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2008 Cleantech Predictions: Solar December 7, 2007

Posted by Andrew Chung in 2008, China, Cleantech, India, predictions, solar.

Many of our readers may not know that Lightspeed has been very active in cleantech over the past year and a half. We have evaluated over 400 cleantech startups to date and have made investments in solar (Stion), biofuels (LS9), clean coal (Coaltek), LED lighting efficiency (Exclara), and batteries (Mobius). My partner Peter Nieh and I (Andrew Chung) lead up the cleantech effort here at Lightspeed, and here are some of our solar prognostications for 2008:

1. Solar will sustain its torrid growth, as costs continue to fall. The solar market has grown at ~40% per annum in recent years, and there are many reasons to think that it will sustain, if not exceed, that clip in 2008. Solar panel prices have followed a predictable experience curve since the 1970’s, with prices dropping by 20% with each doubling of manufacturing capacity. As the silicon-dominated industry moves to thinner and higher-efficiency wafers, increases manufacturing scale, improves wafer and cell processing technologies, sees polysilicon prices return to rational levels, and migrates production to lower-cost countries –- costs will continue to drive towards parity with grid rates, and solar will become increasingly more attractive. Companies have developed creative PPA (power-purchase agreement) financing models to reduce or eliminate upfront installation costs, which will make solar more accessible for a wider range of corporate and residential customers. The election year should also see more state subsidy support for solar and a renewal of the federal tax credit, which will further bolster growth.

2. Emerging startups that benefit from the polysilicon supply shortage will face increased pressure, as the poly-Si crunch begins to ease. Solar veterans can debate the timing endlessly, but many expect additional poly-Si supply to come online by late 2008. Startups that tout silicon-independent solar solutions, like concentrators and thin film (CIGS, a-Si, CdTe, etc.), will face pressure to come to market more quickly, as their cost/supply advantages erode with greater availability of poly-Si and a retreat from spot-pricing. E.g., none of the CIGS thin-film startups, which have collectively received hundreds of millions in investment in recent years, managed to reach mass commercialization this past year as many had projected. They will continue to be under pressure to reach market before the window of opportunity closes.

3. Entrepreneurs will increasingly look beyond cell and module production. As the technology-heavy areas of cell and module production get crowded, more and more entrepreneurs look to startup opportunities in the downstream balance-of-systems part of the value chain. This area has seen less attention to date, yet makes up ~50% of the total installed cost. Novel packaging techniques, distributed inverter / MPP tracking / power management technologies, systems monitoring solutions, streamlining of the installation process, and creative solar financing models — entrepreneurs increasingly recognize the ripe opportunity in this part of the solar business, and 2008 should see heightened startup activity in this area.

4. China and India will begin to emerge as strong domestic markets for solar. With a 500 MW coal-fired plant going up in China every week, the growth of greenhouse gas emissions has reached dizzying levels. China already “boasts” 16 of the 20 most polluted cities in the world, with hundreds of thousands a year dying prematurely from such pollution. Many experts expect that the government will spend tens of billions of dollars in the next 5-10 years –- a significant portion going to solar -– to reach the mandate of 15% from renewables by 2020. In India, where the energy shortfall has reached 15% and domestic coal reserves will run out in ~50 years, the government is actively pursuing incentive policies and feed-in tariffs to help drive the use of solar and other renewables. 2008 should see further policy refinement in both countries, which will spur increased domestic adoption of solar.

5. More IT entrepreneurs will continue to start or join solar ventures. Cleantech has captured the imagination of many seasoned IT entrepreneurs, and we expect that 2008 will be another high-water mark for crossovers into the space. Solar, in particular, has been attractive to IT veterans due to a high translatability of manufacturing skills from semiconductor production in the upstream part of the value chain; and the applicability of IT-related disciplines like power management, systems management and monitoring, supply chain management, and financing arbitrage in the downstream part of the value chain.

If you missed them, here are our 2008 predictions for consumer internet, enterprise infrastructure and mobile as well.

2008 Enterprise Infrastructure Predictions December 5, 2007

Posted by jeremyliew in 2008, datacenter, enterprise infrastructure, flash, virtualization.

