Benjamin Kuo’s Blog

Although Tesla Motors–which launched its electric sports car Friday in Santa Monica–may get the attention of Silicon Valley, there seem to be a lot more, Southern California companies at the forefront of the green automobile industry. We have more than a handful of companies looking to tackle the auto industry. We had Tom Taulli look into the industry with his piece: Southern California: The New Detroit? this morning.

Among Southern California electric/hybrid car firms here: Miles Electric Vehicles; Phoenix Motorcars; Venture Vehicles; and Aptera Motors. Add to that a few auto technology firms — Fallbrook Technologies for transmissions and Transonic Combustion for fuel injection — plus many others, and it looks like there’s a substantial amount of automotive innovation going on in the region.

Part of the reason for this is a long involvement by Southern California in the automotive industry. Not too may people are aware that the Art Center College of Design in Pasadena is one of the leading schools for automotive designers in the word. The major auto firms all have design houses out here — BMW Group/Designworks USA, California Advanced Product Creation (Ford), Calty Design Research (Toyota), 5350 Industrial Concepts (General Motors), Mercedes Benz, DaimlerChrysler, and Volkswagen/Audi all have design operations in Southern California.

As Tom writes:

Of course, it’s all good news for a variety of companies in southern California, which are developing next generation car technologies. “Southern California is the home to a myriad of design studios for all the major car companies,” said Andre Peschong, who is a principal at Bridgewater Capital. “There is a talent pool of engineers, CAD design specialists and let’s face it, a car culture.”

There was a good interview with Idealab’s Bill Gross on NPR yesterday. Interview starts around 4/5ths through the podcast version. (I talked with Bill Gross last year in an interview here…)

CNET has some further details this morning on Kaai and Soraa, two stealth startups in the LED market which were recently stealth funded by Vinod Khosla’s Khosla Ventures. The companies — both of which are apparently out of UC Santa Barbara — were founded by blue LED inventor Shuji Nakamura and fellow UCSB professor Stephen Denbaars.

It seems that Southern California has suddenly become the center of the electric/hybrid car craze, with two fundings this week of electric car startups. SoCal has long been the center of automobile design industry (BMW, Ford, Toyota, General Motors , Volkswagen, and other automobile manufacturers all have design centers in the Los Angeles area), but the interesting mix of cleantech, automotive design, and venture money is something new here.

Yesterday, Venture Vehicles scored $6M in funding from NGEN, and today, PEHub’s Dan Primack reports that Phoenix Motorcars in Rancho Cucamonga is in the midst of closing a round from Kleiner Perkins. Venture Vehicles and Phoenix Motorcars join Aptera Motors, Idealab’s electric/hybrid vehicle effort.

It seems like a day doesn’t go by that I don’t read about a new thin-film solar panel firm, solar concentrator, carbon credit, or other clean technology firm being funded. There seems to be astronomical interest in almost anything, and everything clean technology related, with a rush to fund anything that might possibly relate to the sector. I’m all for solar power and alternative energy, however, it seems to me that a huge number of these companies are very early, very technology (and not market) focused, and it will take either quite a few years, or some consolidation and working through the many different companies in the sector, before this will truly impact the market. I think a huge amount of focus needs to go into market-driven (not technology driven) firms before consumers can see the impact of all this venture investment.

With all of the hype in the industry about clean technology firms, I recently started looking (personally) at solar power to see just how feasible it would be to convert to solar power right now. I went and contacted six different companies, three of which responded, for a photovoltaic system for my house. I got a range of quotes, using a few different manufacturers of photovoltaic modules, but all in the range of $25K - $30K (after a pile of California rebates) for a system that would handle our household needs. Interestingly enough, most of the installers in the area only do a few dozen installs a year to personal residences; some I talked to had only done one or two installations in my area. It’s really currently a big ticket item; running the numbers it’s not cost effective for the average homeowner.

One of the big areas that companies seem to be looking at right now with solar are reducing the costs of photovoltaic modules. Interestingly enough, based on the quotes I received on modules, they made up only about half the cost of the install; the remainder are things like an inverter, mounting brackets, permits, and labor (where I received wildly differing quotes). Even assuming the dozens of firms developing thin film or other more affordable photovoltaic panels can cut the cost of modules in half, it’s not a huge dent in what is still a large ticket item with a long payback time (>10 years+). I think the challenge for companies in the solar space is actually figuring out how to make the overall system cost more palatable to homeowners, and growing the market demand beyond the “green” consumer to mass acceptance. This might not be so much of a technology fix, as a financial or distribution model which reduces the risk to homeowners. Right now, even with the number of firms looking to reduce solar costs, there’s still only a small market of “green” consumers willing to fork over a fairly substantial amount which will only see a payback over the long term. It seems to me that solar power firms have their work cut out for them, and that investors in the space ought to have a fairly long time horizon in mind when they make bets in this industry.

We just posted an interview I did with Bill Gross of Idealab
this morning. There are a surprising number of clean technology and energy related companies hiding here in Southern California: Altra Biofuels, Clipper Windpower, Earthanol, Energy Innovations, eSolar, Fallbrook Technologies, Oryxe Energy, Transonic Combusion, Soliant Energy, Stirling Cycles, Sunpower Systems, Vycon, Gevo, NanoH2O and Zinc Matrix Power, just to mention a few. Vinod Khosla (via Khosla Ventures) is fairly active in investing in firms in the clean energy space here, having funded NanoH2O, Transonic Combusion, Gevo, and Altra Biofuels; so is Rustic Canyon, with investments in Transonic and US Renewables (headed by Jim McDermott of Stamps.com)–itself an investor in biofuel and clean energy projects. Idealab’s companies are Energy Innovations, Stirling Cycles, eSolar and Aptera Motors. NGEN Partners, a major investor in the space nationwide, is located in Santa Barbara.