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1) You're right. Every time VC tries to get involved in energy, they lose their shirt (with some rare exceptions). Luckily, there are many other more establishe

1) You're right. Every time VC tries to get involved in energy, they lose their shirt (with some rare exceptions). Luckily, there are many other more established funding options in energy (strategics, grants, private equity, experienced angels, etc.). The same is true with other traditional engineering sectors (defense, infrastructure, etc.). High growth software != VC. 2) I'm confused, isn't this negated by market size? Energy market sizes are measured in trillions, so displacing incumbents is still an extremely profitable venture. However, what's lacking is the potential of a monopoly. Energy is a commodity, so there's always heavy competition, which I guess is another strike against the VC model, but not against the high growth possibility. 3) While governments are often customers, they are rarely the only or even the majority customer. However, what is true is that the energy sector learned long ago that lobbying earns a 22,000% rate of return[1], so they use that tool. A lot. That' doesn't mean it's not a place for software. It just means you have budget that in. 4) I'm not sure what "inside" means? Do you mean politicians? Energy CEOs? Software engineers? Mind explaining this point more? I can tell you that every leader I've met in the energy industry cares a ton about the incoming disruption, even if they are incentivized to do anything about it (e.g. your 15% bonus). P.S. This was fun. Are you in the bay area? I'd love to grab coffee to hear more from your perspective! [1]: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1375082 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1375082

bsder 8y ago
2) A lottery ticket payout can also be very large, but it still doesn't make it a good bet. The problem is that you will have to go a long time with zero income and then suddenly you hit the jackpot (or go bankrupt). That's not conducive to running a business. 4) The leaders only "care" about this disruption in the sense that they may lose their jobs when people start protesting or disconnecting from the grid. They certainly don't have any fear of a competitor showing up and blowing them out of the market. So, there is no incentive to make a move that requires them to spend significant money. The fact that the big commercial property owners in Southern California were doing massive arbitrage with their energy storage during the last heatwave tells me that CAISO is WAY behind the ball. There is no reason that CAISO shouldn't be doing arbitrage to itself. This was also matched by information from some of the local universities who have cogeneration but don't actually push energy back to the grid because the grid operators we too far behind the curve. I see these same issues in other industries, as well. Cold chain, for instance. Lots of people at the top want better tracking, but everybody's business processes are ossified in concrete. And nobody is authorized to actually spend money. And extra information will simply make life worse for the people at the bottom actually carrying out all the work. You will spend years throwing yourself at the wall in that industry until something finally breaks. Or, at some point, someone like Amazon says "Thou shalt track everything and report it to us" and suddenly the entire cold chain industry has a heart attack. However, the market can remain irrational longer than you can remain solvent. I actually don't get up to the Bay Area much anymore, but if I'm ever in that part of the world I'll give you a plink.

bsder 8y ago

2) A lottery ticket payout can also be very large, but it still doesn't make it a good bet. The problem is that you will have to go a long time with zero income and then suddenly you hit the jackpot (or go bankrupt). That's not conducive to running a business. 4) The leaders only "care" about this disruption in the sense that they may lose their jobs when people start protesting or disconnecting from the grid. They certainly don't have any fear of a competitor showing up and blowing them out of the market. So, there is no incentive to make a move that requires them to spend significant money. The fact that the big commercial property owners in Southern California were doing massive arbitrage with their energy storage during the last heatwave tells me that CAISO is WAY behind the ball. There is no reason that CAISO shouldn't be doing arbitrage to itself. This was also matched by information from some of the local universities who have cogeneration but don't actually push energy back to the grid because the grid operators we too far behind the curve. I see these same issues in other industries, as well. Cold chain, for instance. Lots of people at the top want better tracking, but everybody's business processes are ossified in concrete. And nobody is authorized to actually spend money. And extra information will simply make life worse for the people at the bottom actually carrying out all the work. You will spend years throwing yourself at the wall in that industry until something finally breaks. Or, at some point, someone like Amazon says "Thou shalt track everything and report it to us" and suddenly the entire cold chain industry has a heart attack. However, the market can remain irrational longer than you can remain solvent. I actually don't get up to the Bay Area much anymore, but if I'm ever in that part of the world I'll give you a plink.