Following up on our consumer internet and mobile predictions, my partner Barry Eggers looks into the crystal ball for 2008 to draw some predictions about enterprise infrastructure:

1. Flash-based storage makes a move towards the datacenter. The last bastion of moving parts in the datacenter – rotating disk drives – will start to feel the heat (no pun intended) as flash-based storage solutions make their way into the enterprise. For the last few decades, rotating disks have dominated enterprise storage the way legendary John Wooden’s teams dominated their collegiate foes. While solid state disk drives based on DRAM have been around since Wooden was carrying a lineup card in his hand, they have been relegated to niche performance-oriented applications, the equivalent of playing backup center to Lew Alcindor. But Flash memory could change all that. Flash-based storage, whose cost/GB is rapidly approaching magnetic disks, offers the additional benefits of 10X the performance, higher storage densities, and last but not least to datacenter enthusiasts, significantly lower power per I/O. All of this could propel SSD 2.0 into the mainstream. Sure, rotating disk drive companies will add flash memory caches and wave their magic marketing wands, but industry insiders will tell you it’s not enough. Innovation will come from a small group of companies that are solving the limitations of flash as it applies to enterprise users. Expect to see hybrid systems, based on a combination of flash and rotating disk, coming to a datacenter near you. Anyone for Green Storage?

2. Virtualization extends to the desktop.
What is good for the server must be good for the desktop, right? Well, yes, but for a different reason. Server virtualization drives higher utilization on machines possessing an ever-increasing number of cores. Desktop Virtualization is not necessarily about utilization. Furthermore, desktop virtualization is not thin client 2.0. Thin Clients were about reducing up-front capital costs with a slimmed-down hardware client. Desktop Virtualization is about intelligently provisioning applications to desktop users. It’s about management, security, compliance, and reducing Total Cost of Ownership. Desktop Virtualization will also be more powerful to end users when used in conjunction with virtualized servers. The limitation with first generation virtualized desktops is that they offer a user experience much less satisfying than a full desktop, but that will begin to change in 2008…stay tuned for more details…

3. The Battle for the Top of the Rack (TOR) heats up.
As server racks are populated with more cores per CPU and more VMs per core, memory and network I/O limitations will become priority concerns. How VMs share those physical resources will impact overall system performance and significantly influence the rate at which mission critical applications are run in virtualized environments. It’s a challenge most adopters of virtualization don’t deal with yet, but many vendors are working on solutions in anticipation of the time when well-utilized CPUs shift the datacenter bottleneck to memory and I/O. Whether the answer comes from software solutions that are internal to the server (advantage software companies) or additional hardware (perhaps a TOR solution) dedicated to managing network services and optimizing physical resource sharing (advantage system players), it represents a meaningful battle for a critical position in the next generation data center.

Later in the week, Cleantech.

2008 Mobile Predictions December 4, 2007

Posted by jeremyliew in 2008, lbs, mobile, wifi.

As a follow up to my Consumer Internet Predictions for 2008, my partner Jake Seid has weighed in with his predictions for Mobile:

Wireless carrier networks must evolve: Today’s cellular networks are like the first fish with feet. They are saddled with a prehistoric architecture optimized for voice while struggling to evolve to a reality where data is the fastest growing source of traffic and revenue for many carriers. They’re struggling because the economics of voice and data are vastly different. While a user’s voice call can be tens of kilobits of data per second or less, data can be an order of magnitude greater or more. If you factor in the revenue a carrier gets from each bit of voice vs. each bit of data, the economic difference can be striking. 2008 will see an evolution in some carrier networks to meet this demand. Those that don’t evolve might just go the way of the dinosaurs.

WiFi(ght) it?: For many years, WiFi was viewed as antithetical to the wireless carrier business model. WiFi is open and unlicensed while the carrier networks are closed and tightly controlled. TMobile was one of the early large carriers to embrace WiFi and 2008 will be a year to watch for significant growth across carriers in the number of users with WiFi enabled cell phones. Carriers who embrace WiFi will deliver significant value-add to their subscribers through a full browsing experience and unfettered access to rich set of web properties. If done correctly, the carrier can use WiFi to significantly increase mobile advertising revenue pie and partake in that growth. It can also help carriers address consumer frustration with indoor cell coverage and in turn give consumers fewer reasons to maintain a separate voice landline.

