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Lobbyists Are First Winners in Obama’s Clean-Technology Push
By Tim Mullaney
March 25 (Bloomberg) -- At first glance, SmartSpark Energy Systems looks like a lot of technology startups. It raised $6 million in venture capital, employs 24 people and doesn’t make any money.
What sets the company apart: It has two teams of lobbyists.
The first jobs of the federal clean-energy stimulus plan are here -- and they’re for lobbyists. SmartSpark is part of a stampede of technology companies hiring insiders in Washington and state capitals to gain influence. They’re vying for a piece of last month’s $787 billion stimulus package.
“There is so much at stake here that there’s an enormous need for entrepreneurs to get close with policy makers,” said Jason Matlof, a partner at Battery Ventures in Menlo Park, California. “There are billions just for R&D. It’s a lot of money.”
The spending is far more than venture capitalists can give renewable-energy companies, especially during a recession, Matlof said. Battery told its eight clean-technology companies last month to put a specific executive in charge of getting public money, and to consider hiring lobbyists.
The stimulus bill, signed by President Barack Obama last month, includes $77.6 billion for clean-energy projects, according to the research firm IDC.
Money Chase
Competition for government dollars will be intense, said Jon Sakoda, a partner at New Enterprise Associates in Chevy Chase, Maryland. NEA has 25 clean-energy startups in its portfolio, he said.
“At least half have either hired lobbyists or will in the next three to six months,” Sakoda said.
Cleantech Group, a San Francisco consulting and executive- search firm, says venture capitalists are bombarding it with requests to form a trade association. They want a permanent presence in Washington to lobby for the industry.
“It’s the topic du jour,” said Dallas Kachan, a managing director at Cleantech Group. “We’ve literally spent the last few weeks trying to figure out how we can play a role.”
Another organization, called Cleantech and Green Business for Obama, is within weeks of announcing a plan to form a permanent group, co-chairman Josh Becker said. The organization raised $1.6 million for the president’s campaign last year.
The new industry wants to make progress in Washington before congressional elections next year and a presidential race in 2012, Matlof said. If the Republicans retake power, it may be reminiscent of 1981, when President Ronald Reagan abandoned Jimmy Carter’s pro-conservation policies, he said.
Avoiding 1981 Repeat
The renewable-energy industry won’t exist without initial subsidies, Matlof said.
“If we don’t solve this problem quickly, we’ll have a repeat of 1981 and the opportunity will go away,” he said. “Reagan canceled all the renewables programs and we went back to driving SUVs.”
The stimulus money arrives at a time when other clean- technology financing is shrinking.
Venture capitalists invested $4.12 billion in clean-energy startups last year, according to the National Venture Capital Association in Arlington, Virginia. Funding fell 14 percent in the fourth quarter from the third.
The recession has made it harder to finance alternative- fuel projects, such as the construction of factories. Companies often funded those projects by selling their tax credits to investment banks. That market was dominated by banks looking to use the write-offs to shelter profits, said Greg Broome, a partner at the law firm of Wilson, Sonsini, Goodrich & Rosati in San Francisco.
“Tax-equity financing has been very slow for the last six months because of the economy,” Broome said.
Solar Equipment
SmartSpark is looking for money to produce solar-power inverters, which turn the direct current generated by solar panels into the alternating current used by electricity grids.
Born out of a research project at the University of Illinois at Urbana-Champaign, SmartSpark is planning a move to Austin, Texas. The company has hired lobbyists in that state, as well as Washington.
“It’s something that is new for us, and we’re doing it in a big way, especially in Texas,” said SmartSpark Chief Executive Officer Ron Van Dell. “But I think it’s appropriate given the market focus we have.”
Dual Role
The lobbyists do two big jobs, said Jef Sharp, co-founder of Qteros Corp., a startup in Marlborough, Massachusetts. His company is commercializing a microbe that lets ethanol makers get more fuel from each batch of wood or fiber consumed.
One job is to help companies like Qteros apply for grants, he said. The more important role is to meet with federal energy regulators, who write the criteria for grants, Sharp said. That way, the government funds projects that fit Qteros’s work.
“With the capital markets, good deals are still getting done, but it’s definitely harder,” said Sharp, who wants aid for a $25 million pilot plant. “The valuations aren’t as good. It’s definitely not a good environment, and there’s a need for the government.”
Qteros has three lobbying firms -- two in Washington and one in Boston, Sharp said.
Law firms say the extra lobbying work is just the beginning of their own stimulus. At the firm of Mintz Levin, business from startups has added 10 percent to its clean-energy practice, said Tom Burton, a partner in Boston. Successful startups will ultimately generate work for tax, financing and corporate lawyers, he said.
Sharing Resources
Setting up a permanent trade group in Washington would cut costs for startups and help companies that can’t afford their own lobbyists, Kachan said.
The Greentech for Obama group doesn’t expect to create a formal lobbying group, though it will probably have a Washington presence, said Becker, a partner at New Cycle Capital in San Francisco.
During the election campaign, his organization hosted events with local entrepreneurs in swing states. Their message: The benefits of clean-energy funding will extend beyond California and other technology centers. The group attracted 7,000 contributors, many of which are executives at clean- technology companies.
To contact the reporter on this story: Tim Mullaney in New York at tmullaney1@bloomberg.net
Last Updated: March 25, 2009 00:01 EDT
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