‘Clean-tech’ Start-ups are Pushing the Green Button: Los Angeles Times, June 2009

Amit Chatterjee worked for three Silicon Valley start-ups and software company SAP, but he was growing increasingly intrigued by global warming and climate change. The more he delved into the issue, the more he became convinced that there was a way to use software to help tackle the problem.

His idea — to help companies track and manage their use of energy, water and other resources — drew the backing of the valley’s most prominent venture capital firm, Kleiner Perkins Caufield & Byers.

Today, thanks to Kleiner’s $6-million investment, Chatterjee unveils his latest start-up, Hara, which monitors and manages companies’ water and energy consumption, and helps them plan ways to mitigate their environmental effects.

Hara’s arrival, after operating quietly for the last year and a half, shows how the tech wizards behind many Internet companies are now hard at work building digital solutions to save water, money, energy and maybe even the planet. Kleiner Perkins managing partner Ted Schlein, a Hara board member, calls it “the greening of IT,” saying that large corporations are ready to use information technology to make their businesses more eco-friendly because it’s the right thing to do and it can save them money.

Venture capitalists, big companies including Cisco Systems Inc. and General Electric Co. and private equity firms have been pumping money into a variety of green IT initiatives, said Ron Pernick, co-founder and principal of Clean Edge Inc., an environmental research and consulting firm. A major push includes an effort to make the nation’s power grid “smarter” by using sensors and networking technology so companies can track their electricity use.

These initiatives look at the demand side — figuring out how people are using energy — rather than the supply side, such as solar power, to replace the type of energy being generated.

Hara’s innovation, CEO Chatterjee said, is giving companies an “organizational metabolism index,” much like a fitness trainer gives someone a body mass index. It measures the fossil fuels, water and waste at a company and calculates how to save money.

In the absence of a good software program, companies have been trying to get on top of this by manually entering data into Excel spreadsheets or other systems, said Rob Enderle, president and principal analyst for Enderle Group. Or they pay large fees to consulting companies to analyze their carbon footprints.

For the last few years, venture capitalists have poured money into so-called clean-tech companies, which use technology to solve environmental problems, at a much faster rate than traditional technology. The field appears particularly poised for growth as the Obama administration begins to pump stimulus dollars into green energy initiatives, and as governments around the world consider making companies pay for the amount of carbon they generate.

“Clean-tech investment almost doubled every year for the past several years,” said Jessica Canning, research director for Dow Jones VentureSource. Venture funding of clean-tech companies rose to $5 billion last year from $687 million in 2005.

That money has dropped in the last two quarters as the turmoil in the financial markets has made investors reluctant to sink large sums into projects that could take years to pay off. Pricewaterhousecoopers reports that funding of clean-tech companies dropped 84% in the first quarter of 2009 to $154 million, down from $971 million the fourth quarter of 2008. Investing in solar shrank 97% and alternative fuels 69%.

“The capital-intensive companies like solar and biofuels, which were the key drivers of the past few years, really fell in the first quarter,” said Tim Carey, head of PricewaterhouseCoopers’ U.S. clean-tech division. “That was partly due to overall uncertainties in the economy. Those companies require large amounts of capital.”

But software firms can be started for far less. “If you have less money, you have to be smart and invest in energy-efficiency technologies, and IT and management systems start becoming more effective,” said Jacqueline Crespo, who leads the venture capital and technology practice at New Energy Finance Ltd. in Palo Alto, a research provider for the clean-energy industry. “You’re going after the same market, but it’s not as capital-intensive.”

That strategy has the added bonus of appealing more directly to the folks who will ultimately buy the new technology. Solar panels could be a hard sell if the return on investment is still years away, but a software system that helps a company become more energy efficient may pay for itself a lot sooner.

That’s what Coca-Cola Co. found when it tried Hara’s software in a pilot test at 12 sites around the world

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