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| || Nancy Pfund |
Nancy Pfund is a Managing Partner of DBL Investors and an E2 Member. Ms. Pfund currently sponsors or sits on the board of directors of a number of private companies, including Primus Power, SolarCity, Solaria, Brightsource Energy and Pandora. Ms. Pfund also worked closely with exited portfolio company Tesla Motors.
Earlier this month, we sat down with Nancy and had a conversation covering topics ranging from the DBL investing philosophy to the current climate surrounding clean-tech start ups. Here’s what she had to say: On “Double Bottom Line” Investing.
“At DBL, we are focused on accomplishing both financial and social returns. One strategy towards these goals is the investment in and siting of business operations in locations that historically haven’t benefited from investment. This type of siting is made viable partly by securing incentive packages from local governments – loans, for example – to enable the move into those lower-income areas and create jobs. We specialize in providing assistance to companies at the public/private interface - introducing companies to workforce training boards, for example, or educating them in green business certification. We believe there is appreciable value in community engagement – if you give back, you will benefit from positive branding.
Of course, financial success is the key to everything else – companies that do well are ultimately the ones that create jobs. Therefore, financial and social goals enforce each other. This is one reason why we have such a strong focus in clean tech – these types of ventures are capable of satisfying both job creation goals and social/environmental needs. For example, our $75 million first round of funding is projected to create 7000 jobs over the life of the investment. It’s important to get these success stories into the current dialogue, to show that clean tech ventures are a part of the overall successes in this area.” On Tesla.
“While we were looking at siting for a Tesla manufacturing facility, we realized that due to the current level of automation in the manufacturing process, labor costs were not the overwhelming component. With a few incentives, it was viable to stay in CA. Ultimately, Tesla was able to purchase the NUMMI plant in Fremont. For an early company, having manufacturing close to heardquarters has value. Furthermore, Tesla is unique in their supply chain in the sense that they themselves are their supply chain – their batteries are produced in house.” On the State of Solar and Manufacturing Costs.
“Overall, we look at the declining manufacturing costs of solar as a good thing. It has certainly resulted in quite a bit of manufacturing dislocation within the industry, so there are going to be winners and losers. However, downstream players are net beneficiaries: the installation sector is benefiting, and the jobs being created there are all local.
For local companies, innovation will be the key to success in this industry. With the development of new technologies like integrated PV, concentrated PV, and more, we see the beginnings of a whole new chapter for solar innovation. CA companies are pioneering these technologies, and they are going international much earlier in their gestation than before. I think we will see a new crop of companies that will be able to take advantage of global trends and global investments, while thriving locally as well. Solar simply will not be a US-dominated market – China will likely be the largest solar market. A solar company here without a China, India, and/or Europe strategy is not going to maximize its potential.
Take Solaria for example, a company that develops concentrated PV installations that are up to 2.4x as efficient as traditional panels. Solaria produces panels and has installations locally, but they also sell in Italy and throughout Asia. The key to this operations flexibility is the fact that their manufacturing processes are automated enough that labor costs are not a major component.
Throughout the industry, manufacturing processes will eventually become automated to the point where the labor costs per unit will be low enough to give companies flexibility in locating their manufacturing.” On Distributed Manufacturing.
"There is a role for distributed manufacturing, because there are regional markets – India, China, the US. So while you will centralize manufacturing in low cost areas if you haven’t automated yet, as you automate your process, you will begin to have more options. Local manufacturing can provide certain advantages; for instance, having a local manufacturing operation may be key to securing certain incentives or deals, or it can provide for a more efficient supply chain. Having a global strategy is key to the success of US companies." On China.
“The China phenomenon has resulted in companies getting active in China as early as possible – some companies are undertaking joint ventures with Chinese companies, some are setting up manufacturing in China, and some are getting Chinese investments. It makes a lot of sense to embrace China rather than view it is a threat if you’re a clean tech company.
The US – China renewable market is still early in its development, and there will undoubtedly be companies that won’t do it right and others that will thrive, but the level of communication taking place and number of deals getting done is encouraging. It’s still a little early to identify the dominant model for success in China, but there is a lot of interesting activity worth looking at.
China will represent a huge market for everything from clean cars to solar to wind - and there is a way to play that if you are a US company that is seeking to participate in the growth of that market. For any business, you go where the market is, and that is why you will see a large international focus for the renewables industry.” On Subsidies for Renewables.
“Renewable subsidies are part of a long tradition by our government of supporting new energy sources - and that support has worked very well for our country in the past. Coal, oil and gas, nuclear, and renewables have all been subsidized. However, if you compare the level of renewal subsidies to oil & gas subsidies in the early 20th century and nuclear subsidies in the mid – 20th century, you find that renewables are under-subsidized by a factor of 5 and 10, respectively. Also, it is worth nothing that a lot of subsidies still exist for these older sources of energy, including coal.
Should we eliminate all subsidies completely? If it was truly possible, sure, I wouldn’t have a problem with that, though it is realistically unlikely.
Historically, America has benefited from subsidizing the development of new energy sources. Singling out renewable subsidies as a bad thing is not consistent with our history. Moreover, countries around the globe are choosing to invest in renewables - this is a global industry, and America needs to stay competitive if it hopes to be a leader in that industry.” On Supply Chain Improvements for Local Businesses.
"One area where supply chains can improve is in the reduction of waste and carbon footprint. Large companies are capable of making these changes, but small companies are still struggling in this respect. This is one reason why we’ve turned our attention to a company that makes compostable, recyclable packaging, which would eventually allow retailers to turn waste into packaging through a distributed (rather than centralized) supply chain, without the need to haul materials great distances. The “cradle to cradle” packaging concept is one that can be very local.
It seems that almost by chance, existing policy support these efforts quite well –look at Alameda’s “StopWaste” program for example, or CalRecycle’s ” Recycling Market Development Zones” program, which provides loans and other types of assistance to qualifying facilities that hit requisites for diverting waste from landfills. There is no overarching policy supporting these types of efforts, so you have to really hunt and look for these individual programs. While there is a lot of room for policy improvement here, there is still plenty you can do with existing incentives." On Distributed vs Centralized Energy Generation.
“There is an unnecessary distinction between distributed and centralized energy generation; we have the resources to pursue both strategies, and we’ll need to do so to ultimately fulfill our energy needs. If you take solar for an example, we feel that the parallel development of distributed and centralized solar is a good thing. California has one of the best solar resources in the world, especially in our deserts and in the southern portion of the state, and a combination of generation solutions allows us to take advantage of that.”
More information on Nancy and DBL can be found here: http://www.dblinvestors.com/. Interview conducted by Tony Bernhardt, E2 Northern CA Chapter Director and Erik Chen, E2 Program Assistant
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