Cleantech Investing

You're in the wrong spot!

2007-09-07T11:13:00.000-04:00

Cleantech Investing has moved to its new home on Greentech Media. If you're seeing this message, you're missing out on all the latest posts! Click here to go to the new site, and bookmark www.cleantechvc.com (or http://blogs.greentechmedia.com/cleantechinvesting/) to keep up with the latest... Thanks, Rob

Expansion Capital and Tioga Energy

2007-09-06T19:35:00.000-04:00

First off, thanks to everyone for all the kind words regarding the move to Greentech Media. So far so good!

Expansion Capital Partners is announcing today (will provide a link when we have one) that they have closed their Clean Technology Fund II at more than $100mm. To all my former colleagues at Expansion Capital, many congrats!!

Tioga Energy has added an additional $4mm to their Series A financing, bringing the total amount of the round up to $14mm. Nth Power provided the bulk of the second closing, according to PE Hub. We mentioned the first closing back in June.

Overdue update

2007-09-06T09:06:00.000-04:00

Picked a bad week to fall behind on deal updates, it would appear...

CPV developer SolFocus announced $52mm in new funding this week, and they may not be done pulling together what could be a $70mm round when completed. According to PE Week Wire, $27.4mm of the new financing is targeted at launching a new Spanish subsidiary, and $24.6mm is Series B financing into the parent company. Insider NEA led the round again, with participation by Moser Baer India, Metasystem Group, NGEN Partners, Yellowstone Capital, David Gelbaum, and other investors. SolFocus also recently acquired a Spanish tracker company, Inspira.

Also according to PEWW, secretive solar startup Sierra Nevada Solar has raised $4.5mm in financing. AlarmClock reports that the financing was provided by EarthBright, a San Francisco-based cleantech investment group funded and led by Jonathan Bonanno, chairman of the Cleantech Investment Committee of the Keiretsu Forum, as well as angel investor Ryan Scott.

Plextronics, which is developing organic PV cells, OLEDs and RFID technology, has raised $20.6mm in Series B financing -- Matt Marshall has details. Strategic investor Solvay Group led the round, which included participation by Firelake Capital, Birchmere Ventures, Draper Triangle Ventures, and Newlin Investment Company. The round brings the total investment raised by the company to $37mm over the last five years.

Jonathan Shieber in today's Clean Technology Investor has an interesting column about the birth of Fisker Automotive Inc., a new plug-in hybrid vehicle startup with plans to introduce a four-door car in 2009. Shieber reports that the company, which has been founded by car designer Henrik Fisker and Quantum Fuel Systems CEO Alan Niedzwiecke (they met during the course of a used car transaction), is looking for outside capital -- and they estimate they'll need $100mm over several rounds to make a go of it. Interesting benchmark for EV and related startups... Of course, the obvious question is: What was an auto designer doing buying a used Land Rover, shouldn't he be driving around in some fancy prototype?

Also according to Shieber (this time in VWire), BC-based General Fusion has raised $1.2mm in seed financing to pursue the commercialization of the company's small fusion reactor technology. We briefly mentioned fusion in passing last week, alluding to the fact that General Fusion isn't alone in pursuing the commercialization of "hot" fusion approaches. If one of the entrepreneurial teams driving toward this goal could achieve "net positive" energy from any of these approaches, it would potentially be a big game-changer... There is more info in this interesting article about Canadian clean tech ("the sexiest area of the North American venture-capital world"), including hints that the company may be looking to raise additional capital.

UK-based Solarcentury has raised a GBP13.5mm round of financing, co-led by zouk ventures and Good Energies. Vantania Holdings Ltd and Foursome Investments, along with existing investors VantagePoint Venture Partners and Scottish and Southern Energy, also participated.

PEWW also broke the news that fuel cell backup power system ClearEdge Power has raised $6.47mm of an anticipated $19.47mm Series C. Applied Ventures is mentioned as an investor.

Tonga Capital Corp, d/b/a Momentum Biofuels, has raised a $4.3mm PIPE.

Climate Change Capital, a private equity firm based in the UK, has closed on a $200mm Climate Change Capital Private Equity Fund, which will invest in expansion-stage startups all the way up to buyouts.

CTI also reported this week that Terrabon, a cellulosic ethanol technology developer, has raised $1.25mm in seed financing, bringing their total investment from "individual investors" up to $4.5mm.

PEWW reported last week that PV startup Solexant (with technology to "harvest energy from the entire solar spectrum") has raised a $4.3mm Series A, with backing from Trident Capital, Firelake Capital, and X/Seed Capital.

Wind power software company 3Tier has raised a $2mm second round from Good Energies.

... And even more updates to follow soon...

Cleantech Investing acquired by Greentech Media

2007-09-04T14:25:00.000-04:00

There's been a lot of news in the world of cleantech investing over the past few days, but we'll have to get to that later...

Because today we're very proud to announce that Cleantech Investing and Greentech Media are joining forces. I'll also personally be joining Greentech Media's Advisory Board.

We're very excited about the move. Greentech Media is launching a phenomenal one-stop-shopping news site for all things clean and green, and it's a great opportunity to team up with Scott and Rick and Eric and Jennifer and all the other folks at GTM.

C-I started out two and a half years ago on somewhat of a whim, as an attempt to capture some of the day to day developments in the fast-emerging cleantech venture investment sector, pretty much just for friends and family. Since then, the sector has exploded, and news now comes out so often and so rapidly that one busy investor working in his spare time can't possibly capture it all anymore. It never helped, either, that yours truly is not much of a web design expert... So when the opportunity came up to collaborate with a world-class online media team like GTM's, it just made a lot of sense. The experience of the GTM team, and the resources we'll be able to collectively focus on what's happening in the sector, will be invaluable for making sure C-I continues to be a useful resource.

But I'm also pleased to note that I'll continue to be the primary author of this site going forward, albeit with a lot more help/collaboration. It's been surprising (nay, shocking) to me for some time now just how many people have been reading the quickly jotted-down notes and thoughts of a modest venture investor every few days. Subscribers to the RSS feed, for instance, have pretty much been doubling every six months since the beginning of last year. It's been a lot of fun, and it'll be even more fun to be doing it as part of such a strong team. Look for even better content and a much better setup from this partnership, in other words...

