The Venture Capital Tree Hugger

We are all starting to focus on energy conservation. So many of our power plants are powered by high priced natural gas and we are near $100 oil (per barrel). With these types of data points swirling around our checkbooks...we are constantly contemplating how we might save on the high cost of energy.

As an investment firm...we think about plausible immediate solutions that may lower the costs of conventional energy forms and thus leave more savings in the hands of consumers. Many of these happen to be centered on information technologies and how they may be used to better organize inventory flow, reduce theft, reduce operational risks...etc. Sometimes we get tangled in the endless search for the holy grail of technology which will take planet earth by storm. It is sometimes exhausting. It becomes easy to overlook simple solutions.

Over the weekend, I took my kids to the local nature observatory. It was there that I was forced by my kids to slow down and relearn some things that had last been taught to me in grade school...things that didn't matter to me then...but they matter to me now.

Transpiration - In my quixotic HG Wells endeavor for perpetual energy, I had forgotten much about the details of transpiration - this is the passing of moisture from the soil through the plant system into the atmosphere. Heat passes over tree leaves etc...drawing moisture from the leaves. The surrounding air is cooled as much as 9 degrees Fahrenheit but is typically between 5 and 6 degrees Fahrenheit. There are actually some pretty complex calculations to determine the cooling effects of different trees. For a three thousand square foot home covered by 35 foot trees (of average leaf size)...this is the equivalent of 5 tons of air conditioning running for about 20 hours per day. This makes me wonder if the placement of concrete on Planet Earth is partially responsible for global warming (i.e. many fewer trees that are cooling the atmosphere). So depending on how cool you want your house during the summer...we are potentially talking about a lot of money here. For example, a 10,000 BTU window AC unit needs to be fed an extra $5.00/month to cool one room in your house an extra 4 degrees Fahrenheit per month (est. room size is 300 sq ft.). In other words, planting a few trees to cover the sides and top of your house can add up to a few hundred dollars in power savings each year.

I am writing this for one simple reason. I am constantly running 100 miles per hour in the venture capital business and sometimes fail to see something so obviously in front of me (such as planting a tree to save money). But as I heard one time several years ago..."If you really want to make sure something stays hidden...hide it out in plain site."

The Difference between Number 1 and Number 2

I was talking with one of my co-investors last week. This is a person involved in venture business for nearly 20 years. He was pondering the difference between a technology company that ends up being number 2 in a space vs. number 1. There seem to be so many instances where the better technology ended up not crossing the finish line in first place.

So what is going on here? I've got two theories. One is based on the notion of perception which is a point my colleague was contemplating and the second is based on something completely out of left field but reflective (in my opinion) of the human condition.

• Theory 1 - The company that achieved the number 1 ranking figured out a way to convince its target market that it was going to be the eventual winner of that market. As a result...humans wanted to go with the winner and the overall market win sort of became a self-fulfilling prophecy. This proselytization occurred in a way as to not alienate the prospects in that target market. SAP did this very well in the energy sector. They convinced prospects that since their competitors had bought SAP...they too needed to buy SAP in order to keep up. In other words...the message was that SAP was going to be everywhere and that the prospect couldn't afford to be left behind. This implied that SAP was going to win the market...and it didn't tick people off.

• Theory 2 - The company that ended up number 2 had a better technology. Their beliefs about their technical competencies were worn on their sleeves in a way that became sort of a mark of arrogance. The arrogance was observed by sales prospects. Since buying technology is, in part, somewhat emotional...the affront of arrogance factored into the relationship DNA and killed many sales cycles. I have seen this many times...company has a big couple of quarters and then decides it knows what's what and is going to teach the customer this and that....then "pow!"...the customer says get lost. The company has then taken a step back at the most important point in its life. It must then apologetically change its ways. By then the hubris has poisoned its host.

The truth is that if I really knew the answer to the question posed above.....I would be in high enough demand that this blog would probably not exist.