NGEN's $180mm, plus GridPoint, BPL Global, and the California Clean Tech Open

• NGEN Partners announced that they've closed their second fund at $180mm. The Santa Barbara, CA firm's unique angle on cleantech is their focus on advanced materials technologies. Congrats to NGEN, one of several firms that have been actively raising cleantech-focused funds at the moment.

• GridPoint, the provider of energy storage appliances for the home, announced $21mm in funding, mostly from Goldman Sachs. Also announced was a demand response co-marketing arrangement with Goldman's subsidiary Cogentrix. This could be an indication that Cogentrix is going to be more directly taking on existing demand response players such as Comverge, EnerNOC and ConsumerPowerline -- a fast growing market segment that has attracted a lot of cleantech VC interest.

• BPL Global, a provider of broadband over powerline for "third pipe" and smart grid applications, announced a $25mm Series C. Interestingly, a Kuwait-led consortium provided the financing, including existing investor Al-Deera Holding, and new investors International Financial Advisors, Kuwait Holding Company, and International Finance Company. Other existing investors include DQE Communications, PA Early Stage, SZAR Partners and the company's founders.
  

• Congrats to all of the California Clean Tech Open winners (KiteShip, Adura Technologies, Greenvolts, EDC Technologies, and Crystal Clear Technologies). It was a lot of fun participating in the judging in this first year of the event, and I'm looking forward to next year's competition.
  

The current state of play in energy tech and cleantech investing

Coming out of last week's Cleantech Venture Forum, it's pretty clear that cleantech (and relatedly energy tech, which is not a 100% overlap, as regular readers of this site will understand) is fast becoming a mainstream investment area for VCs, in part driven by LPs' interest.

In terms of energy technology investing, Rodrigo Prudencio of Nth Power was kind enough recently to share some of the data that his firm is tracking. As part of a recent presentation he gave at Rice University, Rodrigo showed how US energy technology VC investments are at $1.7B so far in 2006 -- compare this with $0.9B for all of 2005, or with the $500mm expected this year in VC investments in Web2.0.

That the energy technology sector (and cleantech in general) is a booming investment area is well understood, but what was really fascinating was Rodrigo's breakdown of the numbers by subsector, which showed that some subsectors are getting a lot more investor interest than others.

Within Distributed Energy Technology, for example (btw, this subsector was 28% of the total), investments in fuel cells and solar dominated the subsector, while other technology areas such as new engine technologies and hydrogen generation were small or nonexistent in the data. This means that solar tech has received more than 10% of all energy technology VC investments so far this year. Interestingly, while investments in fuel cell technology have been generally flat or dropping over the past year, battery-related investments have been growing very quickly. For those who argue that batteries and fuel cells are competing technologies, this is interesting data.

Even more interestingly, in the Fuels subsector, ethanol-related VC investments have received more than $400mm, or just about one quarter of all energy tech investments. Some (including yours truly) would argue that much of this hasn't really been venture capital investment, but has instead been project finance and/or mezz financing that happened to include VCs in the mix. But the more important comparison is with other fuels-related investment areas -- biodiesel, fuels-related biotech, and new drive train technologies have collectively received less than $100mm so far this year. Such investments clearly are not receiving the same level of attention in the rush to invest in ethanol-related opportunities.

Encouraging to those who have been proponents of technology-enabled energy efficiency technology is the fact that 21% of energy tech investments this year were directed to Energy Intelligence, and of that, the vast majority has been directed to IT & software, end-use management, and sensors. This is good validation that such scalable technologies are primed for rapid market adoption -- or at least that investors think so. Such investments have more than doubled over the past two years.

Thanks to Rodrigo for sharing this very interesting look. As Rodrigo points out, there's a lot of deals concentration in certain technologies, and "the opportunity is to find neglected but valuable subsectors." Amen, and especially true for those investors with a broader cleantech mandate as well.