During the post-launch period, we'll eventually bring all the past content and ongoing posts over to the new home on the GTM site on a permanent basis. In doing so, we'll work to make sure that however you may have been coming to C-I in the past, whether via RSS reader or daily email or directly via cleantechvc.com, it'll be a seamless transition for you. And now it'll also be easy for you to go from C-I right over to the main GTM site to learn more about anything related to cleantech you may be looking for.

As always, if you have any comments or questions (or especially business plans...), don't hesitate to contact me at cleantechvc@gmail.com. Thanks for reading!

[PS: For you reporters out there, don't bother to ask... "terms of the transaction were not disclosed."]

Propel Biofuels

2007-08-30T08:41:00.000-04:00

Extremely pleased [self-promotion alert] to share the announcement that Propel Biofuels has raised a $4.75mm Series A round (see Propel's pdf press release here), with funding provided by @Ventures and Nth Power. The investment round also included participation by several leading Seattle-area businesspeople, including Andrew Stout (founder of Full Circle Farms), Barry Barr (founder of KAVU), and Jack Rafn (founder of RAFN Construction). Also coming onto the board alongside Peter Mills of @Ventures and Nancy Floyd of Nth Power will be Arthur Rubinfeld, previously Exec VP at Starbucks, where he was responsible for building out the company from 100 locations to over 3,800 stores worldwide.

There are around 200,000 gas stations across the United States, but only 750 biodiesel refueling stations and 1,200 E85 refueling stations. And most of these locations aren't convenient or accessible to most drivers. As automakers bring clean diesel autos and flex fuel vehicles to market, and as venture-backed biofuels producers ramp up their volumes, the ability of most Americans to easily find locations to fuel their cars with biofuels remains a huge bottleneck in the market's development.

Propel's BDS Unit directly addresses these challenges, with a low-risk, no-upfront capital system for independent gas station owners, green-minded retailers and others who want to offer biofuel choices to their customers.

EnerTech, Secure Energy, Reklaim, Thermilate, and other news

2007-08-28T12:01:00.000-04:00

Don't forget to enter the 4th Annual Energy Tech Investor Conference Photo Caption Contest!

Well-known energy tech venture firm EnerTech Capital has raised a $75mm first close toward a $250mm targeted third fund, according to VentureWire today. LPs include CalPERS, Dow Ventures, Kuwait Petroleum, and Masdar. Another LP, Acorn Factor, a publicly-traded investment group, expects to be occasionally co-investing with EnerTech on their expansion-stage energy deals.

Jonathan Shieber reported in Friday's CTI that Secure Energy Inc. has raised $5.5mm of a targeted $8mm round of financing. Secure Energy is converting a Caterpillar manufacturing site in Decatur, IL into a coal gasification plant.

PE Week Wire reported on Monday that tire / oil / etc. recycler Reklaim has raised $7mm of a $10mm Series B, led by Goldman Sachs.

VWire reported on Friday that UK-based Thermilate, which sells a paint additive with insulative benefits, has raised a $1.5mm round of financing, with participation by Enterprise Ventures on behalf of the Coalfields Enterprise Fund.

In the continued pursuit of a strong New England cleantech cluster, Xconomy is reporting that the New England Energy Innovation Collaborative (NEEIC) and the newly-formed Clean Energy Council will be joining forces. [note: my firm @Ventures is a member of NEEIC, and I'm on the advisory board for the CEC] Speaking of the NE cleantech cluster, here's a nice profile of GreatPoint.

Cleantech investors in the news: Ray Rothrock lays out Venrock's investment strategy in "new electrons".

Other news and notes: A quick nanotech overview... 190 non-Si PV developers worldwide? Wow... A nice column on Demand Response... An interesting interview with Hunter Lovins... Underwater turbines getting set for launch in Ireland (tip of the hat to Karen Shilo for sending in that one)... Finally, an amusing story on continued efforts toward cold fusion -- but interestingly, despite what's described in the article there have been some serious venture-backed efforts to commercialize warm fusion lately.

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Clean Energy Entrepreneurship Two-For-One on September 11!

Foley Hoag (www.foleyhoag.com) has graciously offered to host and sponsor at their Emerging Enterprise Center in Waltham the kick-off event for the MIT Enterprise Forum Energy Special Interest Group followed by the next REBN-East networking event. Entrepreneurs, come to learn about new business opportunities from experts at the US Army Natick Labs during the MITEF ESIG program and your business cards and elevator pitches for the networking afterwards. More details below!

Registration/ RSVP

If you are attending the MITEF ESIG Event, please register at the MITEF website (http://www.mitforumcambridge.org/EnergySIG/energysept07.html)

If you plan to attend ONLY the REBN-East Networking Event, please RSVP to Rob at cleantechvc@gmail.com.

And, as always, please forward this invitation to any of your renewable energy research and business colleagues that you think might be interested!

Program Information:

REBN-East, the MITEF Energy Special Interest Group, and the Massachusetts Technology Transfer Center are pleased to announce a joint program:

4:30 – 6:30: MITEF Energy SIG Tech-In Program #1: US Army Natick Labs

6:30 on: REBN-East Happy Hour

Do you want to start a clean energy company, but don’t know where the market opportunity lies? Do you have an interesting clean energy technology but are looking for new markets where it might be used? Do you want to enter your exciting new technology in the 2008 Ignite Clean Energy Competition but don’t know what product to target first? The Energy Special Interest Group at the MIT Enterprise Forum of Cambridge is pleased to present its fourth year of programming, which will be focused on Market Pull.

For our first event of the year on September 11, 2007, several Team Leaders from the US Army Labs at Natick will present the energy needs of the Warfighter/Soldier in several critical areas:

(1) Lightweight energy sources for individual warfighters;

(2) Energy sources for unit organizations/collective protection including high efficiency lighting and field photovoltaics;

(3) Combat Feeding Equipment and System Energy Sources; and

(4) Propulsion and power sources for individual Warfighter robotic applications (SUAV)

Our presenters:

· Dr. Lynne Samuelson, Chief Scientist, Office of the Director

· Mr. Don Pickard – DoD Combat Feeding Directorate, "Combat Feeding Equipment and System Energy Sources."

