Microsoft co-founder Bill Gates, along with a host of other investment partners, is starting a $1 billion investment group, called the Breakthrough Energy Ventures fund, aimed at fighting climate change through investing in the business of clean energy production. The BEV fund, intended to run for 20 years, will be focusing on investing in companies that are developing new technologies that will reduce greenhouse gas emissions in the areas of agriculture, electricity generation and storage, transportation, industrial processes, and energy-system efficiency.
“Anything that leads to cheap, clean, reliable energy we’re open-minded to,” explains Gates, acting as BEV’s chairman.
BEV’s directors include Alibaba founder Jack Ma; Reliance Industries chair Mukesh Ambani; venture capitalists John Doerr and Vinod Khosla; former energy hedge fund manager John Arnold; and SAP cofounder Hasso Plattner. Bloomberg and Forbes estimate the combined net worth of these individuals to be $170 billion — potentially a massive amount of clout to back green energy development with. Further to this, Gates plans on bringing more strategic partners into the fold, as the fund will require more than the initial $1 billion it is being started with.
Gates and his partners know that investment in this field is risky: it is estimated that venture capital firms invested $25 billion in clean energy technology development between 2006 and 2011, with more than half of those investments going up in smoke. Unlike information technology, Gates explains that “People think you can just put $50 million in and wait two years and then you know what you got. In this energy space, that’s not true at all.”
Because of this, investing in new green energy technologies is also a relatively untouched field, according to Gates, offering the BEV group the potential to see healthy long-term profits. They estimate the current global energy market to be worth one trillion dollars, and expect it will grow by one-third by 2040. “It’s such a big market that the value if you’re really providing a big portion of the world’s energy, the value of that will be super, super big.”
“Being a 20-year fund with patient capital that’s not needing short-term gains allows us to have a longer-term outlook as well as fund technologies that don’t fit into the traditional VC model as it exists today,” says partner John Arnold.
Traditionally, innovative developments in the clean energy field are made in the lab, but they tend to remain there, lacking the investment capital to actually commercialize the idea that would make it available to the public. As BEV advisor and Stanford University Professor Arun Majumdar explains, “You need investment to take things out of a research lab at a university like Stanford, or MIT, Berkeley, and many other places, or national labs, for example, they’re doing a lot of research.”