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Sustainability, CleanTech and Climate Change Alert

A Cleantech ‘Sputnik Moment’: What Comes Next?

Wednesday, February 02, 2011

This article was published in Law360 on February 14, 2011. © Copyright 2011, Portfolio Media, Inc., publisher of Law360.

In his January 25, 2011 State of the Union address, President Obama spoke of a “Sputnik moment” for clean energy technology, or “cleantech.” Invoking the wake-up call the United States received in 1957 when the Soviet Union surged ahead in the race to launch the first earth-orbiting satellite, the President’s call to action was meant to spur U.S. innovation to develop better, cheaper alternative energy sources that can cost-effectively satisfy 80 percent of the country’s electricity needs by 2035. The rhetoric is striking, but how can these goals be met, and what opportunities will this initiative create for companies and investors in this sector?

According to the Obama administration, the answer is a new program called “Startup America,” which the Secretaries of Energy and Commerce and other high-ranking government officials announced at the White House on January 31. Described as a national campaign to encourage private-sector investment in high-tech startups, accelerate research, and address barriers to success for entrepreneurs and small businesses, the plan has several key components:

  • Creation of a “Startup America Partnership,” a new private-sector-led effort to mobilize capital investment for development and commercialization of startup technologies. Steve Case, co-founder of AOL, will chair the partnership and Carl Schramm, president and CEO of the Kauffman Foundation, will be a founding board member. With foundation seed money, the partnership will convene an Entrepreneurship Action Summit in the near future to bring together leaders from the venture capital, investor, foundation, corporate, and academic worlds to find ways to “grow the entrepreneurial ecosystems that support innovative, high-growth U.S. startups.”
  • Proposals in the President’s 2012 Fiscal Year budget to (1) expand the New Markets Tax Credit to encourage investment in startups and small businesses operating in low-income communities, and (2) make permanent the elimination of capital gains taxes on the sale of qualified small business stock. These commitments are in addition to White House pledges to seek a one-third increase in cleantech funding, compared to the 2010 budget, for expansion of Energy Department research and deployment programs, doubling the number of Energy Innovation Hubs across the country, and underwriting additional efforts to reach a “$1 a watt” goal aimed at making solar energy cost-competitive.
  • Dedication of $2 billion in existing small business investment company (SBIC) guarantee authority to match private-capital investment in qualifying startups and small businesses.
  • Establishment of mentorship programs at the Department of Energy and Small Business Administration, training initiatives at the Department of Veterans Affairs, and a Treasury Department conference in March 2011 to explore access to capital for small and entrepreneurial businesses.
  • Formation of a Commerce Department “i6 Green” program with funding of up to $12 million, to encourage innovative ideas that accelerate commercialization and new venture formation, and a new initiative to reduce waiting time for cleantech patent applications.

The original “Sputnik moment” inspired the creation of the National Air and Space Administration and ultimately the U.S. moon landing in 1969, along the way motivating young Americans to study engineering and science. The post-war U.S. economy was stronger than its 2011 counterpart, and the anti-spending mood in Congress these days further limits how much government funding can be directed to these new programs. Even so, the strong Presidential emphasis on the importance of cleantech innovation and the availability of new funding and support mechanisms are sure to create opportunities for developers and investors in this sector. Government assistance rarely comes without complications, however, and the challenge for cleantech players will lie in assessing the pros and cons of new and existing funding sources and finding the right mix of factors to move the process from concept through the entrepreneurial “valley of death” to successful commercialization.

More information about the “Startup America” initiative can be found at http://www.whitehouse.gov/startup-america-fact-sheet, and information on additional commitments can be found in the Fact Sheet for the State of the Union address at http://www.whitehouse.gov/the-press-office/2011/01/25/fact-sheet-state-union-president-obamas-plan-win-future.

Jane C. Luxton and Russell J. Barron

Written by



Jane C. Luxton
Russell J. Barron

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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