Jumping Into the 6th Technology Revolution

We're at risk of missing out on some of the most profound opportunities offered by the technology revolution that has only begun.

Yet many are oblivious to the signs and are liable to watching this become a period of noisy turmoil rather than the full-blown insurrection needed to launch us into a green economy. Might know about require is not a new spinning wheel, but fabrics woven with nanofibers that generate solar power. To make that come about, we need a radically reformulated way of understanding markets, technologies, financing, and the role of government in accelerating transformation. But will we understand the opportunities before individuals disappear?

Seeing the Sixth Revolution for What It will be

We are seven years into the beginning of what experts at BofA Merrill Lynch Global Research call a Sixth Revolution. A table by Carlotta Perez, that has been presented during a recent BofA Merrill Lynch Global Groundwork luncheon hosted by Robert Preston and Steven Milunovich, outlines the revolutions that are unexpected in their own instance that lead to the one in which we find ourselves.

1771: Mechanization and improved water wheels

1829: Development from steam for industry and railways

1875: Cheap metallic, availability of electricity, and the use of city gas

1908: Very affordable oil, mass-produced internal combustion engine vehicles, and wide-spread electricity

1971: Expansion of information and tele-communications

2003: Cleantech and biotech

The Vantage of Hindsight

Seeking back at 1971, we know that Intel's introduction of your microprocessor marked the beginning of a new era. But in that time, this meant little to people watching Mary Tyler Moore and The Partridge Family, or listening to Tony Holiday & Dawn and Janis Joplin. People would take into account humanity's first steps on the Moon, opening relations amongst US and China, perhaps the successful completion of the Individuals Genome Project to 99. 99% accuracy, and possibly all the birth of Prometea, the first horse cloned by Italian scientists.

According to Ben Weinberg, Partner, Element Partners, "Every day, we see American companies with promising technology that are unable to deploy their products because of a lack of bill financing. By filling this gap, the government will of curiosity the mass deployment of innovative technologies, allowing technological innovations ranging from industrial waste heat to pole-mounted solar PV in order to prove their economics and gain credibility in the arrears markets. "

Flying beneath our collective radar was initially the first floppy disk drive by IBM, the international first e-mail sent by Ray Tomlinson, the roll-out of the first laser printer by Xerox PARC and also Cream Soda Computer by Bill Fernandez and Charlie Wozniak (who would found the Apple Computer firm with Steve Jobs a few years later).

Times have not transformed that much. It's 2011 and many of us face a similar disconnect with the events occurring around us. We are at the the same of 1986, a year on the cusp of the personal computer and then the Internet fundamentally changing our world. 1986 was also 2010 that marked the beginning of a major financial shift into brand new markets. Venture Capital (VC) experienced its most substantial finance-raising season, with approximately $750 million, and the NASDAQ was basically established to help create a market for these companies.

Leading the charge was Kleiner Perkins Caulfield & Beyers (KPCB), a firm that turned technical expertise into possibly the almost all successful IT venture capital firm in Silicon Valley. Typically the IT model looked for a percentage of big success to offset losses: an investment like the $8 zillion in Cerent, which was sold to Cisco Systems intended for $6. 9 billion, could make up for a lot of great strategies that didn't quite make it.

Changing Financial Models

However VC model that worked so well for information and telecommunications doesn't work in the new revolution. Not only is the financing dimensions of the cleantech revolution orders of magnitude larger than the third, this early in the game even analysts are striving to see the future.

Steven Milunovich, who hosted the BofA Merrill Lynch Global Research lunch, remarked that each industrial wave has an innovation phase which may last for as long as 25 ages, followed by an implementation phase of another 25. Almost all money is made in the first 20 years, so real individuals want to get in early. But the question is: Get in whereby, for how much and with whom?

There is still market scepticism and uncertainty about the staying power of the clean energy innovation. Milunovich estimates that many institutional investors don't believe in world-wide warming, and adopt a "wait and see" frame of mind complicated by government impasse on energy security law. For those who are looking at these markets, their motivation ranges as a result of concerns about oil scarcity, supremacy in the "new Sputnik" race, the shoring up of homeland security not to mention - for some - a concern about the effects of weather change. Many look askance at those who see that we have been in the midst of a fundamental change in how we produce and utilize energy. Milunovich, for all these reasons, is "cautious temporarily, bullish on the long. "

The Valley of Departure

Every new technology brings with it needs for fresh financing. In the sixth revolution, with budget needs 10 times those of IT, the challenge is moving from suggestion to prototype to commercialization. The Valley of Demise, as a recent Bloomberg New Energy Finance whitepaper, Crossing the Valley of Death pointed out, is the gap in between technology creation and commercial maturity.

