Dow Jones VentureSource on Friday said that venture capitalists plowed a record $3 billion last year in clean-tech companies, a 43 percent jump from the year before. The number of deals rose from 173 in 2006 to 221 last year.

This is a typical pattern of large investment waves, which are often followed by consolidation among companies and company failures.

The numbers are in on clean-tech investing in 2007 and, once again, the direction is way up.

Europe, led by Spain and Germany, saw a 27 percent increase to $360 million in venture capital. China, meanwhile, saw venture investing fall nearly 70 percent to $129 million, although four venture-backed companies went public.

Unlike software or medical devices, energy-related companies require large amounts of capital to prove out their technology as cost-effective. A biofuels plant, for example, can cost more than $100 million–beyond the funding venture capitalists are able to do. Project financiers typically back only well proven technologies, as a report by Ernst & Young noted. Click here for PDF.

Despite this funding challenge and regulatory hurdles, Dow Jones VentureSource sees significant potential. Both consumers and businesses are interested in buying eco-conscious products and, because the energy business is so big, gaining a small amount of market share from incumbents can be very profitable.

The biggest raising last year was $200 million for Project Better Place, the Shai Agassi-led company to set up a network of services stations with batteries for electric
cars.

“Our data shows that 59 percent of all U.S. investment in the sector is going toward companies in the product development phase, which suggests that funding for clean technologies is likely to continue as these companies continue to develop and start generating revenues,” said Jessica Canning, director of global research, in a statement.

U.S.-based firms caught the lion’s share of the money, with 83 percent of the global total. The total in the U.S. was $2.52 billion in 2007, a 79 percent increase.

Ernst & Young recommends looking to government sources of money, reducing technology risk, and using debt selectively for financing.

More specific to clean tech is a funding gap, sometimes referred to as the “Valley of Death.”

The median deal size in the U.S went up slightly to $8 million, which is a bit higher than all industries.

There is ongoing concern that certain areas within clean tech, notably solar and biofuels, are becoming an over-heated financial bubble that cannot sustain the influx of new companies.

So is this outpouring of venture dollars all good news for energy and environment entrepreneurs? Not entirely.

The Netflix Player by Roku

So why go back to charging users for each video they rent? They obviously are attracted to the all-you-can-eat model.

This means Hollywood could conceivably break down the walls and give VOD and Web-movie distributors access to films as soon as Netflix gets them.

“Why would anyone feel alienated by this?” said Michael Pachter, a financial analyst with Wedbush Morgan Securities. “You can’t get a better deal elsewhere. Netflix would be essentially giving you Apple TV without charging you for the Apple box.”

Mr. Hastings, you’ve done a good job by setting up your “Watch Now” streaming service with 10,000 catalog titles, but you need to go further. Let customers purchase new releases on a per-video basis if they want. Some might resent being asked to pay in addition to their monthly subscriber fees, but if you explain that Hollywood charges more for new releases, your customers will understand. Give us choice.

Netflix executives said during the company’s investor day last month that most of the movies it rents are catalog titles.

Since then, Netflix has steadily grown and snatched market share. In the quarter ended March 31, Netflix saw net profits jump 36 percent to $13.4 million, or 21 cents a share. The number of subscribers grew 21 percent to 8.24 million.

But a month after the Netflix Player went on sale, I haven’t read a single review that hasn’t deducted points for the lack of films available with Netflix’s streaming service. It’s the biggest complaint from device owners I’ve spoken with.

Netflix doesn’t serve a la carte

Subscription fees have helped make Netflix the No. 1 online video rental service. Founded in 1997, the company started out charging customers on a per-video basis and switched to subscriptions two years later. Not long after that, Netflix began offering unlimited rentals for a flat fee.

But improvements in download and streaming technology are coming rapidly. The Roku device is perhaps the best example of this. Adoption of Internet movie rentals could occur faster than anyone realizes.

CEO Reed Hastings and his management team have hit a home run–or at least a solid run-scoring triple–by partnering with Roku, the company behind the Netflix Player. The $100 device enables customers to stream movies from the Web to their TVs. Most reviewers have applauded the device for its low cost, easy setup, and viewing quality (a good Internet connection means no stalling or long download delays).

