Sky's the limit for green pioneers

By Jonathan Guthrie
Published: August 13 2008 03:00

Standing next to an array of mirrors that are turning scorching sunshine into steam and electricity, Graham Ford forecasts a future for clean technology entrepreneurs that is as limitless as the Fenland sky above. "We are still at a very early stage in the development of clean technology," he says. "Most of the businesses will fail. But scaleable solutions will also come to the fore that have not even been invented yet."
It is by pure chance the Financial Times is visiting Mr Ford's company Helio-dynamics on one of those rare British summer days unpunctuated by sheeting rain. Our more normal lousy weather might make his claims appear hyperbolic. However, the proof of Heliodynamics' commercial concept is that Mr Ford and his co-founders recently sold the business to Energymixx for £5m. The Swiss company plans to market mirror arrays designed near Cambridge to industrial clients in sunny Italy.
Clean technology has been a hot area for entrepreneurship, driven by growing general nervousness about climate change. Backing from external investors rose from £103m to £227m in the UK last year, a healthy amount by the modest standards of British venture capital.
A fair proportion of that figure was absorbed by businesses in and around Cambridge, reflecting the strength of the physical sciences cluster spawned by the university. Across Europe, investment jumped from €317m (£248m) to €712m, according to Library House, a data company that researches technology start-ups.
Doug Richard, Library House chairman and a venture investor himself, describes clean technology as "a collection of sectors pursuing a common goal". The focus of the entrepreneurs is pioneering technologies that reduce global warming and waste. These include renewable energy, energy efficiency, emissions reduction and recycling.
Talking at the headquarters of Library House in Cambridge, which resembles a college-cum-trading floor, the ex- Dragons' Den panellist is keen to counter those who adhere to the 19th century political economist Thomas Malthus's dire predictions for population outstripping resources. Neo-Malthusian detractors of clean technology argue that only much lower population growth and consumption can save the planet; clean technology, in that context, is merely a vain search for ways to sanction continued human overindulgence.
"The problem with that argument is deciding who has access to existing energy sources and who lives or dies," says Mr Richard, with appropriate libertarian irritation. "I believe our efforts should be focused on solving this annoying problem [of sustainability]. We should consume less energy, but not by sacrificing economic growth." Malthus's conclusion was proved wrong as technologists increased the productivity of farmland in step with a rising population. Besides, as Mr Richard notes, rising living standards usually reduce birth rates.
Clean technology investment dipped in the second quarter of this year, in line with a downturn in venture capital that reflected jitters about the world economy. Mr Richard nevertheless asserts that clean technology is "non-cyclical", saying: "The front-page news [on climate change] and the huge issues facing the planet do not change."
But nor does the difficulty of garnering start-up capital. Tim Haynes, founder of Nujira, an energy-saving business, says that a £500,000 seed capital round in 2002 was the hardest part of raising the £10m it has banked so far.
The company, whose technology promises to halve electricity consumption by energy-hungry mobile phone masts, is finding an additional "substantial" financing much easier. It helps that Nujira has contracts to supply its Coolteq device to 12 out of 18 mast manufacturers.
"If you look inside a mobile phone base station, you find that a large proportion of the operating cost is from taking small signals for transmission to phone users and amplifying them," Mr Haynes says.
The solution he and his team came up with was "envelope tracking" - modulating the energy used to amplify a signal in tandem with its peaks and troughs. Previously, a constant amount of energy was used, which was big enough to cover peaks but most was wasted during troughs.
Mr Haynes, looking very much the technology entrepreneur with his open-necked shirt and stubble, believes the market for Coolteq in mobile base stations and TV transmitters is worth $350m (£184m) a year. Adapting the technology for use in mobile handsets to extend their battery life could generate sales of $800m.
Mr Haynes started the business in time-honoured fashion in a garage, progressed to a converted farm building and now works from offices and labs in Cambourne, Cambridge that accommodate 50 staff. He says: "In the next year to 18 months we will know whether we have listing potential, or whether another kind of exit would be appropriate."
In the short term, investors in Nujira such as Amadeus, the Cambridge-based technology specialist, are likely to hold on to their shares. Secondary market volatility has closed the new-issues market, with consequent damage to trade sale exit multiples. Andrea Traversone, a partner at Amadeus, says declining liquidity for venture-backed companies is a serious worry. Meanwhile, too few clean-technology companies have been sold to establish a returns profile to guide would-be investors.
However, Mr Traversone re-mains upbeat about Nujira, which he views as unusual in having disruptive technology that is highly defensible and that could unlock a big market opportunity. He says envelope tracking is, in fact, an old idea "the whole industry had failed to crack" until Nujira came along.
Earlier this year, Arvind Sodhani, president of Intel Capital, an important venture capital investor, warned of a speculative bubble in clean technology start-ups. It is an inevitable concern in the wake of the dotbomb and the less-thanimpressive performance of many social networking websites. But echoing the words of solar power entrepreneur Mr Ford, Mr Traversone ripostes: "This is not a fad, this is a secular trend in investment."
Refrigeration scientists warming to an old technology
Higher oil and gas prices increase the value of energy-saving technology of the kind developed by Camfridge, a green refrigeration business based in Cambridge.
Brandishing a test chilling unit intended for a domestic fridge, founder Neil Wilson enthuses: "This is energy-efficient, gas-free, and for the consumer it will be very low-cost. It does everything better and is competitively priced."
Like Nujira, Camfridge aims to harness rising energy costs and concern about climate change to make an old technological idea a market reality. The concept deployed by Camfridge - magnetic refrigeration, in which a fluctuating electro-magnetic field reduces the temperature of a coolant - dates back to the 1920s.
Mr Wilson, a Cambridge physics PhD previously involved in US software start-ups, says the technology pioneered by Camfridge uses half the energy of conventional refrigeration and dispenses with coolants that are based on global warming gases.
Camfridge is the fruit of a collaboration between Mr Wilson, co-founder Alessandro Pastore and two Cambridge University physics professors. Its small staff is crammed along with its equipment into a room in the St John's Innovation Centre. A fridge shrouded in a sheet hides the brand name of a manufacturer collaborating with Camfridge.
The Carbon Trust, the government-backed eco-advocate, has endorsed Camfridge with match funding. The company's main difficulty is persuading venture capitalists to contribute £1m to the £3m it hopes to raise within a year. Camfridge wants to commercialise its technology in time for the 2012 London Olympics, when a lucrative tie-in with a cold drinks business may materialise.
But few venture capitalists are excited by such a small investment opportunity. As ever in research and development, it is a case of science for science's sake, money for God's sake.
Copyright The Financial Times Limited 2008