But some investors and also policy makers continue to hope that private capital should fuel this gap, much as it did the last. Individuals express concern over the debt from government programs for instance the stimulus funds (American Recovery and Reinvestment Act) which use invested millions in new technologies in the clean vigor sector, as well as helping states with rebuilding infrastructure along with other projects. They question why the traditional financing models, which will made the United States the world leader in information technology and telecoms, can't be made to work today, if the Government would just simply get out of the way.

But analysts from many sides about financing believe that government support, of some kind, is essential to maneuver projects forward, because cleantech and biotech projects demand a much larger input of capital in order to get to commercialization. The gap not only affects commercialization, but is also affecting ventures in new technologies, because financial interests are concerned which will their investment might not see fruition - get to professional scale.

How new technologies are radically different from the actual computer revolution.

Infrastructure complexity

This revolution is greatly dependent on an existing - but aging - energy national infrastructure. Almost 40 years after the start of the telecommunications revolution, our company is still struggling with a communications infrastructure that is fragmented, repetitive, and inefficient. Integrating new sources of energy, and building better use of what we have, is an even more complex - and more vital - task.

According to "Crossing the Vly of Death, " the Bloomberg New Energy Lending Whitepaper,

"The events of the past few years confirm that it will be only with the public sector's help that the Commercialization Pit of Death can be addressed, both in the short as well as long term. Only public institutions have 'public benefits' agreements and the associated mandated risk-tolerance for such classes connected with investments, along with the capital available to make a difference at scale. Venture financiers have shown they are willing to pick up the ball plus finance the third, 23rd, and 300th project that purposes that new technology. It is the initial technology risk the fact that credit committees and investment managers will not tolerate. "

Everything runs on fuel and energy, from the homes to our cars to our industries, schools, and hospitals. Most of us have experienced the disconnect we feel when ensnared in a blackout: "The air-conditioner won't work so I think I'll turn on a fan, " only to realize we all can't do either. Because energy is so vital to make sure you every aspect of our economy, federal, state and local choices regulate almost every aspect of how energy is developed, started, and monetized. Wind farm developers face a patchwork quilt of municipal, county, state and federal limitations in getting projects to scale.

Incentives from administration sources, as well as utilities, pose both an opportunity and a menace: the market rises and falls in direct proportion for you to funding and incentives. Navigating these challenges takes occasion and legal expertise: neither of which are in abundant deliver to entrepreneurs.

Development costs

Though microchips are making ever-smaller electronics, cleantech components - such as wind turbines as well as photovoltaics - are huge. They can't be developed from a garage, like Hewlett and Packard's first oscilloscope. The latest generation of biofuels that utilizes nanotechnology isn't gonna take place out of a dorm room, as did Emmanuel Dell's initial business selling customized computers. What this means for the purpose of sixth revolution projects is that they have much larger funding really needs, at much earlier stages.

Stepping up and supporting uniqueness, universities - and increasingly corporations - are partnering with early-stage entrepreneurs. They are providing technology sources, such as laboratories and technical support, as well as management expertise throughout marketing, product development, government processes, and financing. Colleges or universities get funds from technology transfer arrangements, while organizations invest in new technologies, expanding their product base, starting new businesses, or providing cost-benefit and risk-analysis of approaches.

But even with such help, venture capital and other secret investors are needed to augment costs that cannot be launched alone. These investors look to some assurance that tasks will produce revenue in order to return the original investment. Therefore concerns over the Valley of Death affects even early on stage funding.

Timeline to completion

So many individuals balk at two year contracts for our cell phones there is talk of making such requirements illegal. But energy ventures, by their size and complexity, look out over decades, if not decades. Commercial and industrial customers look to multiply their costs over ten to twenty years, and agreements cover contingencies like future business failure, the selling of properties, or the prospect of renovations that may impinge on the long term viability of the original project.

Kevin Walsh, curbing director and head of Power and Renewable Energy source at GE Energy Financial Services states, "GE Energy levels Financial Services supports the creation of CEDA or perhaps similar institution because it would expand the availability of low-cost capital to the projects and companies in which we expend, and it would help expand the market for technology supplied by other GE businesses. "

Michael Holman, analyst pertaining to Lux Research, noted that a $25 million investment through Google morphed into $1. 7 billion 5 numerous years later. In contrast, a leading energy storage company started along with a $300 million investment, and 9 years later survey remains uncertain. These are the kinds of barriers that can booth the drive we need for 21st century technologies.

Planning to help bridge the gap in new cleantech and biotech projects, is a proposed government-based solution called any Clean Energy Deployment Administration (CEDA). There is a house together with senate version, as well as a house Green Bank bill to present gap financing. Recently, over 42 companies, representing a large number of industries and organizations, signed a letter to Web design manager Obama, supporting the Senate version, the "21st One Energy Technology Deployment Act. "

Both the house and additionally senate bills propose to create, as an office within the US Department of Energy (DOE), an administration which would be tasked with lending to risky cleantech projects for the purpose of sending new technologies to market. CEDA would be the bridge needed to confirm the successful establishment of the green economy, by joining up with private investment to bring the funding needed to secure these technologies to scale. Both versions capitalize the particular agency with $10 Billion (Senate) and $7. 5 Billion (House), with an expected 10% loss reserve long lasting.