It’s important to note that Netflix’s traditional mail-order business isn’t affected by the same 30-day restriction. This is one of Netflix’s biggest advantages over anyone delivering movies over the Web or on VOD.

The Internet and movie rentals are supposed to be your turf.

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CNET Networks)

Netflix buys physical DVDs as soon as they go on sale and, by law, Hollywood is powerless to dictate what the company does with its property. This means that by the time iTunes or VOD services are allowed to start renting movies, Netflix has been shipping those little red packages for a full month.

And look at the growing competition that’s swarming into the sector. Apple, Amazon, Microsoft’s
Xbox, cable companies, and Hulu are all out to use digital distribution to offer consumers instant gratification.

Here’s why they may have gone this way.

And remember that advantage Netflix enjoys by being able to mail DVDs a month before Internet or VOD distributors? It’s possible that might vanish soon.

“What Netflix is saying to customers is ‘We’re going to give you new movies on a disc and we’re going to give you as much catalog and streaming as we can possibly deliver to you for (the same monthly subscription),’” Pachtel said. “That’s a smart business model.”

news analysis Netflix, don’t take half steps with your digital-delivery service. Give your users what they want, and what they want is the latest hit movies.

I’d be willing to pay a premium for that.

Reader, I don’t know about you but I’ll choose instant gratification over waiting for the postman every time. I’m a film buff. Why should I be forced to decide what I want to watch in advance? Let me push a button and choose whatever movie I want.

So come on, Netflix. Spend big, move fast. Get your customers thinking of you when it comes to instant gratification. Gather expertise on streaming technology and pricing before your competitors.

But discs are not the future. And I’m not the only one who thinks this way. Hastings predicted last month that DVD rentals will peak within the next 5 to 10 years, yet Netflix is leaving the Internet delivery of new releases to Apple and other competitors.

Early indications are that Web sales don’t eat into DVD sales.

While Roku’s Netflix device offers easy access to movies and does away with the long download delays, it still doesn’t offer the best-looking picture.

In January, Apple cut a deal with the movie industry that allows iTunes to rent new releases 30 days after the flicks become available for sale on DVD. It would be nice to get them sooner, sure, but Apple is providing an option that Netflix is not.

Netflix customers will gradually move to the Web

The Web hasn’t taken over yet. There’s plenty of time to boost the quality of Netflix’s streaming library and consumers may not fully embrace Internet video until it’s as good as watching a DVD.

Take a look at this excellent story from the Los Angeles Times. Executives at some of the major studios, who used to believe that the Web and VOD services could hurt DVD sales, are experimenting with limiting the time an outlet has exclusive access to films. Others studios are testing whether it pays to make Web and VOD rentals available when DVDs go on sale.

The studios have a distribution structure whereby they cut deals to provide exclusive access to films for specific periods known as “windows.” Theatrical releases typically come first, followed by home-video release, then pay-per-view channels, then regular cable, etc. This is why Apple and VOD services must wait 30 days before distributing rentals.

Pachter disagrees with me. While he said he wouldn’t be surprised to see Netflix experiment with streaming new releases, he likes the current hybrid approach: offering catalog titles for Internet streaming and mailing new releases in the form of physical DVDs.

This is an important comparison because Apple has already begun offering new releases for rent via iTunes. Trust me on this Netflix, you don’t want to fall behind to Apple. And let me be clear. Hollywood hasn’t barred Netflix from obtaining the latest releases. Netflix managers have acknowledged that they could have received the same deal as Apple. They chose not to, and I think that’s a mistake.

If there are hundreds or thousands of “software as a service” and “hardware as a service” companies? Sure. That’s a situation not much different from today. Some independent software vendor delivering its own software in the form of a service isn’t going to get into the hardware and operating system business. The investments are just too large.

