Advanced Glazings, and other news

• Tyler Hamilton has the scoop on a $6mm round of financing raised by Advanced Glazings, which offers insulating, anti-glare architectural glass. Tyler's written about the company before. According to Tyler, the round was led by The Walsingham Group and GrowthWorks.

• A couple of good general cleantech articles recently worth noting: First, see this column by Peter Fusaro, aimed primarily at the mainstream utility industry. It's a fairly optimistic take on the cleantech movement. Next, there's this CNN.com article, which provides a more sober take, specifically from the VC's perspective. Both are worth checking out.

• Always thought-provoking, Joel Makower opines here on the emergence of "patient capital" as an investment class. Interesting to contrast his take with the two aforementioned general cleantech articles... [Self-promotion alert: I'm going to be taking part on Joel's panel at the upcoming Investors Circle conference, which should be an engaging session]

• While this site purposefully avoids discussions of public policy, they do impact cleantech markets. So sometimes it's useful to pass along articles with good overviews and updates, such as this BusinessWeek article discussing federal policies toward energy efficiency technologies.
  

Fat Spaniel, a World Bank clean energy VC group, and CA Cleantech Open get-together

• Fat Spaniel, which offers real-time energy usage and generation monitoring, announced a $3.5mm Series A investment from DFJ Element. Fat Spaniel is seen as offering an enabling technology for distributed renewable generation.

• Buried in this article about the World Bank is a mention of the organization potentially starting up a venture capital group to invest in clean energy technologies. If the CIA and US Army can start up VC groups, why not the World Bank?

• If you're in the Bay Area this coming Thursday, the CA Clean Tech Open's technologist/ entrepreneur "matching event" should be a fun happening. PS: Since the link got put up, the location has been finalized -- SRI International's offices in Menlo Park.
  

Happy Earth Day!

Happy Earth Day, everyone. It's a good day to sit back and enjoy some of the latest stories of interest to come across the wires, starting with a couple of recent deals to note:

• Targeted Growth, a Seattle bioagricultural company that is developing "gene enhancements" that increase yields for various biofuel crops, has apparently raised $10mm recently, according to this column. The total investment in the company to date is $15mm, and among the investors so far are Investment Saskatchewan and GrowthWorks. Increasing yields by 20%, as is talked about by the company, would significantly improve costs for biofuels.

• Ocean Power Delivery, a Scottish wave-power technology developer, has raised a $22.5mm round of funding, according to a GE press release (cited on Clean Edge). GE is providing a $2.6mm debt facility and taking an undisclosed amount of equity. OPD is currently delivering machinery for their first commercial contract, in Portugal. Interestingly, this deal also marks another example of GE Technology Lending beginning to take equity stakes again -- thanks to their Ecomagination effort, this trend of venture-stage equity investments would bring GE into the "cleantech VC" club.

• While we're looking internationally, here's a good article on the growth of cleantech VC and private equity activity in India.
  

• Red Herring posted an article recently which cited a study calling into question clean energy technologies on the basis of energy price volatility being lower (relative to some other commodities) than one might have expected. It's good to get away from some of the hype about energy prices -- the effect of oil prices on the market attractiveness of electricity-generating clean technologies, for example, tends to be a bit overstated in the press. However, a few quick thoughts on this study: a) the authors admit that their historical analysis may not have any bearing at all on future volatility; b) the authors also admit that volatility in energy prices may have more relative impact than volatility in other commodities because consumers are more exposed to it (and, I would add, it's probably a bigger part of the overall consumption basket than some of these other unnamed commodities); and finally c) as we've pointed out before, some researchers actually think that prolonged exposure to steady high prices, rather than exposure to price volatility, will force the greatest rate of change. So take this Red Herring article with a grain of salt...

• A good Earth Day story: The tale of "The Dog".

• Finally, congrats to Tyler!

Miartech and Smart Fuel Cell

• Miartech, a Shanghai company which appears to be designing energy demand response capabilities into semiconductors intended for consumer products, raised $6mm in first-round funding from DFJ, DFJ DragonFund, and DFJ Element. It's interesting to see DFJ leveraging all three entities on the same deal.
  

• German methanol-fueled fuel cell developer Smart Fuel Cell (say that three times real fast) announced a 15mm euro raise from "several renowned European institutional funders." The company's fuel cells are being used so far as auxiliary power on a line of motor homes, and are targeting a broad range of transportation and battery-replacement applications. The company had previously raised 9.6mm euro of funding, from investors including the 3i Group, Pricap Venture Partners, E.I. DuPont de Nemours, and Buchanan Industrial Technologies.

Tuesday links

• The Washington Post has a good article on cleantech investing today, following up on the good AP article from a couple of days ago [self-promotion alert: Diana Propper of Expansion Capital is quoted in the WaPo article]. Coincidentally or not, note from the same day's WaPo this article on oil prices, and this article on AES' big investment decision on alternative energy.
  

