structures.

EG: What investment categories are interesting to you?

UN: We are dedicated to following a value chain-oriented strategy, similar to the one we have employed in the solar industry, to other markets. We are currently looking at opportunities in clean coal, wind, biofuels, building materials, etc.

EG: Are you concerned by the limited number of people in the marketplace with domain knowledge?

UN: Similar to some of the investments we made in the early days of the Internet boom, CleanTech companies will require executives that will adapt from new and adjacent industries.

When we look at investing an “A” round of capital, we prefer that the founding team have domain expertise; but as the company scales and needs professional managers, we look for executives with proven startup experience and will take a chance on managers who come from other domains.

EG: Is CleanTech investing important you on a personal level? Why?

UN: Yes, it is very important to me. Climate change is real, and as a global society we are seeing the detrimental effects of it almost every day. It is important to me to drive the creation of more carbon-neutral options and sustainable business practices for my two children as well as the next generations. I am privileged to be in a position where I can try to make a big difference and hopefully derive profits in the process by building new companies that will reverse the effects of decisions that were made in the past.

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