Roots of the Problem

Maurice Gunderson is looking to become a roots investor. This is different from a seed investor or early-stage investor, since both of those refer to the age of prospective portfolio companies. What Gunderson wants to do is examine the root causes of an energy industry dilemma, so that the larger market can flourish in the future.

Gunderson is a veteran venture capitalist, having co-founded Nth Power back in 1993. He retired from the firm in March – just as it began raising its fourth fund – and last month quietly reemerged as a venture partner with CMEA Ventures (as we all know, VC “retirement” is usually code for “changing jobs”).

He says that he is looking for companies at the convergence of advanced materials, biotech and energy. What does that mean? He wants to improve the efficacy of crops that are being grown for the purpose of energy production.

“The current feedstocks for ethanol and biodiesel – things like corn and soy – are optimized for food, not energy,” Gunderson explains. “We need to learn what types of efficiencies and economies we can get by optimizing agriculture for fuel… These new crops might not taste very good, but they won’t be used for cooking.”

This could be a very lucrative market, considering how much money VC and LBO shops are pouring into new ethanol and biodiesel production facilities (which really is project finance more than traditional private equity). There are obviously a number of hurdles – molecular development, convincing farmers to change crops, etc. – but it’s always a smart bet to improve the efficiency of an input product when so many people are focused on its output.