Location, location, location: This old adage for how to make money in real estate may be the wireless carriers’ slogan for how to make money in 2008. Location- based services can open powerful new business models for carriers and compelling new applications for consumers. Intent can be deferred from location and location can also significantly increase the relevance and utility of mobile services and ads. As an advertiser, imagine not only knowing that someone clicked on your mobile ad, but that they also requested directions on how to get to your store. Take this one step further and imagine that (without compromising privacy) an advertiser only pays when a user clicks, navigates and then arrives at the store. Location- based services are only possible in the mobile medium and have an opportunity to create significant utility for the consumer and value for advertisers and carriers.

Later in the week, predictions for Enterprise Infrastructure and Cleantech also!

2008 Consumer Internet Predictions December 3, 2007

Posted by jeremyliew in 2008, ad networks, advertising, casual games, Consumer internet, games, gaming, mmorpg, predictions, semantic web, social media, social networks, structure, user generated content, video.

Last year I made some predictions about the consumer internet in 2007 and they were at least directionally correct. So let me take a crack at 2008. Regular readers will not be surprised at some of my predictions as they are themes that I’ve been talking about for some time. Later in the week my colleagues will take a crack at predictions for Mobile, Infrastructure and Cleantech.

1. Social Media advertising, Online Video advertising and In-Game advertising start to become scalable.

Social media, online video and games are at early stages of development as advertising vehicles. Even more than the internet at large, a disproportionately small percentage of advertising dollars are being spent on these three media relative to time spent. Some people have even questioned if social media will be a media business at all, or online if video is a good way to monetize.

The slow start is because there are no standards yet in any of these media. If an advertiser wants to buy TV advertising across NBC, CBS, ABC and FOX, they can buy a common unit, the 30 second spot. If she wants to buy print advertising across Time, Fortune, Forbes, Newseek and Businessweek, she could similarly buy a common unit (e.g. a full page ad). But to buy across YouTube, Metacafe and Break, or across Myspace, Facebook and Bebo, or across GTA, Wild Tangent games and Pogo.com games, she needs to buy custom ad units in each property. This makes ad sales look more like business development – she is negotiating not just price, demographics and reach, but also what the actual units are. This is what makes new forms of advertising so hard. All three industries need ad unit standards to be able to scale. Otherwise they will be trapped by demands for customization.

This year, standards will start to emerge in each media. Some candidates for standards include (i) for social media; behavioral targeting, content targeting, demographic targeting or social ads, (ii) for online video; contextual targeting, overlays or pre-roll and (iii) for in game advertising; rich media or product placements. I don’t know which of these candidates will become standards, but I am confident that we will start to see growing support from both advertisers and publishers for the more successful units.

Ad networks will also gain share in each media, helping make the process of both buying and selling advertising easier.

Viewed through this lens, Facebook’s recent Beacon launch and subsequent adjustments are simply early moves towards figuring out what will be the native social media standard.

2. Structured web emerges.

The last couple of years have seen an explosion of user- generated content, across blogs, social networks, social media sites and user reviews. Previously, when most web content was created by editors, there was good structure and metadata around it. As most of the user- generated content has been unstructured, there has been an overall decrease in the level of structure, and hence a decrease in the ease with which people and computers can access and use this data.

But Meaning = Data + Structure. Search on user-generated sites has not been a great experience so far. This year we should start to see some point solutions emerge to help add structure to unstructured data, substantially improving the user experience. This will include both explicit (user-generated structure) and implicit (inferring structure from domain knowledge or user behavior) methods.

3. Games 2.0

Tens of millions of users are now using casual immersive worlds and playing MMOGs. These sites are some of the stickiest on the web, resulting in some of the highest levels of time spent per month online, and indicating that this is becoming a primary form of online communication for some users. Many of these users skew young, and if you believe that demographics is destiny, then you will expect this behavior to spread. The social aspects of these games is key to their popularity

Even more people are playing casual games online. These people often don’t have the ability to commit the time that MMOGs demand. They want to play with their friends, but instead of spending hours online together, they want to do it on their own schedule and in bite sized chunks.

These trends are likely to come together in asynchronous multiplayer games.

Other key drivers of growth for these products will include innovation in business models (free to play, ad- based and digital goods- based models) and channels (in- browser gaming, mobile, widgets).

Note – this post is cross posted to Venturebeat.