Friedman Calls for Treasury Backed VCs?

I really like Tom Friedman’s thesis that “energy technology” (ET) will be the growth engine of our economy moving forward but his latest call for a treasury backed VC funding sounds off the mark to me and to TechCrunch (see: Friedman Misses the Point and Economic Reality of Silicon Valley).

I do agree with Tom that having the US Treasury hand out “bridge loans to nowhere” for failing companies is a bad idea but I’m not sure that lack of capital is the real issue when it comes to VC investment in new energy technology. 

VCs are not short on cash as far a I know. Instead, the energy tech funding issue seems to lie with the market for these goods and services. In short, everyone knows energy technology will be huge, but no one knows when.

Every investor (VCs included) look for signals from the market to make investment decisions. For example, take the price of oil.  If you chart the price of oil and gas against the number of clean tech fundings I bet you would see a clear correlation (has anyone done this?).

VC’s invest in 3-5 year horizons. When gas was $4 and heading higher a ton of money went into clean-tech. Then when gas dropped below $2.50 everyone pulled back. The same thing happened in the recycling sector where there were lots of recycling businesses formed due to skyrocketing cost of materials. Now that cost of materials have plummeted, there is a major pull back on public and private recycling efforts.

VC’s are not the answer, right now. 

What has to happen first is the government needs to step in and stabilize the markets for green/clean tech and sustainable practices. This could be done through of taxes, incentives, long term purchase contracts, etc.

Once there is a clear market signal, then the VCs and entrepreneurs can get to work. 

I’ve heard Tom Friedman himself argue this point so perhaps this latest op-ed piece got taken out of the full context that Friedman usually provides.