By helping a new technology move more effectively through the pipeline from idea to deployment, CEDA can substantially strengthen private sector investment in energy technology development in addition to deployment. It can create a more successful US clean energy market place, with all the attendant economic and job creation benefits.

What person Benefits?

CEDA funding could be seen as beneficial for even one of the most unlikely corporations. Ted Horan is the Marketing and Enterprise Development Manager for Hycrete, a company that sells the waterproof concrete. Hardly a company that springs to mind as we think about clean technologies, he recently commented on the reason Hycrete CEO, Richard Guinn, is a signatory on the notice to Obama:

"The allocation of funding for promising clean energy technologies through CEDA is an important help solving our energy and climate challenges. Companies within the cusp of large-scale commercial deployment will benefit significantly and help accelerate the adoption of clean energy source practices throughout our economy. "

In his judgment, the manufacturing and construction that is needed to push us out of a stagnating economy will be supported by development coming from the cleantech and biotech sectors.

Google's Dan Reicher, Director of Climate Change and Energy Initiatives, is a huge supporter from the inception of CEDA. He has testified well before both houses of Congress, and was a signatory on the letter to President Obama. Google's interest in fresh and renewable energies dates back several years. The company is make an effort to involved in projects to cut costs of solar thermal along with expand the use of plug-in vehicles, and has developed the Power Meter, a product which brings home energy management to a person's desktop-for free.

Financial support includes corporations like GE Energy Financial Services, Silicon Valley Venture Capital such as Kleiner, Perkins Caulfiled and Byers, and Mohr Davidow Investment strategies, and Energy Capital including Hudson Clean Energy and even Element Partners. Can something like the senate version for CEDA leap the Valley of Death?

As Should Coleman from Mohr Davidow Ventures, said, "The Devil's in the details. " The Senate version has couple of significant changes from previous proposals: an emphasis on wonderful breakthrough as opposed to conventional technologies, and political independence.

Neil Auerbach, Managing Partner, Hudson Clean Energy

The clean energy levels sector can be a dynamic growth engine for the US market, but not without thoughtful government support for private cash formation. **[Government policy] promises to deliver as a valuable bridging tool to accelerate private growth capital formation around companies facing the challenge, and can help always make sure that the US remains at the forefront of the race for prominence in new energy technologies.

Breakthrough Technologies

Coleman believed that "breakthrough" includes the first or second deployment of any new approach, not just the game changing science-fiction solution who finally brings us limitless energy at no cost. The Bloomberg New Energy white paper uses the term "First in Class. " Bringing solar efficiency up from 10% to 20%, or bringing manufacturing costs down through 50%, would be a breakthrough that would help us begin to contest with threats from China and India. Conventional technologies, those who are competing with existing commercialized projects, would receive less emphasis.

Political Independence

Political independence is finest of mind for many who spoke or provided an studies of the bill. Michael Holman, analyst at Lux Researching, expressed the strongest concerns that CEDA doesn't target enough on incentives to bring together innovative start-ups through larger established firms.

"The government itself taking on the responsibility of deciding what technologies to back isn't more likely to work-it's an approach with a dreadful track record. That said, it is important for those federal government to lead - the current financing model just for bringing new energy technologies to market is broken, not to mention new approaches are badly needed. "

For many, typically the senate bill has many advantages over the house bill, on providing for a decision making process that includes technologists and also private sector experts.

"I think both sides [of the aisle] understand this is an important plan, and must enable the government to be flexible and hire a number of different approaches. The Senate version empowers CEDA to take a portfolio approach and manage risk gradually, which I think is good. In the House bill, CEDA should undergo the annual appropriation process, which runs danger of politicizing every investment decision in isolation and prior to we have a chance to see the portfolio mature. " - Will probably Coleman, Mohr Davidow.

Michael DeRosa, Managing Director regarding Element Partners added,

"The framework must ensure the selection of simple technologies, optimization of risk/return for taxpayer dollars, plus appropriate oversight for project selection and spending. **Above all, these policies must be designed with free markets key facts in mind and not be subject to political process. "

Should history is any indication, rarely are those in the center of game-changing events aware of their role in what will sooner or later be well-known for their sweeping influence. But what we can easily see clearly now is the gap between idea and business oriented maturity. CEDA certainly offers some hope that we will probably yet see the cleantech age grow up into adulthood. But will probably we act quickly enough before all of the momentum as well as hard work that has brought us this far falls even as other countries take leadership roles, leaving people in the dust?

THE GREEN ECONOMY is an information enterprise, providing timely, credible facts and analyses on providers adapting to meet the challenges of a green future.