If you are the CEO of a green technology company, you might want to brush up on your language lessons.
This week, Sage Electrochromics—a company that makes windows that automatically tint to cut heating and air conditioning—was acquired by Saint-Gobain in a deal that underscores one of the long-running, yet little-noticed, trends in green technology. Namely, that conglomerates from France have been on an extended buying spree in the U.S.
The French seem to be everywhere. Late last month, NanoH2O, which has developed an advanced desalination membrane, announced it had raised $60 million more in venture funds. One of the new investors was Total Energy Ventures International, the venture arm of the Total energy conglomerate. Since 2009, NanoH2O has been working with Veolia, the water and waste conglomerate that helped build the sewers of Paris.
Total, meanwhile, bought a controlling interest in SunPower, the U.S.-based solar manufacturer and developer in 2011. (Note: earlier I said 2010.) Total Ventures also has investments in Agylix, an Oregon-based company that turns old plastic into petroleum, and various other start-ups.
In 2009, Areva, the nuclear power plant builder that is primarily owned by the French government, bought Ausra, a solar thermal developer. Areva solar recently announced it would build a 250-megawatt solar thermal plant in India, a first for that country.
But wait! There’s more! Schneider Electric, which provided electrical equipment to projects commissioned by Napoleon III, has purchased U.S. and European companies at a steady clip over the past two years. A few days ago, it bought M&C Energy Group, which provides sustainability and procurement services.
Last year, it bought Telvent, which provides grid monitoring services, for $2 billion as well as Lee Technologies (data center equipment--$140 million), SmartLink (cabling), Summit Energy (energy management, $268 million) most of Luminous Technologies (power storage equipment) and others.
The only company that’s perhaps outdone Schneider in relentlessly sweeping up companies in energy services and equipment is ABB. ABB has an American CEO, an ex-GE exec named Joe Hogan, but It’s based in Switzerland. Where French is a legal language!
None dare call it conspiracy.
And Nissan-Renault was the first major car company to promote all-electrics.
What is driving this trend? First, renewable energy and energy efficiency have historically loomed larger in Europe than the U.S. Energy prices are higher in Europe and the continent doesn’t have the same fossil fuel resources. Energy conservation has been an integral part of the economy since the 1970s. Environmental concerns have also often received more attention and popular support in Europe than the U.S. Thus, it is only natural that European firms would have a heightened interest in green start-ups.
France itself could even credit the company with inventing the green industry. In 1839, Edmond Becquerel discovered the photovoltaic effect while experimenting with an electrolyte cell. A year later, August Mouchet proposed the idea of solar-powered steam engines. In 1859, Gaston Plante invented the lead acid battery.
But more importantly, Europe tends to specialize in conglomerates, those large, sprawling companies with decades of experience, long-standing customer relationships and deep expertise in their labs. When engineers graduate, they often take jobs at companies like Audi, Siemens or Audi and don’t leave until their retirement party or the ambulance shows up.
By contrast, conglomerates in the U.S. have taken a backseat to start-ups and new ventures. New college graduates want to work at the next Facebook or Google. They’re not clamoring for jobs at Eaton. Granted, I am generalizing here, but look at the flow of venture capital. Far more VC funds flow to companies in the U.S., Israel and Taiwan than European countries.
Conglomerates are better suited to develop and market green technologies. Some of these ideas take millions of dollars in capital and years to develop. Start-ups typically don’t have these luxuries.
The customer base is also different. The potential audience for Instagram or Pinterest is three billion people. Anyone with access to a computer and a digital camera can participate for free. By contrast, green tech companies typically have to sell their products to utilities, auto companies, industrial contractors or oil companies and their engineers will put your product through the industrial equivalent of a colonoscopy before they even think about engaging in a trial project.
These customers ultimately might buy billions of dollars worth of your products, but it could take years. The only way for a start-up to guarantee it will be around for the long haul is to join with an established player.
Saint-Gobain, which made the original mirrors for the Palace of Versailles, had earlier invested $80 million in Sage. The acquisition will provide the capital to finish a $135 million factory in Minnesota.
Expect more deals like this to follow. VCs have become skittish about investing in green technology. Many governments have also begun to cut funding for green programs. Nonetheless, the outlook still looks promising. Nuclear has hit a wall in Japan, Germany and South Korea. French voters have expressed their view of fracking—they don’t like it. Oil still hovers at over $100 a barrel. Meanwhile, Asian giants like Samsung, TSMC and LG continue to partner and buy their own U.S. startups.
The garage sale has just begun.
