Bubbling with good intentions

As companies vie to battle global warming, the green tech market may be overheating

Amid concerns the planet is warming, the market for clean, green technology is beginning to show signs of overheating, too.

"I call it the global warming bubble," said Bob Metcalfe, who knows something about bubbles. An inventor of the ethernet and founder of Marlborough networking company 3Com Corp., the stock of which plummeted when the tech bubble burst in 2000, Metcalfe now serves as chief executive of Cambridge biofuel start-up GreenFuel Technologies Corp.

But while the flurry and investment that comes with a bubble creates a froth that inevitably results in some big losers, Metcalfe and others argue it also creates an environment where disruptive ideas can emerge and change the world.

"What bubbles do is they're an accelerator in technological investments to be made; they cause the status quo to be questioned," Metcalfe said. "The trick of course . . . is to have a chair when the music stops."

With 930 energy start-ups worldwide counted in Lux Research's Cleantech Report last year, and corporate spending on clean-tech research and development up 10 percent from 2005 to 2006, to $22 billion, there can be no doubt that many idealistic companies promising to change the world will flop.

But Ted Sullivan, senior analyst at Lux Research, said the influx of money and the interest in renewable energies isn't creating one big unsustainable bubble, but rather "boomlets" - citing biofuels and the solar industry as recent examples.

In the biofuel sector, for instance, some companies have withdrawn their initial public offerings or scaled back plans, he said. A Seattle biofuel company, Imperium Renewables, filed to withdraw its public offering in January, and the biodiesel company Renewable Energy Group, of Iowa, withdrew its offering in March.

Still, he said, the energy problem - driven by environmental concerns and rising costs - is so massive the entrepreneurial activity, scientific research, and patents that are building in the sector represent real progress.

"This isn't a bunch of kids in Bermuda shorts coding a new Web portal," Sullivan said. "There's still a lot of progress there, and if someone gets it right the upside is massive."

John Balbach, managing partner of Cleantech Group, argues that the situation is far from a bubble, but instead has natural waves of investment that surge and ebb.

"Biofuel as a category continues to move forward, but it has shifted to different technologies," he said.

Many of the North American and European investors who sunk $5.2 billion into "cleantech" companies last year - up from $714 million in 2001, according to Cleantech Group LLC - are alumni of the last high-tech boom and bust.

Venture firms that once focused on information technology are beginning to make green investments. Metcalfe, now a managing partner at Polaris Venture Partners, is one example of someone from information technology making his way into green businesses. He also sits on the boards of a solar company and a battery company.

John Doerr, the Silicon Valley venture capitalist who counts Google, Amazon, and Sun Microsystems among his early investments, was famously quoted saying the Internet spurred "the greatest legal creation of wealth in the history of the planet." More recently, he has said that "greentech" could be the biggest economic opportunity of the 21st century."

Vinod Khosla, a cofounder of Sun Microsystems, has become well-known as an ethanol advocate, founding a venture firm that makes investments in renewable technologies.

Locally, venture firms like @Ventures in Wilmington now focus on early-stage green technology. RockPort Capital Partners in Boston has raised more than $380 million since 2006 to invest in sectors such as energy and power.

Part of the problem is finding the kind of entrepreneurial talent to take technical material, raise capital, and grow a business in the energy industry, with people from the high-tech industry moving in to fill the gaps.

"I've found a ton of people I know in the high-tech field say, 'I want to change, I really want to get into clean tech, I want to do something I feel good about, how do I do it?' " said Mitchell Tyson, chief executive of Advanced Electron Beams, a Wilmington company working on creating energy-efficient industrial process.

Since both fields involve technical material, innovation, and rapid growth and disruption of traditional industries, Tyson believes that successful entrepreneurs in high-tech may find clean technology a natural transition.

Hemant Taneja, cochairman of the New England Clean Energy Council and a managing director at General Catalyst Partners, is one example of a high-tech expatriate who sees extraordinary opportunity in clean technology.

"I think we're absolutely in a bubble," said Taneja, who founded and sold a mobile software company before he shifted to clean-tech. "But when the correction occurs, the glaciers are still melting and" the price of oil continues to go up.

Locally, venture capitalists, entrepreneurs, and policy makers are hoping to get a piece of that action.

Governor Deval Patrick has made growing the clean technology sector in Massachusetts a priority, citing the state's strength in research and venture capital. The New England Clean Energy Council, an organization formed to promote the clean energy sector, recently created a fellowship program, giving experienced entrepreneurs from the information technology and life sciences sector a green energy boot camp, complete with visits to research laboratories, seminars on market forces, and sessions on public policy.

The Ignite Clean Energy entrepreneurial competition for clean energy companies in the Northeast was held for this year for the fourth time, and the Massachusetts Institute of Technology this month awarded its first $200,000 Clean Energy Entrepreneurship Prize.

"As venture investors look to place their funds into viable companies, one of the missing ingredients is an experienced CEO at the helm who understands how to raise capital, how to explore new markets . . . how to package or guide a technology to optimize its commercial viability," said Nick d'Arbeloff, executive director of the council, and also an alum of the regular tech industry, as a cofounder of telecom start-up Wildfire Communications. "These are folks who know how to do this as a matter of course - they've done it one, two, three times before."

Carolyn Y. Johnson can be reached at cjohnson@globe.com.