When the internet bubble popped back in March of 2000 there was a lot of lost footing and confusion, including a bunch of shell shocked venture capitalists, private equity guys and, of course, investment bankers who were walking around dazed, asking one key question, hoping to rescue their future… “What is the next big thing?”
When I talk about “big,” I mean really big, in the context of changing the landscape of the capital community and, in turn, changing the mind set of people changing the way they live. To explain a little better, let’s look at the “last big thing,” the internet. The internet certainly provided the type of changing landscape that I’m referring to. As a powerful and robust catalyst, providing the masses cheaper, faster and better experiences, the information highway changed the way we do business, buy consumer goods, communicate and more. On a fundamental level the internet changed the way we operate on a daily basis. It is this type of paradigm shift that I am referring to when I speak of a “big thing.”
Getting back to the next big thing, we needed a catalyst that was backed up by an event or events. . In my opinion, Al Gore was that catalyst. Through his film, An Inconvenient Truth, he brought attention to the masses on the global warming issue. Coupled with the rapid global economic acceleration fueled by China and India’s torrid rate of growth, we see the next big thing taking shape: alternative energy sources. The massive and rapid growth of China and India has strained consumption of basic resources such as copper, steel, cement and oil which means substantially higher costs for these resources. We are particularly feeling the pinch of oil prices here in the US (we have jumped from approximately $20 per barrel to over $100 per barrel in just three years,) which is the final and strongest catalyst for seeking alternative fuels. Al Gore started the beating of the drum and it was validated by rising commodity prices and has been brought to a fever pitch by oils meteoric rise. The world has suddenly realized that natural resources are finite and we should figure out a way to save the planet.
Alternative energy, whether it be solar, ethanol, biomass fuels, bio diesel, wind power generation, hydro-electric plants, or electric cars, will fundamentally change the investment landscape and subsequently trickle down into lifestyle shifts. Take a minute to think about all of the industries that are now in business to support these endeavors, there is a massive market opportunity. The world (or at least the United States) has woken up and has jumped on the “green” wagon. To get proof of this fact, simply follow the money. A substantial shift is occurring within venture capital, private equity and to some extent, hedge funds. Capital is being deployed in this green/alternative energy initiative at a very rapid pace.
Some outside pundits say that this space is getting over heated and everyone is trying to throw money at any company associated with the green space, but from what I see, that is not the case. The alternative energy space is extremely large and can include many different types of technologies and companies, and is attracting some very serious attention from major capital players. Trust me, I haven’t traded in my SUV or put solar panels on my house yet, but I think there is really something to this trend and believe we will see another major paradigm shift in the next few years. I will continue to follow this space closely and will have follow up articles and interviews with key people and companies.
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