· Mr. Steve Tucker, Shelter Technology, Engineering & Fabrication Directorate, and Barry DeCristofano, Lead for the E-textiles program, "Flexible Photovoltaics," (power shades, battery chargers, etc.)

· Ms. Jean Hampel, Shelter Technology, Engineering & Fabrication Directorate, "High Efficiency Shelter Lighting and Insulation.

· Mr. Kailash Shukla, Technology, Systems & Program Integration Directorate, "Soldier Power Needs."

Our presenters will also discuss how to work with these labs to develop the technology they want and need.

This event is a joint program with the Massachusetts Technology Transfer Center with assistance from Grayhead Associates, the Massachusetts Defense Technology Initiative (MassDTI) and the Massachusetts Hydrogen Coalition (MHC).

The MITEF Energy SIG events are made possible by the Massachusetts Technology Collaborative (MTC).

4th Annual Energy Tech Investor Conference: Photo Caption Contest

2007-08-23T20:24:00.000-04:00

Loyal readers -- The organizers of the upcoming SRI 4th Annual Energy Tech Investor Conference (see details below) have kindly offered up two free tickets for the event to readers of this site. If you want one of the tickets, however, you've got to earn it.

At the conference organizers' suggestion, we're launching a "Cleantech Photo Caption Contest"!

Below are three pictures that might inspire you -- you can pick any of the three that you like. Simply pick one of the three, come up with a funny caption (15 words or less), and email it to me by the end of the day, Thursday August 30th. Make sure you indicate which picture you're captioning! And you can submit as many entries as you want.

Two winning captions will be selected by yours truly and the SRI team. Judging will be totally subjective (this is a VC site, after all), but generally speaking points will be awarded for humor, topicality, and brevity, in that order. Make sure your entry is something that you wouldn't mind having your name attached to in public...

Photo #1: Solar-powered robot

Photo #2: Fuel

Photo #3: Al and Sir Richard

Each winner will receive a free ticket to the 4th Annual Energy Tech Investor Conference (value of $1,595 each), which is taking place October 3-4 in San Jose. It should be a good networking opportunity. Dan Reicher (Google.org's new Director of Climate Change & Energy Initiatives) will be keynoting, and the lineup includes many other cleantech industry luminaries (see the agenda -- more details can be found at the conference website).

So make us laugh!

And for everyone else who doesn't win, the organizers have kindly extended a discount to Cleantech Investing readers. CLICK HERE to register using this discount, and enter the code ENERGYTECH300 when you do.

DoE VC Day, and Inside Greentech

2007-08-21T22:14:00.000-04:00

I have had the pleasure of attending the Department of Energy's Energy Efficiency and Renewable Energy (EERE) Venture Capital Technology Showcase day today and tomorrow (tip of the hat to MIT's Bill Aulet for helping make the connection). It has proven to be a fascinating look into the organization of, and specific research efforts of, the DoE labs system.

First of all, taxpaying readers will be pleased to know that the DoE is not spending any money on free lunches, drinks or coffee for venture capitalists; or on brightly colored wall paint or floor tiles in the indomitably beige corridors; or even on wall decorations of any kind (except for repeated instances of posters featuring perhaps the weirdest Hollywood cross-promotion ever: a rat from a recent Disney movie holding up a compact fluorescent bulb and wearing a big grin, urging people to replace their incandescents, the relationship between rats and CFLs remaining somewhat unexplained...). What budgets are made available to the Department are going only into productive research, clearly!

Secondly, what is also clear so far is that recent efforts in the EERE group to drive commercialization are having some immediately positive effects, as evidenced by the strong presentations by researchers. The first day was very informative, with a lot of great market and cost data in key research areas like solar and biofuels. And the technologies presented as available for commercialization, while necessarily just a flavor of the overall volume of research being undertaken, show a thoughtful recognition of the realities both of the market and of technology needs on the ground. It was a very strong performance and hopefully a good jump-start in turning some of these needed technologies into new entrepreneurial efforts toward broad market adoption.

Amidst all the ongoing debate about governmental policies and broader positions on energy and environmental issues, this event by the EERE group has done a lot to bring together clean energy technologists and potential financial backers, and will hopefully become a regular event.

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Making news today is the public announcement that The Cleantech Group (parents of the Cleantech Venture Network) has acquired Inside Greentech. The merged groups will launch a new cleantech media effort, Cleantech.com, with Inside Greentech's Dallas Kachan heading up the group.

Congratulations to both groups, it's a great match and (as I'm quoted suggesting in Inside Greentech's announcing article) a great indication that cleantech is continuing to capture investor and business leader interest. Enough to support multiple media efforts covering the sector, at least. Neal Dikeman had a very good post today recapping much of the recent ramp-up in green tech media activity.

More to follow as this fast-emerging space continues to evolve.

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Final note on the day: Even two years after Katrina, the revitalization efforts continue. This effort to marry rebuilding efforts and green building technologies is worth noting...

Are electric vehicles the next "frothy" cleantech venture subsector?

2007-08-20T22:13:00.000-04:00

Looks like we're going to get to figure out the answer to that question over the next few years, as we see just how many EV startups can succeed...

Not sure who posted it first, PE Hub or VWire, but the news came out at the end of last week that Venture Vehicles has raised a $6mm Series A led by NGEN and including DVC Technologies NV. The company's first concept vehicle, with a design licensed from Carver Engineering (a subsidiary of DVC), is a tilting three-wheeler that they say will be able to go zero to 60 in 6 seconds, hit a top speed of 100mph, get mileage of 100mpg, and cost less than $20k.

Today Dan Primack at PE Hub scooped that Phoenix Motorcars is close to raising a $15mm Series A including funding by Kleiner Perkins, Virgin Fuels and AES Corp. Pre-money valuation is said to be "anywhere from $10 million to $20 million".