And it's all strong validation of the increasing interest in these industries, and in the cleantech investment thesis in general. Further such indications can be found in this article in PE Week, which points out that a lot of former IT/etc. venture investors are now looking to expand their efforts in the sector. Oftentimes because LPs are asking for it to happen.


Other news items: (Self-promotion alert) I'm extremely pleased to note today's VentureWire People mention that Alex Sloan has joined Expansion Capital Partners as a Principal... [If only VentureWire would provide online links to their stories, it would be great to be able to point to their work more often...]

Also, for those in the Bay Area on October 4th, the next Renewable Energy Business Network (REBN) happy hour is going to be held at Gordon Biersch in Palo Alto starting at 6:30pm -- and in a terrific opportunity, if you're interested in an overview of PARC's cleantech efforts and an in-person review of SolFocus' business model and technology, PARC is generously hosting a tour for REBNers immediately preceeding the happy hour (so: 5 to 6:30pm). Those interested in attending the PARC event should RSVP to Nick Allen as space is limited (no RSVP necessary for the happy hour at Gordon Biersch afterward).

Cleantech Venture Forum recap

My colleague at Expansion Capital, Kjartan Jansen, kindly offered to write down his thoughts from the recent Cleantech Venture Forum in NYC. Thanks, KJ!

I had the pleasure of spending the second half of last week at the 14th Cleantech Venture Forum in New York. The group continues to do a terrific job and there was notable excitement among the participants (disclosure: Expansion Capital Partners is an investor in the Cleantech Venture Network).

If I were to summarize the conference in a few sentences, they would be:

• Cleantech as an investment thesis and asset allocation is now mainstream. Some institutions are still skeptical, but they're becoming rare.
• More money is coming into the space, but the quality of dealflow being tracked still exceeds this nicely.

When I think hard about it, I could have said the same thing after the previous CTVF in San Francisco. But since the east coast events tend to focus more on the capital markets (i.e. Wall Street) and policy, vs. venture capital on the west coast, we heard from more folks outside the investment community this time. So the change felt more apparent.

Notable appearances included (in no particular order):

• Andy Rueben (Vice President of Corporate Strategy and Sustainability, Wal-Mart)
• Vinod Khosla (Khosla Ventures)
• Andy Karsner (Assistant Secretary for Energy Efficiency and Renewable Energy)
• Vijay Vaitheeswaran (the Economist)
• Kevin Walsh (MD, Renewable Energy, GE Energy Financial Services)
• Joseph Boren and Win Neuger, both from AIG (Joseph from AIG environmental and Win is the CIO of the parent company)
• Several journalists from major publications and news sources were either covering the conference or on the panel (see agenda)

Most panels seemed well received by the participants, and while I did not have a chance to participate in many of them (as I, like most participants, was in and out of meetings -- networking is always a key benefit of these events), I did sit in on the Vinod, Andy, Vijay fireside chat as well as parts of the bio-fuels panel, to note two.

And conveniently, both sessions covered the same topic: Biofuels (ethanol).
Not too many new thoughts for regular readers of this blog came out of this, but here’s a quick summary of what was discussed in the sessions:

- Ethanol is currently replacing MTBE as a fuel additive; this alone will likely put demand above 7.5B gallons by 2012.

- There is some debate around the energy and environmental balance in ethanol produced using current technologies; there is really no debate around the energy or environmental balance of cellulosic ethanol. Hence interest in earlier stage cellulosic ethanol technologies.

- Still early days for cellulosic ethanol; the cost still needs to come down significantly.

The gamble appears to be whether or not ethanol is adopted more widely than as simply an additive (i.e. E85 – 85% ethanol, 15% gasoline). This is what Khosla believes should happen and is pushing very hard for. He argues for three things:

• Mandate that 70% of all new cars be “flex-fuel” by 2014
• Mandate that 10% of gas stations owned by major oil co’s offer E85 in the same time frame
• Reduce current subsidy of ethanol to $0.25/gallon, but increase it to $0.75/gallon if oil drops to $25/barrel

He also noted that we should have a good indication of where policies regarding this are headed, since all candidates for the ’08 election have to go through the Iowa primaries. And Iowans care a lot about ethanol.

