Monday, June 30, 2008

NYT: Venture Investors Wrap Up an Unusually Bleak Quarter

posted by Dustin

June 28, 2008
Venture Investors Wrap Up an Unusually Bleak Quarter

SAN FRANCISCO — So far this has been a challenging year for companies hoping to go public. But it has been even rougher on venture capitalists who were hoping to get a big payday from such an offering.

In the second quarter of this year not a single company backed by venture capitalists has gone public. It is the first time that has happened since 1978, according to a venture capital industry group.

General weaknesses in the financial markets have kept many companies from taking the plunge. But venture capitalists say they have started to back technologies like alternative energy that take relatively long to gestate before they are ready for the public market.

Some other venture capitalists say the industry is struggling to find its direction and has never fully recovered from the dot-com bust.

That may come as little surprise to the well-heeled individuals and institutions that give their money to venture capitalists seeking big returns. Some of these investors have criticized venture capitalists for failing to provide substantial returns on a broad basis since 2000.

Public offerings serve a critical role for venture capitalists by giving them a way to sell, at huge profits, stakes in the start-up companies they invest in and build. So the offering drought is being taken very seriously by the venture capital industry. The National Venture Capital Association, an industry group, said it planned to discuss the issue on Tuesday in a media blitz on television news outlets.

"It's a big story," said Emily Mendell, a spokeswoman for the group. She declined to discuss the problem further, saying that the industry would release its official analysis on Tuesday, after the end of the quarter.

Nancy Pfund, a veteran venture capitalist with DBL Investors in San Francisco, said the absence of venture-backed offerings in the quarter was surprising, but the reasons behind it were not hard to understand.

She said there were two overriding factors. Wall Street is being very selective in taking companies public, and blessing only those with particularly high revenue and growth projections. And venture capitalists are wary because they worry that their returns will be limited in a depressed market.

"It's not a good time to go out," she said. "No one's going to appreciate the value you've created, and it's such a high bar."

Ms. Pfund is an investor in a number of alternative energy start-ups, like Solar City, which does solar panel installation. She said the company had blossomed and was on pace to more than double last year's revenue of $26 million, but she said that it, like a lot of energy start-ups, was simply too early in its development to go public.

Indeed, some venture capitalists are arguing that the pipeline for public offerings has dried up in part because of the considerable shift in the industry's interest in the last three years into "green" technologies, which was taking time to bear fruit.

But Paul Kedrosky, an investor and the author of Infectious Greed, a venture capital-centric blog, said that there were deeper, more systemic problems for venture capitalists in addition to the cyclical challenges. He said part of the problem was that the industry was backing companies that lack widespread investor appeal, like YouTube clones and dating and social networking sites.

"There is nothing that the industry is producing that investors want," Mr. Kedrosky said. "The stuff they're investing in is idiosyncratic — it's fun and appealing to them but Wall Street doesn't care."

"The Valley is operating in its own little world, and the capital markets don't care about the things that are getting the Valley excited."

Over all, the market for public offerings has been in a funk. So far this year there have been 36 offerings, down from 130 during the same period last year, according to Renaissance Capital, a research firm based in Greenwich, Conn.

"Deal volume has fallen off a cliff," said Paul Bard, head of research for Renaissance.

The public offerings this year raised $27 billion, but Visa's offering accounted for $18 billion of that. Mr. Bard said there was likely to be a sharp drop in the amount raised this year from last year's $60 billion.

Mr. Kedrosky said the problems were particularly acute for venture capitalists — and that leaves them with some answering to do to their own investors.

"Here's an industry struggling in a big way to hang onto its investors, let alone find new ones," Mr. Kedrosky said. "They've been hanging on by their fingernails."

The lack of a good way to cash out just makes things worse, he said. "There is no venture industry if there is no I.P.O. market." 

Thursday, June 26, 2008

Another Inconvenient Truth: How biofuel policies are deepening poverty and accelerating climate change

posted by Dustin Mulvaney

Biofuels are presented in rich countries as a solution to two crises: the climate crisis and the oil crisis. But they may not be a solution to either, and instead are contributing to a third: the current food crisis. Meanwhile the danger is that they allow rich-country governments to avoid difficult but urgent decisions about how to reduce consumption of oil, while offering new avenues to continue expensive support to agriculture at the cost of taxpayers. In the meantime, the most serious costs of these policies – deepening poverty and hunger, environmental degradation, and accelerating climate change – are being 'dumped' on developing countries.


Biofuel farming accused of driving up food prices
Updated Wed Jun 25, 2008 1:26pm AEST
Oxfam says the competition between fuel and food is dragging more than 30 million people into poverty.

Oxfam says the competition between fuel and food is dragging more than 30 million people into poverty. (user submitted: Greg O'Brien)

Biofuels were supposed to make up a big part of the answer to two of the great challenges of our age: climate change and energy security.

To many governments grappling with soaring oil prices and growing fears about climate change, tailoring incentives to engineer a switch from oil-based fuels to those made from food seemed like a good idea.

But increasingly, there are fears that biofuels may be creating as many problems as they solve.

Oxfam says the renewable fuels are not as climate-friendly as first thought.

The international aid agency blames the biofuel policies of developed countries for a 30 per cent spike in food prices which are dragging more than 30 million extra people into poverty.

"As more science has come to light and as people have looked at this issue more carefully, I think our conclusion is that changing to biofuels in transport in countries like Australia, Europe, America is not good for the planet," says Oxfam Australia's Jeff Atkinson.

In its global report, Another Inconvenient Truth, Oxfam argues the benefits to the climate of using biofuels have been overstated.

It says many farmers have cleared further into forests and wetlands to accommodate the crops, and others have moved out of food production to make room for biofuel feedstock.

"Of course changing from petrol to biofuels in one's car is going to reduce greenhouse gas emissions but to look at the whole picture you have to look at how these biofuels are produced and where they are produced and many of them are produced in developing countries of course," Mr Atkinson said.

"But what's happening is that there is competition between fuel and food."

"Take the corn crop in the US for example, which would normally be grown for food, a lot of that is now being grown for fuel instead and factors like this of course are driving up food prices."

That rise is as much as 30 per cent, Oxfam says.

But Bob Gordon from Renewable Fuels Australia rejects the notion that biofuels are entirely responsible for the global food shortage.

"It is oil that is the primary driver and you'll find that the United States, you'll find that the European governments and everybody accepts that," Mr Gordon says.

"The issue with biofuels is that we have to play it carefully if we're going to use biofuels as a fuel alternative, and only one fuel alternative."

He says the current crop of biofuels is just the first step in the transition from an oil-based economy.

"Biofuels do require land use. We need to be careful about that," Mr Gordon says.

-Adapted from a report by Ashley Hall for AM

Wednesday, June 4, 2008

Biofuels' expansion into the cerrado

I also ran into this blog which has something about the expansion of biofuels into another biome whose importance for biodiversity and indigenous peoples is being increasingly acknowledged in Brazil, the "cerrado".

Biofuels' expansion into the cerrado

I also ran into this blog which has something about the expansion of biofuels into another biome whose importance for biodiversity and indigenous peoples is being increasingly acknowledged in Brazil, the "cerrado". 

Connecting sugar and oil prices

Sorry that this one is in Portuguese.