Jonathan Shieber at VWire broke the news Friday that Craton Equity Partners, a first-time fund in southern California, has raised over $120mm of a targeted $250mm fund.

Energy efficiency continues to be hot: Efficient lighting equipment manufacturer Orion Energy Systems has filed for an $100mm IPO. [Self-promotion alert: Orion has been backed by Expansion Capital Partners and others]

Two more scoops by VWire: 1. "Green drywall" developer Serious Materials has around half of a $40-50mm round of financing soft-circled, according to the CEO, although they are still "trying to lock down the lead". The company is tracking toward revenues well north of $20mm in 2007, and took in a $5.5mm first round of financing in 2006. 2. News came out on Monday that algae-to-biofuels developer Inventure Chemical raised an undisclosed amount of Series A financing -- VWire reported that the size of the round was $2mm and that Cedar Grove Investments, Brighton Jones Wealth Management and angel investors provided the funding.

Other news and notes: More fine work by Lux Research on the applications for nanotech in cleantech... Two great solar columns by Neal lately, here and here... Finally, in the ongoing efforts to build regional cleantech clusters, here's an intriguing proposal.

Heliovolt and Metrolight

2007-08-15T16:19:00.000-04:00

Two other cleantech deals hot off the presses today:

Tech Confidential is reporting that CIGS startup HelioVolt has raised a $78 77mm Series B. According to the site, a first close has been completed and a second close is expected later this month. Investors in this round are said by HelioVolt's PR folks to include "A DC investment firm", "A Middle Eastern clean tech fund managing $100B worth of investments", and "a multi-billion dollar company in Spain". Readers can fill in the blanks (or just wait until tomorrow's PR if you can't guess already). NEA had led the company's previous $8mm Series A... Tech Confidential speculates that HelioVolt is now positioned to be the first of the many CIGS players to actually get product to market, but they're just speculating. [8/15 note: Corrected the size of the round as requested by the company's representatives] Meanwhile, Kevin Bullis writes in the Technology Review that silicon ain't dead quite yet.

Metrolight, which has developed advanced ballasts for more efficient use of high-intensity discharge (HID) lights for high-bay (ie: warehouses), outdoor and other lighting applications, has raised a $9mm round of financing co-led by Virgin Fuels, and including Gemini Israel Funds, Israel Cleantech Ventures, and Alshuler Shaham Ltd. The company is based in Israel, but will be using the funds for more market push into the U.S. and Europe.

Last chance to apply for this fall's Cleantech Venture Forum!

2007-08-15T12:14:00.001-04:00

The deadline is this week to apply to present, so for cleantech startups seeking funding, get those execsums polished up!

Jadoo, SunEthanol, Verdant, Rive, and the Top Young Innovator

2007-08-15T11:38:00.000-04:00

Velocity Venture Capital, a Sacramento-area venture firm with $10mm under management, has made their largest ever investment in fuel cell developer Jadoo. The total amount of the round and any other funders weren't disclosed -- as far as Velocity's portion, they invest $100k to $1mm per company. Jadoo had previously raised an $11mm Series B in 2005, including investments by MDV, Venrock, and strategic investor Sinclair Broadcasting Group.

Touting a newly-discovered ethanol-producing bug called the Q Microbe, SunEthanol has raised a Series A (VWire describes it as "under $5 million") from strategic investor VeraSun and financial investors Battery Ventures, Long River Ventures and AST Capital. The bug in question has the ability to both break down cellulose and produce ethanol, in one step. And, notably, it's the result of research carved out of the University of Massachusetts (UMass and Jattra Ventures also appear to have stakes in the company). Read more on cellulosic ethanol here.

According to today's Venture Wire, Verdant Power is looking to raise a $20-30mm Series B round of financing. We mentioned them yesterday, when their challenges and progress were profiled in the NYT...

According to PE Week Wire, Cambridge's Rive Technology has topped off their Series A with $3.15mm from Advanced Technology Ventures. The company had previously raised $5.22mm in the round back in June of last year, with financing from Charles River Ventures and seed funders. The company's advanced catalyst technology is used in petrochem refining.

Congrats to Flagship Ventures' David Berry for being named Technology Review's Top Young Innovator for 2007!

Other news and notes: The potential and the challenges of selling to the "bottom half of the pyramid"... An update on thin-film... Finally, one for the record books -- the first known traffic ticket handed out by a police officer driving a fuel cell car has been issued. Book 'em, Sgt. Smith!

AltaRock and other news

2007-08-14T07:34:00.000-04:00

PE Week Wire reported on Monday that AltaRock Energy, a stealth-mode enhanced geothermal systems (EGS) developer out of the Seattle area, raised a Series A from Khosla, Kleiner and existing seed investor Aaron Mandell of GreatPoint. VentureWire today added in that an investment group affiliated with Dundee Securities provided funding as well, and VWire discussed several other geothermal-related startups that have received capital infusions lately, including Western GeoPower and Vulcan Power. Experts agree there are a lot of untapped geothermal resources out there. But geothermal startups are currently most often project-specific efforts using existing tech instead of new tech development groups, so it's always a bit tricky to see how VCs best get involved in the sector. With a clear market opportunity and hundreds of existing patents and applications covering geothermal technologies, perhaps that will change over time, but slow adoption rates and high capital intensity will continue to provide a bit of a damper as well... Here are some recent presentations on EGS out of MIT (including one by AltaRock founder Susan Petty).

Other news and notes: An intriguing market-based policy proposal to promote faster adoption of new energy techs (hat tip to Eric "Enrico" Engstrom for the heads up on this one)... More follow-up on the Massachusetts cleantech cluster... Joel has an interesting column on the information aspects of the clean water challenge -- and meanwhile the bottled water debate heats up... More developments in biodiesel... An interesting interview with Paul Cook, founder of Raychem... Finally, this cleantech innovation stuff isn't as easy as it might look -- and once again we are reminded that VCs will play only a very small role in the funding of new innovations and market solutions.