• For an amusing and well-done video on climate change, see the Renew US site -- more details are available on E.P. Joel Makower's website.

• A couple of upcoming conferences to note: The MIT Energy 2.0 conference, and the upcoming Cleantech Venture Forum in London. Happy networking!
  

Zinc Matrix, ESS and Cornell Capital

• Zinc Matrix Power last week announced a $7mm round of financing. Existing investors Intel Capital also participated, alongside an unnamed "private equity" group which may or may not have been a new investor, it's unclear. OnPoint Technologies, which led the company's $9mm October 2004 prior round, didn't participate in this current round. Red Herring has a very good discussion of the company's technology and future plans.

• ESS, which offers software for corporate EH&S departments, announced an $8mm round of financing, led by Grayhawk Venture Partners and DCA Capital Partners. Unnamed existing investors also participated. The company's software helps companies track compliance with environmental, healthy and safety regulations.

• Cornell Capital, which has recently provided financing for XsunX ($7.9mm), McKenzie Bay International Ltd. ($5mm), GreenShift ($6mm), Barnabus Energy ($15mm), and NewGen Technologies ($5mm), has announced their intention to invest $150mm into cleantech.
  

Some thoughts on today's PE Week Wire

Dan Primack (the mastermind of the mandatory daily reading, PE Week Wire) had some interesting comments today, regarding a cleantech b-plan contest he judged yesterday:

On Tuesday night I helped judge the semi-finals of a clean-tech business plan competition up in Lowell. Almost all of it was off-the-record, but a few quick observations:

* Lowell is home to Konarka, a VC-backed company that makes flexible photovoltaic materials (particularly for military use). Listening to clean-techies talk about Konarka is like listening to Web 2.0 disciples discuss Google, except without the malevolent envy. It seems that almost every photovoltaic b-plan was viewed through the Konarka lens. Big-market folks like GE, however, were hardly mentioned at all.

* I was on a judging team with Robert Shaw of Arete Corp. He is a clean-tech know-it-all, but in the most literal sense.

* Most of the b-plans involved solar tech, which apparently reflects the larger clean-tech market opportunity. Not wind, biofuels, hydrogen, water, etc. – but solar. This is probably old hat to many of you, but was new to me.

* There were a bunch of clean-tech VCs at the event, and I tried to ask each of them the following questions: “Is there enough clean-tech dealflow to justify the amount of venture capital being allocated to the space?” The unanimous answer was “no.” Kind of reminds me of China...

It's shocking to hear that people in Lowell like Konarka...

Some other points Dan made were a bit more surprising, at least in light of available data and conversations I hear among fellow cleantech investors... Taking them in turn:

• Regular readers of this site will know that cleantech dealflow is about a heck of a lot more than just solar, despite the fact that it was the "hottest" (pardon the pun) sector in 2005. In fact, breaking down the Q3 2005 numbers from the Cleantech Venture Network (the most recent available, unfortunately), about 59% of cleantech venture funding in that quarter was energy-related (versus clean water, materials efficiency, etc.), of which a little less than half was generation-related, and of which only some certain portion would be solar related [note: The CTVN was an early investment of my firm]. These numbers are imperfect, but should be at least directionally correct. So at best, we can assume that solar remained less than 25% of total cleantech dealflow in that quarter, probably significantly less. Indeed, anecdotally it appears that in 2006, a lot of cleantech VCs have turned their attention to other areas such as biofuels and clean coal alongside solar. So "cleantech" doesn't equate to solar alone, or even predominantly. Solar is, however, getting the most press attention and has recently seen the most high profile IPOs...
  

• Regarding the "larger cleantech opportunity," solar also doesn't excessively dominate. According to Clean Edge's most recent numbers, biofuels were a $15.7B market in 2005, solar was $11.2B, and wind was $11.8B. Clean water technologies weren't tabulated, nor were the other cleantech sectors, but these are not small markets by any means either. Not knocking the solar opportunity at all, but again, regular readers of this site will know that it's not the dominant portion of the "larger cleantech opportunity."

• Regarding the comment about too much capital chasing too few deals in cleantech... It's a fair question. But if you ask any VC (at least ones not current fundraising) in any sector the question "is there enough dealflow to justify the capital entering your space," what do you expect them to say? "Yes, actually, there's plenty of dealflow, so I invite everyone else to come into my sector." Just saying there might be a bit of understandable self-interested bias in the "unanimous" answer that was heard... As for me, I'll just note that I've been working my tail off lately...

[4/17 update: See Dan's thoughtful response here.]

