The New Challenge

Starting and running a business is never easy. That said, it
is easier in some industries than in others. Look at internet technology, for
instance. Open standards, open source code, developer programs and platforms
have made it easier than ever for a single person to develop and launch
innovative, fun and effective applications.

The exact opposite is true for clean technology. The
barriers to entry and the hurdles to overcome are among the highest of any
industry, other than perhaps biotechnology.

Clean technology startups face daunting and complex
challenges from factors both within and outside their control. First, the
research and development needed to create new forms of energy are exponentially
costly and time consuming, whether it is at the molecular level with enzymes or
the macro level with wind turbines. Most innovations must be proven at the lab
before they have a chance of attracting venture capital.

Even if you can get an innovation to work in the lab,
scaling it to the size needed to perform at utility or commercial levels is
extraordinarily complexand costly. An integrated biorefinery that can make
renewable fuels from biomass can run in the hundreds of millions of dollars.
With the recession still chilling the capital and debt markets, clean tech
entrepreneurs are finding it nearly impossible to attract the funding needed to
prove technology at a commercial scale.

Complicating matters even further are the significant
regulatory, safety and policy issues that must be addressed before products and
technologies can be certified to work with the existing infrastructure. Here in
the Northwest, new energy sources must compete with some of the nations lowest
power costs (about $.07 per kilowatt hour). Surveys show that while the
majority of Americans support clean technology, they dont necessarily want
their power bill to increase.

Despite these hurdles, only four other states have received
more venture capital for clean tech companies than Washington state. In total,
more than $750 million has been invested in clean tech during that time, and
clean tech represents a growing share of total VC investments. Our state has
been a leader in developing a range of innovative companies across the
spectrum, from biotech to biofuels, from smart software to smart grids and from
energy efficient lights to energy efficient buildings.

There are an estimated 22,900 clean tech jobs in the Puget
Sound region alone, a number that is anticipated to increase by about 3,900 in
the next five years according to a report from the Prosperity Partnership. And
all industries within clean tech are expected to grow at a rate higher than the
economy as a whole.

We have a strong set of assets in the Northwest including
experienced entrepreneurs, angel investors such as the Northwest Energy Angels,
deep expertise in software, biotechnology, materials science, and building
management and efficiency. Our universities are developing new technologies, as
are our two national labs.

But even these assets can use a little boost. The Cleantech
Open, which is a national nonprofit dedicated to finding, funding and fostering
clean tech companies across the United States, was created to help early-stage
businesses overcome the challenges mentioned above. This innovative approach is
having an impact, with Cleantech Open alumni having raised over $160 million in
private capital while creating more than 1,200 jobs; more than 80 percent of
these positions remain economically viable today.

This month, the Pacific Northwest Cleantech Open will select
three companies to represent the region in the finals of the national contestthe
largest clean energy business competition in America.

Who knows? Perhaps one or more of these firms will be among
next years Seattle Business Green
Washington Award winners and will march forward despite the complexities of the
clean tech industry.

Byron McCann is chair of the Pacific Northwest Cleantech
Open, co-chair of the Northwest Energy Angels and founding partner at Ascent
Partners Group, an investment bank advising clean technology and information
technology entrepreneurs.