Two upcoming Boston-area events

2007-08-11T17:39:00.001-04:00

To any Boston-area cleantechies out there:

Matthew Richards of the local TiE clean energy special interest group has organized what sounds like a very fun networking day-cruise to tour Hull Wind 1, a large local wind turbine site. From Matthew:
Sign up now for a tour of the Hull Wind turbine, featuring a catered lunch on a YACHT as we sail to Hull! The town of Hull hosts one of the premier coastal Wind Power facilities in the United States, earning a recent Department of Energy Wind Power Pioneer award for the program that provides more than 10% of Hull’s energy needs. Sign up now for this exclusive (and fun!) tour of Hull Wind 1, a 660-kilowatt wind turbine that is part of this innovative clean energy program! If you work (or WANT to work!) in Boston’s fast-growing clean energy industry, but have not yet seen Hull Wind 1, IT’S YOUR TURN! This tour leaves from Quincy Terminal and features a catered lunch on the Island Expedition, a full-featured harbor cruising vessel that fits up to 200 people. Enjoy food and networking, PLUS a guided tour and in-depth seminar on the science of wind power, the history of launching Hull Wind 1, and the technology innovations that are on the horizon for the wind sector.

The cost for this event is $60, and the only additional cost is $1 to park at Quincy Terminal. We leave at 12pm, and dock back in Quincy Terminal at 3:15pm. Do not miss this opportunity!

DATE: Tuesday, August 28, 2007, from 12pm – 3:15pm

TO REGISTER: go to http://boston.tie.org
We’re very pleased to announce that Foley Hoag (www.foleyhoag.com) has graciously offered to host and sponsor the next Renewable Energy Business Network event at their Emerging Enterprise Center in Waltham. The event will be the same informal format as our previous get-togethers, each of which had over 80 attendees, so bring your business cards and your elevator pitches, all are welcome…

REBN-East Happy Hour:
September 11, 2007, 6:30pm.
Hosted and sponsored by

Foley Hoag

.
Location: Emerging Enterprise Center at Foley Hoag, 1000 Winter Street, Waltham MA

Solatube, Silicon Genesis, and other news

2007-08-11T17:00:00.000-04:00

The big news from the past week has to have been the House energy bill and other related developments inside the beltway, but that's more of a "politics as a spectator sport" event than anything directly affecting cleantech investors in the immediate time-frame. So other than that, it was a slow week in the world of cleantech investing...

Daylighting system developer Solatube raised an undisclosed amount of "mezzanine funding" from Praesidian Capital. Dow Jones' Clean Technology Investor pegged the round as a $6mm debt financing.

According to PE Week Wire, Silicon Genesis Corp, a developer of engineered substrate process technology for the semiconductor, display, optoelectronics, and notably for kerf-free silicon wafers for solar markets, has raised a $23mm round of financing. From PEWW: "Backers include H&A Asia Pacific, Lake Street Capital, Riverside Management Group, Firsthand Technology Ventures, Convexa Capital Ventures and Spencer Energy AS. Silicon Genesis has raised over $117 million in total VC funding, but this represents its first round since a 2001 infusion of $35 million at a post-money valuation of approximately $166 million."

Cleantech investors in the news: Here's a nice profile of the role being played by Chevron Technology Ventures.

Other news and notes:

AltEnergyStocks had a very good overview of the opportunities available in large-scale electricity storage... The WBCSD had a nice take on the opportunities and challenges of cellulosic ethanol... And a recent report suggests thin-film solar will be a $7.2B industry by 2015... Here's a good example of the kind of applications for distributed sensor networks that would have been useful to have put in place years ago ("If bridges are a priority", then let's take spending away from other critical infrastructure and energy tech development needs in order to monitor them? Umm, maybe it really shouldn't be either/or...)... Do business travelers care about being green?... "You will never drive a hydrogen car"... But if you drive a biodiesel car, the byproducts may have some useful applications as well... Nathanael Greene points us to the Daily Show's hilarious send-up of the Cape Wind controversy... So I guess the next logical step would be paying people to walk around (hat tip to Matt Lecar of Trinity Ventures for this one)... Finally, deus ex nucleara?

Massachusetts cleantech update: Entrepreneurs wanted

2007-08-11T13:11:00.000-04:00

The Massachusetts Technology Collaborative released a fascinating survey of the local clean energy economy this past week (click here to go to their home page, where you can download a press release and the full report).

The "Clean Energy Census Report 2007" illustrates the importance of the clean energy industry to the local economy, with over 14,000 workers already employed by the industry, and with industry-wide growth rates far exceeding those of other top local economic sectors. They track 116 local clean energy companies that have been founded since 2001, and as a sign of the entrepreneurial nature of the industry, they found that over half of the 556 local clean energy companies tracked have less than 5 employees.

There's also some evidence of what some local cleantech investors have anecdotally pointed to as a surprising relative lack of investment opportunities in the area, given all of the world-class energy- and water-tech research that is being done locally. To be clear, it's not that the region lacks for cleantech entrepreneurial activity -- in addition to the MTC data above, the Cleantech Venture Network's Q1 2007 figures show that 14 out of 64 (22%) North American cleantech deals tracked that quarter were in the Northeast, for over $120mm in funding (17% of the total). But the sense is that, given all the local expertise and research, there should be even MORE activity. Even though the MTC tracked 116 clean energy companies formed since 2001, that's still less than 20 companies a year.

The MTC data points to a few potential chokepoints:

The report suggests that local cleantech companies' focus on local revenues is a potential hindrance. Indeed, out of about $165mm in tracked clean energy company revenue (itself a relatively low figure), $69mm of that was derived from Massachusetts customers. Less than $7mm was in exported products overseas. Exports are an indication of regional competitiveness, and export assistance is often an important policy driver for regional economic growth.

Furthermore, many of the companies tracked by the report are very small -- 105 out of 173 companies that shared their revenues had less than $1mm. This is both encouraging and challenging. It's encouraging that there are so many early-stage startups, but as with the point about local revenue above, it points to the "chicken and egg" problem that a local clean energy ecosystem needs to somehow get jump-started. Because clean energy companies will sell to other clean energy companies, and partner with other clean energy companies. As happened with IT and software and biotech and other sectors, you need some of these companies to grow to a big enough scale that they can support the development of their vendors and partners.