In an interview, Sun Microsystems’ chief technology officer of information technology, John Dutra, balked at committing to the 2015 goal, and cautioned that Cinque’s post was more of a "vision" than a "tactical plan." But Sun’s drive to reduce its in-house computing hardware is real. In five years, Dutra says, more efficient servers and virtualization–the conversion of multiple computers into software that can be run on a single machine–will allow Sun to do away with five of its eight data centers, reducing both the centers’ square footage and data consumption by around 50%.

At first glance, none of this should be particularly surprising. In a widely quoted post in November 2006, Sun CTO Greg Papadopoulos opined:

However, Sun is not just any company. It makes computer systems. And there is a very real question whether "arms merchant" is necessarily a great role to eye in a cloud computing world.

…That there will be, more or less, five hyperscale, pan-global broadband computing services giants. There will be lots of regional players, of course; mostly, they will exist to meet national needs. That is, the network computing services business will look a lot like the energy business: a half-dozen global giants.

As a result, if any of the large system vendors truly believe that a highly concentrated compute utility is the future, it’s unclear why they should be embracing the role of passive arms merchant given how little control they would have over their own destiny in such an environment.

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The idea is that these mega-service providers will increasingly deliver most of the world’s computing in the form of a service. In other words, they’ll be the back-end to “cloud computing” or "The Big Switch" (to use the term from Nick Carr’s latest book.) For a company to look to a future in which it doesn’t own and operate its own computers is fully consistent with this vision.

However, if one accepts Papadopoulos’ vision at face value–that there will be a very small number of providers–the competitive landscape looks much different. Such providers could do much of their own system engineering–as Google, in fact, does today. At the very least, a handful of mega-providers would have the sort of market power over their suppliers that probably no single company does today.

That said, Dutra goes on to indicate that Sun does eventually plan to reduce those numbers to zero, renting out the company’s processing and storage capabilities from external data centers–albeit, it would appear, at some vague future date.

No matter what your views of Yahoo’s current stability may be, this is undoubtedly a big victory for OpenID. Not so long ago, the protocol was considered a dot-com/futurist pipe dream. OpenID was created by Web 2.0 guru Brad Fitzpatrick, who founded LiveJournal and was brought on board at Google last year as one of the most prominent players in its OpenSocial developer initiative.

OpenID is designed to facilitate single log-ins for multiple unaffiliated Web sites. Gradually, large sites like AOL and Plaxo have begun supporting the standard, but it remains a tool for the Web’s early-adopter set rather than the online community at large.

But recently, fueled by debate over social-networking interoperability, universal standards have been one of the most buzzed-about subjects in Web 2.0.

Yahoo, which counts its registered users at 248 million worldwide, says that supporting OpenID will mean that OpenID-compatible accounts are available to a total of 368 million Web users. When Yahoo’s support of OpenID goes live, starting with a public beta launch on January 30, this will mean that a Yahoo ID can be consolidated into an OpenID account that will be valid at all partner sites.

On the flip side, sites that accept OpenID will have the option of displaying a “Sign in with your Yahoo ID” button.

As more major Web players start to sign onto OpenID–and more casual Internet users start using the standard–there will inevitably be security concerns raised. Since OpenID has no central repository for identity management, users can choose which sites they trust with their OpenIDs. But that doesn’t mean they’re going to always make the right decisions. Sometime in the not-so-distant future, an incident or two will likely surface that will call into question just what universal standards mean for privacy and personal security on the Web.

This is an area to watch.

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Valve)

If you enjoy (legally) downloading PC game content over the Internet, then you’re most likely familiar with Valve Software’s Steam, a platform for the delivery and management of PC games.

On Tuesday, Valve announced an upgrade to “Steamworks,” a suite of publishing and development tools available to, well, publishers and developers for free.

The first of the new notable features include Custom Executable Generation (CEG) technology. According to Valve, CEG makes unique copies of games for each user, allowing them to access the application on multiple machines without install limits and without having to install root kits on their PC. Players that like to play from multiple locations (home, a friend’s house, and definitely not work) should find this news heartening.

Another new feature is the in-game downloadable content (DLC) and matchmaking system. Developers can now deliver new content from inside the game itself. Users can now make new content purchases and immediately experience the new content in the same same game session. Without necessitating a restart.

