Saturday, April 02, 2005

California Clean Energy Fund gets started

One good outcome of the PG&E bankruptcy here in California -- as part of the bankruptcy settlement, $30m has been set aside for clean energy venture investments.

The advisors tasked with setting up the California Clean Energy Fund (CalCEF) originally looked at setting up the fund as an independent direct-investment entity, but eventually decided to allocate most of their fund to three existing firms for co-investment and fund management -- Nth Power, DFJ, and Vantage Point got the call.

One implication of this decision is that the CalCEF capital will now be tied to the same types of investments (with the same return expectations, timeframes, etc.) as the co-investment firms' funds target. As a "public benefit" fund, any profits will be recycled back into the CalCEF for future investment.

One alternative would have been a standalone fund that targeted lower returns, essentially as a non-profit. This would have possibly allowed CalCEF to target investments with longer exit horizons, or lower expected returns -- seed funding for 10-year-plus potential "breakthrough" technologies, funding for less-scalable service and consulting business, or funding for niche opportunities, as some examples -- something that private VC cannot realistically address. In many cases, such funding is either made through angel investors or government grants, or often isn't made at all. So it would have been interesting to see how that might have played out.

However, one cannot fault CalCEF's advisors for choosing to leverage the existence of several established funds in the clean energy space, it is certainly the safer decision...


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