The report didn't break out type of company other than to bucket them across the categories of Renewable Energy (generation techs like solar, etc.), Energy Efficiency, Consulting and Support (legal services, etc.), and University Research. What isn't clear is what portion of these entities are actually developing technologies and products, which are installers and other service companies, and which are project developers. That's a difficult categorization challenge, but it's important from a venture capital perspective, since technology and product development tend to lend themselves to that capital category much more easily than services and project development. It would be very interesting to try to compare relative levels of tech/product development enterprises for Massachusetts versus California.

For whatever reason, only a small portion of clean energy startups in the region are receiving venture capital financing. Venture capital is always only a small portion of the overall financing sources for startups in any case. But it's notable that less than 10% of the companies that shared their source of financing in the MTC report described it as "venture capital". It's hard to tell if this is a symptom or a cause...

Perhaps most tellingly, federal support for Massachusetts clean energy companies appears to be very low. Only 14% of startups listed "grants" as their primary source of startup financing, and it's unclear how much if any of these grants were from federal sources. And only $3mm in revenue (out of the $165mm) was identified as coming from Washington DC or the Federal Government. Given all the world-class research being done here, these seem to be awfully low figures.

While the Massachusetts state government has been actively working to fix the perception that the state hasn't been supportive of the local clean energy industry, it still should be noted that a plurality of respondents both in this report and in the 2004 "Creating the California Cleantech Cluster" report indicated that California is the most supportive/ attractive region for clean energy businesses, with Mass only a distant second.

Taken together, the MTC report findings are reason for a lot of optimism about the local clean energy cluster. But they also paint a picture of a somewhat insular clean energy industry that hasn't historically been as supported by local government initiatives, and particularly by the federal government, as it could have been. And the smallish size of revenues overall could suggest that a lot of whatever is being developed isn't being adopted by the marketplace.

This last point is the lament of local clean energy pundit Bill Aulet, who wrote a thoughtful column recently for Xconomy.com suggesting that a big problem for the local clean energy economy is the focus on developing very future-looking renewable energy technologies without big markets today (he describes it as "majoring in minors"), instead of developing incremental improvements on today's energy technologies. The column has prompted a lot of thoughtful comments on the Xconomy.com site that are also worth reading. (Also: hat tip to Wade Roush of Xconomy, and to Bill, for pointing to the MTC report and bringing this topic to my attention)

Any question about whether we need one or the other type of technology development misses the point -- we need BOTH. And more of it. Bill's replies to the commenters indicates he agrees.

For myself, as a recent transplant to Massachusetts from San Francisco, the major difference appears to be in the pool of ready entrepreneurs. Namely, that in Massachusetts there don't seem to be as many entrepreneurs out of IT and other sectors that are re-purposing themselves to make cleantech their next big thing. That kind of dynamic has been critical to the recent upswing of cleantech startup activity in California, because it has driven a very rapid infusion of proven startup managerial talent into the industry.

There aren't any surveys or other hard data to make this point, but there's one telling piece of anecdotal evidence: The California Renewable Energy Business Network (REBN) events of last year were full of IT entrepreneurs who came to the events to try to network and learn and position themselves to jump into a new effort in the space. The REBN-East events we have held this year in the Boston area have had even more interest and higher attendance -- but the crowd has been mostly businesspeople already involved in cleantech, and a whole lot of venture investors.

So in other words, the biggest takeaway from the MTC report and from other anecdotal evidence is clear: If you are a pragmatic New England entrepreneur or proven business grower with an interest in cleantech, now's your best chance to get into the sector. The local governments are looking for excuses to support local efforts. Much of that local world-class research is available for technology transfers into startups, with university professionals eager to help find productive homes for the innovations, targeting both future-looking and near-term markets. The regional industry is poised for a rapid growth period. And we check-writers are eager, ready and willing...

8/13 update: I've already had a few Massachusetts-area entrepreneurs ping me to try to get some ideas as to how to get started... Here are a few links that should be useful (other submissions are welcomed as well, just shoot me an email and I'll try to keep this page fresh):

Networking:

The Renewable Energy Business Network (REBN) has been pulling together informal networking events for renewable energy researchers, businesspeople, and those who want to make the connection between the two... Join the listserv at the group website to learn about future events, and from the website you can also join the LinkedIn group for making direct connections with possible business partners.

The New England Energy Innovation Collaborative (NEEIC) is a major cluster-creation effort that -- in addition to a lot of other great things -- has been particularly working to drive entrepreneurial activities out of local research efforts.

The Boston regional TiE chapter has formed a CleanTech & Energy special interest group, and regularly provides networking and content events for members.

Tech transfer sites:

The Massachusetts Technology Transfer Center's Technology Portal is a good place to start looking.
Harvard's tech transfer search site.
MIT's tech transfer search site.

Other suggestions are welcome!

Lighting deals and other news

2007-08-04T22:49:00.000-04:00

Group IV Semiconductor, which is developing quantum dot-based LEDs for efficient lighting, raised a Series B (note: link opens pdf) led by Garage Technology Ventures Canada, and including Applied Ventures and existing investors Khosla Ventures and BDC Venture Capital. The amount of the round was undisclosed, but VWire reports that the round was bigger than the C$9.1mm Series A the company raised in 2006.

BridgeLux, another developer of LED technology, raised a $23mm Series C, according to VentureWire. Chrysalix led the round, and they were joined by VantagePoint, and existing investors DCM, El Dorado Ventures, and Harris & Harris Group.

Clear Water Compliance Services, which sells systems for cleaning storm water runoff, announced a $25mm controlling investment by Plainfield Asset Management -- $5mm in equity and the rest in debt.

Also according to VentureWire, Advanced Technology Ventures has closed on at least $272mm for their eighth fund. VWire didn't describe if that was a final closing amount.

Other news and notes: The looming solar consolidation continues to gain momentum... A nice interview with Ira... How did Boston not make this list???... Policy events to note here and here... Here's a great overview of carbon capture and storage (CCS)... $4.5 billion per year spent to power data centers... A tough take on EEStor... Finally, some promising research into an alternative approach to the internal combustion engine.