Andy Karsner was expectedly non-committal beyond what we already know through the recent energy bill.

But it should also be noted that if one takes current projections, some argue that there is already enough capacity in place and under construction to meet the projected demand. So not everyone is excited about jumping on new investment opportunities with Biofuels or Ethanol noted in the company name…

Noteworthy was also Andy Rueben’s presentation during the gala dinner, where he practically pleaded with the audience to share our knowledge about products that can help Wal-Mart save money (I.e. better/cheaper/more durable lighting; better/cheaper/more effective indoor control; smaller/more economical packaging etc). Considering the audience generally views Wal-Mart as a strong potential customer for their portfolio companies, my guess is someone will give him a ring…

I also found the quality of presenting companies to be significantly higher than in previous years, another sign of the maturing investment sector. And in keeping with the above commentary, the winner of the most promising presenter award was Targeted Growth – a Biofuels company.

Hope to see everyone at the next CTVF in San Francisco, at the end of February.

"It's been a very interesting few days"

There has been a lot of cleantech investing news over the last couple of days:

The ongoing Cleantech Venture Forum (I couldn't be there, but my colleague Kjartan will kindly be "guest blogging" on it; for disclosure, my firm is a sponsor) has prompted a lot of attention and announcements in the industry. First off, the revised announcement by the Cleantech Venture Network that they are forecasting cleantech VC investment totals will be $10B from 2006-2009 in North America (compared with $6.4B from 2003-2006). This at the same time that major institutional investors are saying they've upped their allocations for such technologies, and Kleiner Perkins are saying they're upping their allocation to "greentech" to $200mm.

Along with these announcements, the Chief Investment Officer at AIG told the CTVF audience that investment decisions at the firm are being made with the strong likelihood of a carbon tax in mind. And there's also been Richard Branson's little $3B announcement today, following up on the earlier mention of $400m being devoted to Virgin Fuels.

Of course, with all of this activity comes the inevitable "is it a bubble yet?" question. We've discussed this before. Suffice to say that a) yes, cleantech is now a venture capital darling, and everyone is looking to play; b) this means that certain sectors are starting to feel "bought up", with some deals being done at eyebrow-raising valuations (often really pre-revenue mezz rounds, and not true venture deals); but c) other sectors remain surprisingly unexamined.

As a judge on several categories in the California Clean Tech Open (big winners to be announced on Tuesday, and as disclosure, my firm is a sponsor), I can attest to this. The "Renewables" category was flooded with applicants... the "Energy Efficiency" category also had a fair amount of activity, but much less... and the "Water Management" category was surprisingly light in terms of both applicants and VCs volunteering to be judges. Granted, clean water technology remains an investment sector that is less-developed than solar and biofuels, or even energy efficiency. But it remains a huge, fast-growing sector with lots of big unmet needs that many innovative startups are targeting with scalable technology solutions. So to point out that the investment climate for solar technologies is "not a sustainable model" (not to pick on Joel, but they used his quote) misses the bigger point that there remain big technology sectors under the "Cleantech" investment thesis umbrella that are relatively untapped.

One of the theses of Cleantech Investing is that the investor interest being focused on solar and biofuels right now will eventually dig deeper into the other intriguing areas of technology-enabled energy efficiency (which will really get interest once carbon credits become more fungible), energy storage, water treatment, water management, advanced manufacturing, materials efficiency, etc.

Plus, even in the solar sector, good investment opportunities remain to be found. The amount of technological discovery being done in the sector is impressive, and there are big pain points throughout the value chain (not just in the PV cells themselves). It's a very big, fast-growing market. But these are all topics for another day.

Other announcements and news:

• Marrone Organic Innovations announced a seed round of $550k. The company is developing weed control solutions for organic agriculture applications; the CEO, Pam Marrone, had previously founded AgraQuest. Seed round financers were not disclosed.
  