Cleantech investor news

• Applied Materials' corporate venture group appears to be focusing on several cleantech areas for their investments, according to this article. Interestingly, Neal Dikeman (of Cleantechblog) has tracked down rumors suggesting that Applied Materials intends to move into the solar PV manufacturing equipment space -- that would fit well with the above article, which mentions that, "Now, as part of Applied Materials, the fund will hear more from the company's engineers and scientists, ensuring that investments jibe with the corporate strategy."

• Agribusiness giant Syngenta (the combination of Novartis and AstraZeneca's agribusiness unit) has launched a corporate venture group of their own, to be managed by Life Sciences Partners, a European VC. The $100mm fund, LSP BioVentures, will be based in Boston, and will invest in -- among several other areas -- biomaterial and biofuel technologies.

Biofuels deals: Altra and GreenFuel

• More quasi-project-finance investing by cleantech VCs: Ethanol project developer Altra (which began life as an investment firm called Malibu Capital Partners) has taken in an "undisclosed" amount of funding from Kleiner Perkins, Khosla Ventures (Vinod's new group), Omninet, Sage Capital Partners, and the Angeleno Group. Matt Marshall has a nice write-up on the deal -- and discloses that the amount of the financing was $50mm.

[4/11 update: This post discusses how Vinod has also undertaken a PIPE to take a 10% stake in Indian ethanol plant equipment manufacturer Praj Industries... Continuing to put his money where his mouth is.]

• GreenFuel Technologies, which took in $11mm in Series B funding from DFJ and others last year, and is one of the more talked-about clean energy companies these days, has now completed their Series B with an additional $6.8mm from Polaris Venture Partners.
  

The latest on Kleiner and cleantech

John Doerr, Vinod Khosla and the rest at Kleiner Perkins have been bringing a lot of positive attention to the cleantech investment community lately. The latest is this Associated Press article, which describes the current "greentech" plans at Kleiner, apparently including not just investing but advocacy as well, interestingly. It's a good article that uses Doerr's perspective as a springboard to discuss the broader trend toward more venture investments in cleantech, and some of the reasons for it.

While it's great to see the AP coverage, we continue to be puzzled that people like Mark Heesen of the NVCA seem to think that returns in cleantech have not been strong historically, when in fact available evidence suggests that's just not true, that instead historic returns in cleantech are likely to have been competitive with those in other sectors [self-promotion alert -- one of my firm's GPs co-edited the study]. This comes on the heels of Mark's statements at the Cleantech Venture Forum suggesting that cleantech is also a more heavily-regulated segment than other investment areas...

However, Mark is entirely correct when he's quoted as saying, "There are a lot of obstacles that stand in the way of creating a new way of creating energy." Nevertheless, regular readers of this site will already know -- that's not what most cleantech investing is all about.

Ideal Bite and Arch Rock

• Green-product website Ideal Bite announced they've taken in $250k in angel funding. The site provides "environmental tips" to 38k subscribers in daily emails, and also offers market research services and a blog. If you're interested in some green marketing comps, see that they've also signed up General Mills for $75-100k worth of marketing and market research, or about $2-3 per subscriber...
  

• In the midst of a very busy period, utterly failed to note the funding of Arch Rock, the "mote" network software provider. We've discussed sensors, M2M communications and their cleantech implications before (and here's another useful take as well), and software solutions to be able to manage the various datapoints and the voluminous data are actively being sought by a number of leading players. Fortunately, here's a good discussion of the Arch Rock raise, giving the opportunity to make up for missing it when it was first announced -- the $5mm round included funders Intel, New Enterprise Associates and Shasta Ventures.
  

Wind power in the news

Wind power has been in the news a lot recently, with market data updates showing strong growth, and the recent funding of Southwest Windpower.

On the same topic, see this Q&A with Quayle Hodek of Renewable Choice Energy. Among other points, some interesting bird epidemiological data...

Also, it seems anecdotally that Clipper Windpower, despite some hiccups, has really been ramping up on hiring, nabbing a lot of folks from GE and elsewhere. Signs that there's room for new entrants in this fairly concentrated market...

Follow-ups and other items

• Meir Ukeles of Israel Cleantech Ventures pointed me to a recent Merrill Lynch Europe oil and gas industry report, where they declare that renewable energy is moving to the "centre stage" for the big European oil giants. It's a proprietary research report, so no link, but if you can find a copy, it makes for a very interesting read.

• Had a very enjoyable and entertaining dinner with several GM execs and green policy thinkers (all brought together by Joel Makower -- thanks, Joel!). A wide range of topics were discussed, some pointed questions were asked, but from the cleantech investors' perspective, I would boil down the key takeaways to: a) GM is serious about promoting the use of ethanol, as their recent market campaign demonstrates, potentially providing a strong voice for that cleantech market; b) when asked about their biggest unmet technology needs, it was interesting to hear the clear response "better batteries!" for hybrids and other vehicles, with hydrogen storage also mentioned secondarily, as GM has a stated plan to target PEM fuel cell vehicles in a post-hydrogen highway world (no word on the expected timing of that, of course...). The full conversation was much richer, naturally, it was an interesting dinner all around, but those two points stood out to this investor.