Cleantech investors and philanthropy

2007-07-31T08:08:00.000-04:00

Carla Dearing recently asked cleantech investors to tell philanthropists where to put their money since cleantech venture investing has gotten so hot. It's a great question, and really brings home the fact that there's been rapid changes in expectations about a lot of cleantech sectors -- we IRR-focused VCs must really believe in the "10x" possibilities of clean technologies, markets and business models that used to be seen as taking too long to develop or otherwise not providing strong returns. Institutional VCs are not allowed to put their LPs' capital into investments without the expectations of those strong returns -- philanthropy is a different game. So Carla smartly asks what's therefore out of play for VCs, where patient capital and non-profits could still play an important role.

The fascinating thing about this question is how much of a moving target it really is. Even just a few months ago, for example, we might have included service offerings like solar financing plays as something VCs likely wouldn't invest in, because of the lack of defensible intellectual property and low barriers to entry (very generally speaking, of course). Now it's one of the hottest investment areas, as the rapidly-growing solar market has led to expectations that the market can support multiple "winners". Low-tech plays in biofuels and other hot sectors have been getting plenty of capital, too, even if not always from VCs (although, sometimes...).

So what's out of bounds? The very fact that this question is being seriously asked reflects a rapid expansion of investor appetite that is at the heart of the recent concerns about a cleantech venture capital "bubble", as we've discussed before. And, as we've described on this question, while there doesn't appear to be any "bubble" across the entire sector, certain subsectors and market niches can certainly feel frothy. Among other factors is the simple truth that not all "hot" investment areas will end up providing the returns some investors are currently expecting, so philanthropists can't consider a societal problem solved just because VCs are putting early money into potential solutions...

So Carla, my two cents' worth as of this moment in time would be: Put your money into the demand side of the market.

In other words, VCs and other institutional investors (project finance, public markets, etc.), not to mention government and academic research efforts, seem to be very happy to put money into the supply side, funding a rapidly growing list of cleantech technologies and services. I hesitate to nominate any particular technology or service sectors as being out of bounds for VCs, because that answer will continue to change as market conditions (and investor optimism) change. But without the anticipated growth in demand for these products and services, a lot of these investments will inevitably fall flat.

Water tech is a great example: There are some great technology development efforts underway that would clean up the water we drink and the wastewater we create, but the most likely buyers aren't buying. And there are a lot of energy efficiency options out there for homeowners and commercial/industrial building owners that make stunning financial sense, and yet still haven't been widely adopted like you'd expect. There are major segments of most clean/green technology markets that VCs and others still aren't putting their money into, but most of those un-addressed value chain segments tend to be downstream.

The most important thing philanthropists could do, in other words, would be to prime the engine of clean technology market adoption. Instead of catalyzing technology development, catalyze market development. Fund adoption of clean drinking water and solar and other distributed energy techs in emerging economies. Educate U.S. water and electric utilities (and their regulators) about the various new choices available, and how they can provide compelling economics and better quality at the same time. Be an angel investor for a local energy efficiency consultancy or green home product distributor. And help consumers understand their green and clean choices, empowering them to actually adopt the solutions that are in their best interest, but that they either don't know about or don't realize the economics around.

And thanks to Carla for asking a great question -- there are probably a lot of great ways philanthropists and investors can work together "profitably", by both sides' definition of the word...

Readers are encouraged to add their own comments and suggestions for Carla as well.

Technology Partners' $300mm Fund VIII, and other news

2007-07-31T07:24:00.000-04:00

Technology Partners, probably best known to cleantech investors as the home of cleantech champion Ira Ehrenpreis, announced today the closing of their newest fund at $300mm. The fund will be equally directed toward cleantech and life sciences investments, and they've already made four investments (including two in cleantech: Tesla, and a "stealth" solar company, according to the press release), so the fund has been closed for some time prior to this announcement. Ira also has joined the Board of the NVCA and mentioned that he's helping them pull together the new-ish Cleantech Council. Cheers to Ira and the rest of the Tech Partners team!

A couple of recently announced deals to note:

Cnano Technology, which is developing low-cost carbon nanotubes for a variety of applications (including some related to cleantech), announced a $6mm round of financing. The funding was co-led by CMEA Ventures and Pangaea Ventures, and also included WI Harper.

HaloSource, a developer of antimicrobial coatings and drinking water treatment products, has raised a $15mm round of financing (VWire identified it as a Series C) from the Masdar Clean Tech Fund. The company's products are aimed at the developing economies.

Sierra Solar Power, a thin film PV startup, has raised a $6.86mm Series A led by GSR Ventures, according to PE Week Wire. They also appear to be in active recruitment mode.

Seems we missed the announcement of Craton's two-tranched $5mm Series A into "green concrete" startup GigaCrete. The funding was completed a while ago, but we didn't want to post it until it was publicly mentioned. Apparently, we whiffed on it when it was...

Other news and notes: In case you missed it last week, Neal Dikeman had a very interesting scoop about IBM and their solar plans... Coal power already becoming obsolete?... Joel on the current state of "green business"... Ladies and gentlemen, your 2007 California Clean Tech Open finalists... Finally, Jack Bauer, eco-hero?

Solaria and LiquidPiston

2007-07-25T11:36:00.000-04:00

The big deal so far this week is Solaria's $50mm Series C, led by Q-Cells and including existing investors Sigma Partners, NGEN and Moser Baer. In the deal, Solaria also gains access to 1.35 gigawatts worth of Q-Cells' PV cells to be used in Solaria panels over the next ten years. The slowness of high-profile CIGS and other thin film PV startups to get into the market has meant that the competition for silicon wafers and silicon-based cells is about as hot as it can get right now.

Cambridge, MA's LiquidPiston announced a $1.25mm seed round from Adams Capital Management and Northwater Capital. The company is developing an advanced "high efficiency hybrid cycle" engine. We've talked before about the challenges of investing in advanced engine technologies.