The new “Steamworks” matchmaking system utilizes the same lobby system used in Left 4 Dead.

These new additions are good news especially for smaller developers that need this kind of regular support from Valve, when using Steam as a distribution system.

Much more information can be found in Valve’s “Steamworks” brochure.

Also, check out the Games for Windows – LIVE announcement made by Microsoft today to see if you can pick out the similarities.

The plant ended up going to that big greenhouse in the sky. The experience made me realize there’s a pretty basic need for sites, such as PicAnswers, which lets anyone upload a picture and ask a question about it. Interestingly, the amount of high profile Q&A services that don’t let users do this is surprising. One of the few to allow it is the AOL-owned Yedda, while sites such as Yahoo Answers, Microsoft’s QnA Live, and Amazon.com’s Askville are limited to text.

This looks like a toy gun but it's actually cable tie gun, which was correctly ID'd by the Q&A community at PicAnswers.com

(Credit:
CNET Networks)

Like Amazon’s Mechanical Turk project, PicAnswers is driven by humans. People upload their photos, and other users chime in if they can answer the query. A lot of the questions posed on the site range from simple identification issues like “what the heck is this?” to advice about what to do about a problem posted in the picture.

Here are a couple of my favorites so far:

Toothpick or food skewer?

My chili is yellow

Is there any Chinese poison in this toy?

Despite its simplicity, PicAnswers is missing two very helpful components: a way to vote on other user’s answers to help filter down the best responses, and a karma system that makes it worthwhile to answer other people’s questions. As it stands, you’re left to sort through the answers yourself and answer out of the goodness of your heart. I’m hoping the site’s creators add these soon. In the meantime, it’s definitely worth bookmarking for the next time you unearth something that needs photo identification.

Here are the questions he answers:
A) How many wackos do you hear from in a day?
B) How do you handle said wackos?
C) Do you use elaborate file/folder systems?
D) How much of your day is spent on replying to e-mails?
E) How do you determine who gets a reply?
F) How often do you check e-mail?
G) What advice would you give to a public figure about what to watch out for if you publish your e-mail address?”

I doubt that this regulatory filing will do much to change Microsoft’s strategy, which has been to hold firm on its February 1 bid of $31 a share, or $44.6 billion. In the current economic climate, Yahoo’s promises of future growth, including doubling its operating cash flow from $1.9 billion to $3.7 in the three-year span, are future promises, not necessarily a reality.

Microsoft, and investors, are waiting to see how Yahoo made it through the first quarter, ending March 31. A nonstellar quarter will make Yahoo shareholders more willing to accept what Gates, Ballmer, and company have to offer, and hope that it doesn’t go down.

Following are some of the slides from the presentation:

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Yahoo)

Hmm, what a good idea. Retail companies get the benefit of a third-party audit of their software vendor’s code and get to make their selections based on whether a vendor meets the PA-DSS standard. It’s great for the retail and financial services industries mandated by PCI, but what about the rest of us poor schmoes? Shouldn’t we get the same kind of protection?

Well, maybe we should but it ain’t gonna happen anytime soon. My suggestion to CIOs in other industries is caveat emptor. IT executives shouldn’t buy any software from any vendor without some type of review of the company’s software development process, security testing, and emergency response procedures. What’s more, purchasing agreements should hold software vendors’ feet to the fire to address security process gaps, fix vulnerabilities within a reasonable time frame, and respond to emergency situations with an appropriate level of urgency. No commitment, no purchase.

Software vendors have always focused their attention on functionality, eschewing security in many cases. For the PCI Security Standards Council, this lack of secure development oversight led to regulations in the form of the PA-DSS. Yes, companies like EMC, Microsoft, and Oracle have embraced secure software development methodologies but we are still buying a lot of vulnerable code from a plethora of vendors.

Since the rest of us don’t have the PCI Security Standards Council to protect us, I strongly suggest more vigilant purchasing policies. Most vendors won’t improve software security until they realize that this omission will go straight to the top and bottom line.

Jon Oltsik is a senior analyst at the Enterprise Strategy Group.