• Cleantech investor Michael DeRosa, formerly of Cordova Ventures, has joined DFJ Element as a Managing Director. Congrats!

• Regarding the recent column here on ethanol IPOs, Neal Dikeman has put up a very thorough, valuable analysis on CleantechBlog, check it out. Notable quote: "...at the end of the day, it is a refiner, not a tech company."
  

• Finally, a small administrative note: I'm not going to allow any more comments in any way related to XsunX. So you day traders can stop alternately promoting and trashing the company, no more comments will be posted here. Apologies to everyone else who may have been sincerely interested in sharing thoughts on the company, I hate having to reach this point, but there we are...
  

Southwest Windpower raises $8mm Series B

Southwest Windpower, which sells small-scale wind turbines for distributed generation applications, announced an $8mm Series B led by RockPort Capital. Chevron's venture group and existing investor Altira also participated in the round. According to the company, sales of small wind generators have grown 50 percent per year over the past two years...

Shriram EPC and Barnabus Energy, plus a Yale VC panel

Two interesting deals from recent news:

• India-based Shriram EPC announced they took in a significant amount of funding (about $22.4mm, if I've understood the conversions correctly) from Bessemer Venture Partners. The deal would appear to have had a pre-money valuation of around $45mm (off of current fiscal year revenues of around $34mm, for those of you out there looking for comps). Shriram constructs steel plants, biomass power plants, wind power plants, and does other infrastructure-related activities including sewer line repair.
  

• Barnabus Energy (soon to be known as Open Energy Corp.) took in $15mm in funding commitments from Cornell Capital Partners, in the form of convertible debentures. Barnabus/OEC appears to be positioning itself to be a bit of a roll-up play in renewables. Cornell Capital Partners also funded XsunX last year in a similar transaction.

Also, stumbled across this description of a recent panel discussion on "green" venture investing, including panelists George McNamee of FA Technology Ventures, Paul Repetto of Greenmont Capital Partners, and Liddy Karter of Karter Capital Advisors LLC. No real surprises, but still interesting to read.

Biofuels producers going to public markets for capital

It's just an early sign, but two recent IPO filings by biofuels producers illustrates what may be a growing trend of bypassing private equity providers to go straight to public markets.

• Aventine Renewable Energy Holdings filed for a $50mm IPO, which appears to be aimed in part at supporting a $60mm expansion of their Pekin, IL ethanol plant.

• VeraSun Energy filed for a $150mm IPO, with the proceeds to be used to finance additional ethanol facilities. Interestingly, VeraSun is currently selling their ethanol to Aventine, but plans to stop doing so in 2007.

We've talked before about how VCs are finding it somewhat difficult to play in the biofuels market, despite an increase in interest in the space given high fuel costs and increased government support (at least verbally).

The major issues for venture capitalists seem to be a) the fact that most such new facilities are being built with very mature, non-proprietary technologies, which can limit scalability and open the possibility of strong price competition, eliminating margins over the long run; and b) putting "steel in the ground" is a highly capital-intensive investment which is also not the kind of scalable investment VCs look for.

Nevertheless, VCs continue to look for opportunities to make direct investments in biofuels producers when they feel it makes sense, and even some indirect investments by providing capital to project finance outfits. Well worth checking out is Vinod Khosla's take on the market and its potential (note: link opens a HUGE 7.3MB powerpoint).

But the VeraSun and Aventine IPOs suggest that the flow of such private equity into biofuels isn't seen as being as efficient than normally costly IPOs can provide via public markets. This may reflect that there are as yet unmet capital funding gaps in the project finance side of cleantech investing, or that the appetite for biofuels stocks among public market investors is so great that companies can get dramatically higher valuations via IPOs, or both.

It certainly raises some intriguing questions:

• Will more private funders (not just VCs, but also hedge funds and traditional energy project financiers) jump into this market, chasing IPO exits, providing more capital and higher valuations?

• Alternatively, is this just a short-term window for high-valuation IPOs that will soon close?

• Will this fairly concentrated market (ADM supplies a quarter of total US ethanol production, followed by a short list of others like Aventine and VeraSun), with clear geographically-driven natural monopoly dynamics, experience continued strong entry by new players, driving down margins for all players? Note that there's already been strong growth from 50 US ethanol facilities in 1999 to 95 such facilities today, and an additional 31 are already under construction. On the other hand, ethanol remains only 2.5% of all US gasoline consumption by volume.
  

• When will breakthrough technology start to play a more important role in this market?
  

We'll have to watch these IPOs to see what comes out of this nascent trend; it's an intriguing situation.