• BASF Venture Capital announced a $3mm investment in LUCA Technologies of Colorado. The company's biotech approach uses microorganisms to turn in-situ coal, shale and oil into natural gas.
  

• The CEO of CIGS solar PV developer Miasole (disclosure: I am a very minor shareholder) disclosed plans to file an IPO within the next 12-18 months.
  

Solaria's $22mm Series B

Solaria, which is developing concentrating solar panels that use 2-3x less silicon for the same amount of energy, announced a $22mm Series B. The round included NGEN Partners, Sigma, Q-Cells, and Moser Baer. Solaria is anticipating commercial products as early as 2007; their products, although concentrators, will have similar form function to existing PV modules.

Deeya Energy and Tuesday Tidbits

• New battery technology developer Deeya Energy has announced a first round of VC funding (amount undisclosed) from Blue Run Ventures, DFJ and DFJ Element. The company claims their technology will provide cheaper batteries with better charge/discharge characteristics. Energy storage remains a critical enabler for a lot of other cleantech applications (think Tesla Motors), as well as a large potential market in its own right.
  

• First Reserve Corporation has bought a 50% stake in Blue Source, LLC. While not strictly a venture transaction, it's important for cleantech investors to view this as further signs of development of a real market for Greenhouse Gas (GHG) emissions reductions credits. Many clean technologies have the potential to lead to the creation of GHG credits for either the clean technology manufacturer or their customers, but as of yet the value of this remains mostly uncaptured as the market for GHG credits continues to develop. If GHG credits become standardized and fungible (and First Reserve is far from the only financial player to be making a bet that this will happen), it has the potential to unlock significant new revenue streams for a lot of cleantech firms, and thus create additional value for their investors. So it's a market to watch very carefully.

Other news and notes: We purposefully do not talk much about politics on this site, but given how past State of the Union announcements have impacted cleantech investment markets, it's worth noting that now we've twice heard this rumor... Here's a good story on the growth of solar in the Bay Area... Finally, here's an interesting column on GM and the hydrogen highway.

SolarCity, cleantech investor moves, and other news...

• SolarCity, which is developing all-in solar packages for the home (including the solar system, net metering with the grid, and remote monitoring), has raised $10mm in financing led by Elon Musk. Musk will also be taking the Chairman role with the company. It's interesting that net metering is the stated goal, rather than storage, which is another take that other companies such as GridPoint are pursuing. Any other funders besides Musk were undisclosed.
  

• Several moves among cleantech investors: Russell Pullan has joined Nomura International -- he was formerly with The Carbon Trust... Greg Sullivan has joined Chrysalix as a Managing Director, following their recent fund closing.

• A Denver energy venture capital firm is looking to hire an experienced post-MBA energy technology Associate. Those interested should contact Lynne Ballegeer at Phoenix Group International.
  

Other news and notes: Lots of talk about Google.org's plans to invest in plug-in hybrids... Here are some very useful stats on various energy markets... And here's a good overview of ocean/wave power... VentureWire mentioned on Wednesday that venture valuations have been going up almost across the board. Notably, median valuations for "advanced materials, agriculture and energy" went up from $7.9mm in 2005 to $14.8mm for the first six months of this year... Heard from an attendee of the recent EEVF in Zurich that there was a lot of interest and a big turnout -- and that the big joke was "Did anyone here NOT invest in Ocean Power Delivery?" (There are now apparently 15 investors)... Finally, Neal Dikeman has some useful thoughts coming out of the recent Investing in Solar Conference.

Aquarius Technologies, new regional cleantech funds, and other news

• Aquarius Technologies, which is developing a "sludgeless" wastewater treatment solution, raised a $7.5mm Series A from L Capital Partners ($6.5mm) and private investors. The technology was brought over to the U.S. and licensed from Elif Technology, an Israeli firm.

