Network to earth

Giants behind Internet companies are putting their money on the potential for another major shift: alternative energy and products good for the environment

WASHINGTON -- Bill Gates, John Doerr and Steve Case believed in the Internet long before Wall Street did. Now, they're betting on the next great "disruptive" technology -- alternative fuels and other environmentally friendly products -- but this time other investors aren't far behind.

Last year, AOL founder Case started Revolution, which has invested in companies such as car-sharing service Flexcar. In November, Microsoft founder Gates committed $84 million to a California company to finance the construction of five ethanol bio-refineries. And last month, Doerr, the venture capitalist who invested early in Google and Amazon.com, set up a $100 million fund to invest in environment-friendly technology.

To be sure, the investments don't make up a large proportion of their portfolios, and even with oil at $72 a barrel, alternative energy sources are still at the margins of the market. Gates, one of the world's richest men, has committed far more to developing low-cost drugs for impoverished countries. And while Case has committed about $500 million of his own money to Revolution, some of that is going to pay for health care and spa investments. But just as early on, they saw the Internet as a way to make money and change the world, they now think green technology is poised to make a difference of its own.

"Greentech could be the largest economic opportunity of the 21st century," Doerr said in a February news release announcing that Kleiner Perkins Caufield & Byers, the investment fund that helped underwrite many prominent technology startups, would raise $100 million for the environment-friendly technology fund.

In addition to Case, Gates and Doerr, Sun Microsystems CEO Scott McNealy last fall led a Business Roundtable task force on sustainable growth strategies.

Sun founder Vinod Khosla is underwriting research on renewable energy. And Robert Metcalfe, a co-founder of 3Com and one of the original developers of a technology called "Ethernet," is working on turning smokestack emissions into fuel.

The "movement is going mainstream," Case told The Washington Post last year, and "we want to ride that wave."

"Clean technology" in particular is a small but growing area of investment that has attracted technology billionaires. Before 1999, those businesses attracted less than 1 percent of venture capital investment. In the past two years, that has risen to between 5 and 8 percent, said Diana Propper de Callejon, general partner at Expansion Capital Partners, which manages money for wealthy families.

By 2009, the Cleantech Venture Network estimates that clean technology companies will need about $3.4 billion in capital investment, said Craig Cuddeback, the network's senior vice president.

In some ways, having made their fortunes, Internet pioneers are just like other wealthy people looking to park their money somewhere. Unlike the early days of the dot-com boom, these entrepreneurs already have company in clean technology investing: pension funds, investment adviser Piper Jaffray, country singer Willie Nelson, and Richard Branson, founder of the Virgin family of businesses.

High oil prices are not the only reason for the rise in interest. Technological advances and low prices for corn have made ethanol a potentially cost-effective alternative to fossil fuels, said Elif Acar, an energy analyst with Standard & Poor's. An energy bill that passed Congress last year has also accelerated the adoption of ethanol by forcing oil companies to eliminate a popular gasoline additive, and mandated the doubling of production of renewable fuels.

There are some parallels between clean technologyand the early days of the Internet, Propper de Callejon said. It is starting from a relatively small base, driven by technological innovation and underinvested relative to the size of the potential market.

In the case of Sun Microsystems, the company became interested in energy conservation because of the increasing electricity demands of more powerful computers. Sun Microsystems began to overhaul its servers to use less power after customers said energy costs were rising, said company spokeswoman Stephanie Hess.

Case is part of a larger trend in socially responsible investing, said David Berge, president of Underdog Ventures. Until recently, socially conscious investors have emphasized where they don't want their money to go, such as tobacco or companies doing business with South Africa during apartheid.

But more investors are making choices based on traits they want to reward, not just traits they want to avoid. Clients come to Berge and ask, "What could you do for us for environmental investing?"

The investment from the technology sector is being felt already. Until recently, the ethanol industry has been the province of large agribusinesses and farmer cooperatives. Today, Neil Koehler, who relied on one angel investor to finance his first ethanol company, took his latest venture public and received financing from Gates.

Gates' involvement in Pacific Ethanol "has helped propel our public position," Koehler said.