Silicon Valley Looks Straight Into The Sun
SANTA CLARA, Calif. - MiaSole, a solar panel start-up, sits near the heart of Silicon Valley - surrounded by blocks speckled with empty buildings that used to house chip, software and other companies.
The greater Silicon Valley has lost 50,000 jobs in the past year, and its unemployment rate, almost 12%, is on par with the state, a rarity given Silicon Valley's highly trained workforce.
But at MiaSole, there are 300 employees, up from 150 a year ago. Every employee, including the janitor, has stock options they hope will someday soar. CEO Joseph Laia faces the quintessential Silicon Valley conundrum: what to do with employees who work all night as MiaSole pushes to commercialize a cheaper solar-panel technology. He's considering a "cot room" for catnaps.
MiaSole is just one example of the growth of green, or so-called clean-energy, technology in Silicon Valley, a place so filled with solar companies that kingpin venture capitalist John Doerr says it could be renamed "Solar Valley" in a decade.
Traditionally, Silicon Valley has spun on the riches created by successive waves of innovation, from chips to computers to software to biotechnology and the Internet. Now, given concerns over global warming and, more recently, the push by the Obama administration to rev up the nation's clean-energy competitiveness, Silicon Valley is looking more for clean tech - from solar power to electric cars and smart grids - to be its next big thing.
Clean tech "is the largest economic opportunity of the 21st century," says Doerr, who was an early investor in Netscape, Amazon and Google. Now, almost all of Doerr's new ventures are in clean tech, he says.
In September, Doerr's former partner, Vinod Khosla, who co-founded Sun Microsystems, announced a $1.1 billion fund for clean-tech ventures, marking the largest pot of venture funds for the sector in two years.
And when Department of Energy Secretary Steven Chu in October announced the first federal grants for high-risk clean-tech ventures, he did it from Google's headquarters.
"We're seeing acceleration of the Valley's focus on clean tech," says Alan Salzman, CEO of the venture capital firm VantagePoint Venture Partners. "The areas of innovation now and for 20 years are in clean tech."
Familiar names in clean tech
Clean tech is far from new for Silicon Valley.
So many solar companies have been started in Silicon Valley in the past seven years that a shakeout is inevitable, says Rex Northen, executive director of the Cleantech Open, a business competition.
But if clean tech was the new kid on the block five years ago, "It's now gone core," says Julie Blunden, vice president of solar-panel maker SunPower. Founded in 1985, it was spun off last year from Cypress Semiconductor.
Google was among the first Silicon Valley heavies to make energy part of its culture. Two years ago, it created a group to research ways to make electricity from renewable energy as cheap as from coal - causing some Wall Street research analysts to opine that Google was losing focus.
Since then, Google has invested $45 million in a handful of clean-tech firms and other projects concentrating on such things as solar, wind, geothermal and electric vehicles. Google has nine engineers devoted to renewable technologies. It expects that number to double within a year, says Bill Weihl, Google's energy czar.
Google also recently launched PowerMeter, its online tool to enable consumers to watch their home energy use.
Other big-name Silicon Valley firms are also making moves in energy. In May, Cisco Systems unveiled its goal to provide the underlying technology for smart grids - which aim to move electricity more efficiently than do today's grids - just as Cisco started providing the plumbing for the Internet years ago.
The payoff? A big chunk of what Cisco estimates could be a $20 billion annual smart-grid market within five years. Cisco started exploring the possibilities two years ago. Now, "It's definitely one of our big bets," says Cisco's smart grid guru Laura Ipsen.
Software makers are getting a piece of the action, too. Phil Bernstein, vice president of Autodesk - a leading maker of design, engineering and entertainment software - says the "vast majority of attention" it now gets from clients is for tools that help make buildings more energy efficient.
Applied Materials, the world's biggest maker of chipmaking equipment, is a prime example when it comes to exploiting the new market. It counts solar as its fastest-growing new business. In fiscal 2009, Applied's sales to solar-panel-making companies accounted for 20% of its $5 billion in revenue. In 2006, when Applied started in the sector, "A lot of people were in disbelief that we could be successful," CEO Michael Splinter says. Now, at any business dinner, not five minutes passes before someone asks: "How's your solar business going?" he says.
A $6 trillion opportunity
If clean tech emerges as the Silicon Valley's next big thing, it may not look much like the last.
The founders of Netscape and Google were in their 20s. But clean tech "will be led by old dogs with experience," Northen says. "It won't be some kid working in a dorm room who'll hit it big."
That's because many energy ventures pose high research hurdles, require big amounts of money, manufacturing expertise and people who know how to navigate a regulated industry.
Google took about $25 million in investment before it went public, says Doerr, a partner at venture capital firm Kleiner Perkins Caufield&Byers. Bloom Energy, which Kleiner Perkins invested in seven years ago, has taken $250 million. Doerr speculates that Bloom is still nine years from a successful initial public offering.
Bloom, which aims to make fuel-cell systems to produce cheaper, clean energy from a variety of fuels, is headed by KR Sridhar, 49. Before Bloom, he led a team developing technologies to sustain life on Mars for NASA.
At solar-panel maker MiaSole, the top seven executives have 120 years of combined experience in the chip and disk-drive industries, including hard-core manufacturing, says CEO Laia, 51, a former semiconductor chip executive.
Instead of rooms packed with software engineers hacking at computer code, MiaSole's operations include a factory filled with robotic machines, a handful of assembly-line workers, and "Danger" high-voltage signs. Solar-panel production begins with rolls of thin steel.
MiaSole has struggled. The company, founded in 2003, has gone through one CEO, Dave Pearce, who reportedly predicted that MiaSole would have $100 million in sales in 2007. Instead, it was forced to lay people off that year. It just shipped its first panels to customers in October.
"This is hard," Laia says. "A lot of people underestimated just how much it takes to build a manufacturing company." Two years ago, MiaSole took the sign off its door and "focused on what it takes to make it work," Laia says.
The energy business presents one thing that has long motivated Silicon Valley's talent: problems that, if cracked, can present huge profits as well as social benefits. While the Internet economy is worth about $1 trillion, energy presents a $6 trillion nut, Doerr says.
"The early leaders in this market will make a ton of money," says Shai Agassi, 41. Agassi, a former top executive at software giant SAP, launched Better Place in Silicon Valley in 2007.
Agassi envisions a world in which gasoline-powered cars are replaced by electric cars, and it supplies charging stations for drivers to recharge or swap batteries and software to enable drivers to manage their travel. Renault-Nissan has agreed to make electric cars that work with Better Place's system. Israel and Denmark will be Better Place's first fully deployed markets in 2011, it says.
While still at SAP and before launching Better Place, Agassi laid out his vision to several people, including Israeli President Shimon Peres. Peres encouraged him to follow through on it.
Agassi responded that his goal was to be the next CEO at SAP. Peres, Agassi recalls, asked him why he wanted to do that when his vision for electric cars could save the planet.
"I didn't have a good answer," he says.