REVIEW & OUTLOOK
Wall Street Journal
Global Warming, Inc.
November 20, 2007
Page A18

Al Gore no longer needs to make claims about creating the Internet, because the former Vice President deserves
much of the credit for creating an entire new industry -- the global warming business.
And like the energy barons of an earlier age, Mr. Gore has the chance to achieve enormous wealth after being
named last week as a new partner at the famously successful venture capital firm Kleiner Perkins. No fewer than
three of his new colleagues sit on the Forbes list of wealthiest Americans. If Mr. Gore can develop market-based
solutions to environmental challenges, we will cheer the well-deserved riches flowing his way. On the other hand,
if he monetizes his Nobel Peace Prize by securing permanent government subsidies for nonmarket science
projects, he'll have earned a different judgment.
There's no shortage of new capital pouring into alternative energy projects these days. According to the National
Venture Capital Association, "clean tech" start-ups attracted more than $800 million in venture capital last quarter,
a new record. What's not clear is whether these are fundamentally energy ventures or political ventures. The
Manhattan Institute's Peter Huber, a former engineering professor at MIT, exaggerates only slightly when he says
that "Basically, 'alternative' means stuff that nobody actually uses." If that turns out to be true, then alternative
energy companies could struggle for market share without government assistance.
Those doubts exist even for the companies backed by Kleiner Perkins. After making more than a dozen "green
tech" investments, Kleiner is still waiting for its first exit. According to a Kleiner spokeswoman, many companies in
its portfolio are "in stealth mode." The firm will "neither name nor comment on them." So it's impossible to
determine precisely how much the Kleiner-backed firms will benefit from either current federal subsidies, or new
provisions that are part of the House and Senate versions of the stalled energy bill. But we do have some hints.
Of the portfolio companies acknowledged publicly by Kleiner, at least two, Altra and Mascoma, are involved in the
production of ethanol, which is already heavily subsidized and would get more subsidies in the House bill and
higher mandates in the Senate version. A third firm in the portfolio, Amyris Biotechnologies, is developing a
biofuel that will provide "more energy than ethanol," according to its Web site, and should be just as eligible for
government set-asides.
Two portfolio companies in the solar energy field, Miasole and Ausra, should benefit if a House provision requiring
investor-owned utilities to generate 15% of their power from wind, solar or geothermal sources becomes law. The
same is true for Altarock Energy, a Kleiner-backed geothermal company. Lux Research analyst Ying Wu reports
that "company valuations will take a pretty big hit" in Miasole's market segment if Washington turns off the subsidy
spigot.
To put it another way, Kleiner's "risk-taking" here isn't all economic. When everything is going according to plan,
do venture capitalists normally turn to a politician/filmmaker to help them cash out of engineering firms?
Nope, but then again alternative energy has never fit the usual venture model. Jack Biddle, co-founder of Novak
Biddle Venture Partners, says there's a reason few start-up companies try to build commercial jetliners. "Large,
complex systems with slow deployment cycles do not play to venture's strengths. The whole idea with
venture-backed companies is speed, speed, speed." Mr. Biddle says the size and complexity of energy systems
"make 787s look like tinker toys. You need lots of capital, lots of time, lots of people."
Mr. Gore seems to grasp the scale of the challenge, and the need for government help, telling Fortune magazine,
"What we are going to have to put in place is a combination of the Manhattan Project, the Apollo Project and the
Marshall Plan, and scale it globally." That's the kind of "green" vision that will require a lot of greenbacks.
We'll be as happy as the Sierra Club if one or more of these new technologies turns out to solve the secrets of
cheap, efficient energy. But we recall the same technological promises being made in the 1970s, the last time the
feds poured subsidies into alternative fuels.
Which leads us to suspect that maybe Mr. Gore has been hired by Kleiner Perkins for more than his technological
know-how, investment acumen, or global vision. His new partners may have hired him for the more prosaic task of
getting 60 Senate votes to keep those taxpayer greenbacks coming.
The VP is No Fool
... two faced maybe, but no fool
Which "Al" is it, servant of the
people (under "BJ" Clinton), or
Carbon Snake Oil Profiteer?
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