During the Google Zeitgeist conference in Mountain View, Calif., Google CEO Eric Schmidt interviewed GE CEO Jeffrey Immelt onstage about the maturity of renewable energy technologies and current policies.

Google CEO Eric Schmidt

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Google)

Schmidt said that the two companies will push for government programs to modernize the electrical grid, which would enable broader use of renewable energy.

“GE and Google will be advocating in Washington for the new and smarter grid,” Schmidt said.

Their policy partnership will call for beefed-up transmission capacity so renewable sources, such as wind, solar, and geothermal, can be further deployed.

Wind power is far ahead of other renewable energy sources in being reliable and cost-competitive with fossil fuel power plants, Immelt said. GE’s wind business, one of the largest in the world, will bring in more than $7 billion this year.

However, wind farms are often placed away from the centers of high electricity use. To greatly expand wind energy, which now makes up less than 1 percent of U.S. power generation, more transmission lines are needed.

“If we really want to drive renewables to where it could be, we are going to need more transmission capacity, and the government is going to have to (intercede) to make that happen,” Immelt said.

GE CEO Jeffrey Immelt

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Martin LaMonica/CNET News)

Right now, renewables other than hydroelectric power represent only a few percent of the overall electricity generation in the U.S. Immelt said that getting 20 percent from renewable sources by 2020 would be possible to achieve.

“Actually, this isn’t hard. The technology exists. It doesn’t have to be invented. It needs to be applied. It needs to be priced for carbon and things like that. This can happen,” Immelt said.

Technical collaboration
On the technology side, the two companies intend to develop smart-grid technologies, plug-in hybrid vehicles, and enhanced geothermal systems, where underground heat is converted into electricity.

Smart-grid technology lets utilities more efficiently manage electricity on the grid. And through smart meters and in-home displays, it lets consumers better understand and control home energy use.

GE and Google will work on utility software to make the grid more efficient, and on software for home smart-grid equipment, Immelt said.

Similarly, the two firms will develop software to help utilities better control plug-in hybrid
cars, which can be used to deliver power onto the grid during peak times. A flexible power grid is important because some researchers have concluded that an onrush of plug-in vehicles could strain the grid and lead to construction of more power plants.

In the area of geothermal, GE and Google will create visualization software and power conversion technology. Google recently invested in an enhanced geothermal systems start-up, while GE does not have a large business in this area now.

Public-private line
In discussing policy and technology, Immelt and Schmidt said that the clean-energy field has been underserved.

Immelt noted that the energy business typically spends about 1 percent of revenues in research and development, compared to 7 percent in health care.

Congress is currently debating measures to open up more oil and gas drilling off the coast of the U.S. this week. But existing tax credits for investments in renewable energy projects are set to expire at the end of this year, which energy executives say is slowing the industry and pushing renewable energy companies to other countries.

Both Schmidt and Immelt said that the government needs to play a more active role in setting an energy policy that promotes diverse energy sources and environmental protection.

GE executives have lobbied regularly in Washington for the extension of the renewable energy tax credit. The company is invested in several different energy businesses, including natural gas, so-called clean coal, and nuclear.

But Immelt said that the renewable energy business needs a 10-year tax credit, which would serve as a catalyst for the industry and could then be phased out.

“I’m a lifelong Republican. I’m a believer in free markets,” he said. “I think we worship false idols over time. There is no such thing–in all the businesses we do–that government doesn’t play a role as a catalyst.”

Schmidt last week said there was “a total failure of political leadership” in addressing climate change, and on Wednesday said that government spending should target socially responsible programs.

Google’s green gene
Although it’s not directly related to its core search business, Google and its top executives have been active in the renewable energy business.

Last year, its Google.org philanthropic arm launched a program called RE<C (for renewable energy less than coal) to make clean energy more cost-competitive.

So far, Google.org has invested altogether tens of millions of dollars in wind, solar, and enhanced geothermal start-up companies. Last year, it filed a patent for a floating data center that would be powered primarily by wave energy.

GE, which touts its Ecomagination green-technology initiative, is heavily invested in energy, water, and energy financing.

Updated with link to Google.org blog and YouTube video of interview.