Remarkable Innovation

There was some excitement in the mainstream media last July about the demonstration by US firm Witricity of a wireless power device at the TED Global conference in Oxford, UK.

No-one here has had a close look at this particular product, so we can’t add any insight beyond what’s been reported. What we have seen over the past year though, are all kinds of innovations aimed at the portable power market. There’s huge demand, yet with their limited lifespan and toxic ingredients, existing batteries are not the optimum solution. Many innovators are trying to address this issue, in a variety of ways.

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The Wall Street Journal’s “Venture Capital Dispatch” blog has a brief piece about some of the venture investment being directed towards the efficient lighting sector, which is currently dominated by Light Emitting Diode (LED) technologies.

The article quotes some enticing numbers, with Marc van den Berg of VantagePoint Venture Partners estimating that the LED market will grow from its 2008 size of $5 billion to reach around ten times that by 2020.

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You may have read earlier this year that the search giant Google  has launched a $100 million venture capital fund called, appropriately enough, Google Ventures.

The part of the announcement that caught our eye related to how they’re planning to do the technical due diligence on the investment opportunities that they identify:

“The company will look to its employees to help evaluate both specific start-ups and investment areas in general”

From the outside, this sounds like a risky strategy; in our experience, using internal expertise for technical due diligence is often a mistake. Pulling an engineer from his or her day job to consult on an investment opportunity has a lot of potential to cause problems.

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There’s more fallout from the Cello Energy case that we commented on last week, with suggestions from The New Republic journal that the US Environmental Protection Agency (EPA) may have been guilty of neglecting their technical due diligence too.

Perhaps Cello’s investors had difficulty finding the right experts to assess the company (we’re right here chaps!), but surely that’s not a problem for the EPA?

We quite often see cases where investors could have saved a great deal of money by applying more thorough technical due diligence, but the recent Cello Energy fraud case is one of the most clear-cut and dramatic examples that anyone here has ever come across. From Reuters:

Jurors in a federal court have ordered Cello Energy, a biofuel startup run by Alabama’s former ethics chairman, Jack Boykin, and backed by both Silicon Valley cleantech investors Khosla Ventures and pulp maker Parsons & Whittemore Enterprises, to pay more than $10.4 million in a fraud case.

Cello agreed to use discounted wood waste from [Parsons & Whittemore] as feedstock, but “a string of witnesses testified that samples of the fuel allegedly produced at Cello’s facility…were derived entirely from fossil and not renewable sources”

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In our previous post on International Water Week we summarised the talk from the Chair of the American Water Works Association International Council, Mr John Batten.

If that session implied opportunity in the US water sector, the very next talk by David Henderson, Managing Director of XPV Capital Corporation, went a long way to confirming it. Billed as a discussion of “trends in water investments”, David’s talk was effectively a dissection of the “perfect storm” scenario for investors that he sees occurring in the water industry right now.

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Not long ago, I went to see Jim Rogers (the renowned investor and paronomasiac author of “Investment Biker” and “Adventure Capitalist”) speak. He was quick to point out the investment opportunity that will transpire as demand and evolving need, particularly in developing nations, drives huge growth in the water industry over the next decade.

I mention this by way of introduction to a couple of posts on the event that I attended this week: the Singapore International Water Week conference and exhibition.

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We thought it would be interesting to put together some statistics about the technical due diligence projects we’ve worked on over the past six months.

This includes projects we’ve done for venture capital, private equity, large corporate and governmental investors. Obviously we can’t go into very much detail about the projects for confidentiality reasons but it’s interesting to take a look at the trends.

Perhaps it’s not a very accurate representation of where investment is being directed over all, but it at least gives an idea of where technical due diligence is being performed before investments are made.

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We’ve pointed out before here that expert assessors are not the only people with useful information to bring to the table when you’re examining a technology company. We posted some time back, for example, about how that company’s customers can be a gold mine of useful information.

Here’s another group worth talking to. Harder to access and perhaps not the ‘gold mine’ of information that the customers offer, but competitors often have some interesting insight to share too.

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“Lee DeForest has said in many newspapers and over his signature that it would be possible to transmit the human voice across the Atlantic before many years. Based on these absurd and deliberately misleading statements, the misguided public … has been persuaded to purchase stock in his company …”
A U.S. District Attorney, prosecuting American inventor Lee DeForest for selling stock fraudulently through the mail for his Radio Telephone Company in 1913

The quote above is from this list of equally amusing failures to predict the success of new technology.

Aside from the slightly frightening confirmation that simply being too forward-thinking can land you in trouble with the law (Galileo had similar problems), the list also highlights another uncomfortable truth.

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