• There has been an increase in the number of regional cleantech funds lately, often sponsored or in some way supported by local governments who see the potential for attracting green jobs. Two good examples announced recently: Abu Dhabi's $250mm Masdar Clean Tech Fund (launched in partnership with Credit Suisse and Consensus Business Group), and Pennsylvania's $90mm Keystone Green Investment Strategy (which will be providing funds to local VCs with cleantech track records).

Other news and notes: Solid-state lighting got a major validation recently with GE's $100mm purchase of the remaining 49% of GELcore (a former JV with Emcore), and partnership with Nichia... Here's an interesting solar-related interview.

BMG Seltec, Virgin Fuels, and other news

• Cleantech VC DFJ Element has funded a $6mm round of financing to BMG Seltec, a provider of technology-enabled services for the asphalt and concrete industry. From the press release, it appears that Element was the sole funder in the round.

• Richard Branson's Virgin Group has started a $400mm fund to invest in green fuels. And they've already spent a big chunk of it in the recent financing of Cilion, it turns out.

Other news: KCPB's Green Innovation contest has been announced... Speaking of biofuels, here's a great back-and-forth between Vinod Khosla and Robert Rapier on the subject... On the same subject, here's a nice column discussing efforts to increase the yields of energy crops... Finally, more details surfacing about Applied Materials' continuing solar efforts.

Cilion, Angstrom Power, Orb, Crystal IS, and Pangaea

Lots to catch up on:

• Matt Marshall at VentureBeat had a scoop last week on a new $170mm raise by ethanol producer Cilion. The funders weren't disclosed, but it's known that existing investors participated alongside new backers -- Khosla Ventures and Western Milling put $40mm into the launch of the company way back in June.

• Micro fuel cell manufacturer Angstrom Power announced an $18mm round of financing led by VantagePoint Venture Partners. Existing investors included Ventures West, GrowthWorks Capital, Chrysalix Energy, OPG Ventures, and Micro-Generation Technology Fund.
  

• Orb Energy, a Singapore-based developer of solar-based backup and thermal systems, has raised an undisclosed amount of funding from zouk ventures' Cleantech Europe, Ed Stevenson's Renewable Capital, and the Singh Family. Orb is initially targeting the Indian market, and expects to build their first manufacturing facility in Bangalore.

• Crystal IS, which has proprietary technologies for the production and working of aluminum nitrate substrates, has raised a $10.6mm Series B led by Lux Capital, with participation from 3i, ARCH Venture Partners, Harris & Harris Group, Credit Suisse (on behalf of the New York State Common Retirement Fund) and Taiwanese Linkmore Ltd. The cleantech applications of these substrates include solid-state lighting and UV for detection and purification of contamination (eg: drinking water).

• Cleantech investors in the news: Pangaea Ventures announced the first close of Pangaea Ventures Fund II, which is targeted at $50mm by final closing. The amount of the first close wasn't disclosed, but early LPs include BASF, Solvay and Ciba Specialty Chemicals... Christopher Darby has been brought in as the new CEO of In-Q-Tel, and batteries and nanotech are top priorities... Also of note, Dan Primack notes that Dan Goldman has left New Energy Capital and is taking on an operating role with GreatPoint Energy.

• Venture-backed cleantech M&A: OrganicID, which is developing RFID solutions for tracking forest products and had been backed by ITU Ventures, was bought by Weyerhaueser... Consolidation in the M2M sector as well, with the recent acquisition of MaxStream by Digi International. The $38.5mm deal was done at what looks to be a 3.7x sales multiple.

Other news and notes: Q2 European energy tech investing was up 5x year on year, and was up significantly even if one excludes Ocean Power's big raise... The end of the silicon shortage is growing near, as illustrated by this recent announcement from Dow... We don't talk about politics much on this site (on purpose), but here's an interesting column by Matt Marshall about some wiser venture investors who have taken another tack, and likely provided some good impetus for the state's cleantech industry along the way... Here's an interesting column which shows how cleantech IPOs might be leading the way when/as the IPO window opens back up.