Cleantech investors in the news: Good Energies is expanding their U.S. operations, opening up new offices in NYC and Washington, DC, according to VentureWire. With $5B in assets under management globally, Good Energies has been ramping up their cleantech investing efforts significantly lately -- the VWire column mentioned portfolio companies Ice Energy, SAGE Electrochromics, Konarka, Renewable Energy Corp and the aforementioned Q-Cells (since Good Energies holds about 50% of Q-Cells, read the above notice about the Solaria investment accordingly...)... Also, here's a very good article on the important role of angel investors, using a cleantech example.

Other news and notes: The WSJ on cleantech... A good overview of water tech investing (yes, yours truly is quoted, but if you skip those parts it's still a good article)... The latest Dow Jones VentureOne/ E&Y numbers are out, and they give some props to cleantech... European VCs are being urged to ramp up their cleantech efforts or "face just getting the dregs of green projects"... Power from space?... Power from tornados?... Power from really smart marketing?... Speaking of smart marketing, here's a useful tool from ZAP -- find an EV plug-in site near you (thanks, Pluggy!)... Some intriguing thoughts on polling and policy... Finally, today's fun read: "He is an extraordinary gentleman, isn't he?"

The Boston cleantech community is heating up

2007-07-20T15:38:00.000-04:00

We'll have to wait on the deal-tracking numbers to be sure, but it certainly feels like the Boston-area cleantech community is getting a lot more active these days.

Many of the leading local VC firms are taking an interest and getting involved through great efforts like NEEIC, and beyond the VC/ entrepreneur end of the market there's been an increase in regional efforts to build a stronger overall "clean energy community". And of course, there's the world-class research being done at the various local universities and other research centers...

Last night's REBN-East event was another good example -- a new high for attendance, and perhaps most impressive was the number of venture investors that were able to come out. Thanks again to Flagship Ventures for kindly sponsoring the event (Dan Primack also mentioned the event on PE Week Wire today -- read his take, and his interesting commentary on the current state of the cleantech sector here). [7/21 update: Wade Roush at Xconomy also had a nice write-up worth checking out here]

Cleantech and related deals:

Eka Systems, a wireless mesh AMR developer, raised a round of financing (PEWW reports it as a $12.5mm Series C), led by Angeleno Group and RockPort, with participation from existing non-institutional investors. We've discussed the cleantech applications of AMR here before.

As also reported in PEWW, GreenDimes, which works to reduce postal junk mail, has raised a $20.5mm Series A led by Tudor Investment Corporation. The company claims to have stopped over a million pounds of junk mail to date.

They fit into the overall "energy resources are becoming scarce" investment thesis, but are they cleantech? Readers are invited to draw their own judgments on that question (comments are always welcomed), but here are two deals that are certainly worth noting regardless of how they're classified: DynaPump earlier this week raised a $12mm Series C led by Element and including NGP Energy Technology Partners and existing investor CTTV Investments (Chevron's tech venture arm)... And thanks to Ben Kuo for bringing to my attention that Kleiner Perkins has apparently invested in GloriOil... Both DynaPump and GloriOil have technologies for enhancing oil recovery from existing oil wells.

Cleantech investors in the news: A provocative column by Yaletown Venture Partner's Kirk Washington... And Kleiner gives out their first awards for "Greentech Policy Innovators" (congrats to Bob Epstein and Professor Jose Goldemberg).

Other news and notes: Battery and fuel cell market growth is driving an increase in demand for core materials... A hot topic of conversation is the intriguing controversy over Planktos... What's in the box?... Finally, theoretical economics rarely intersects with venture capital, but for those of us who unfortunately trained in the subject here's a fun clip to watch over the weekend:

Think, Gevo, and corn-based ethanol under fire

2007-07-19T07:40:00.000-04:00

[7/19 edit: The title of this post can be read several ways, in retrospect. To be clear, Think Global AS and Gevo are not under fire. rd]

Think Global AS, the Norwegian electric vehicle manufacturer, raised a $60mm Series B round of financing. New investors Element, RockPort, Hazel Capital and CG Holding all participated alongside existing investors Canica, Capricorn Investment Group, Wintergreen Advisors, and individual investors. Venture funding of electric vehicles is really heating up -- how long until this guy has VCs knocking on his door? Maybe this guy will buy a Think with his insurance settlement.

Bio-butanol developer Gevo emerged from stealth mode to announce a financing by new investor Virgin Fuels and existing investor Khosla Ventures. Jonathan Shieber at VWire reported today that the round was an "under $10mm" Series B [7/19 edit: corrected the quote]. The financing is intended to help the company "whip it good" into a pilot plant stage. If toxicity and cost issues can be addressed, biobutanol has a lot of potential as a gasoline replacement with better energy density, transportability and other benefits versus ethanol.

Meanwhile, the backlash against corn-based ethanol is starting to ramp up. Many industry participants apparently expect that cellulosic ethanol will be able to save the day. But alternative sources of sugars are also being increasingly turned to. Because of all of the policy implications in the U.S., it will be interesting for cleantech investors to watch how this debate continues to evolve. Meanwhile, biodiesel continues to get little attention, but is looking poised for an uptake.

Other news and notes: Cleantech venture investments in China more than doubled last year, according to the Cleantech Group... Finally, a "cooler" use for cubic zirconia.

Energy prices to remain high

2007-07-18T21:50:00.000-04:00

That's the verdict, at least, of a few recent news items.

First of all, the National Petroleum Council released a study (pdf of execsum here) which projected continued energy demand growth which will require the use of every available energy resource, dirty and clean -- very interestingly, they made a strong endorsement of energy efficiency as an energy source.

Secondly, this news that Goldman Sachs is projecting $95 per barrel oil by the end of the year, unless OPEC and other suppliers significantly boost output. Now, oil is just one energy source with limited direct impacts on many clean energy technology markets.

But thirdly, word came out that electricity consumption in Europe is continuing to expand at the same pace as GDP, despite significant efforts to promote efficiency improvements. And in the U.S., Citibank is advising their investor clients to abandon coal industry investments -- for a number of reasons including expectations of continued pressure to reduce carbon emissions.

It's a good time to already have a head start "up the learning curve". But caution, as always, is still warranted.

Cleantech VC deals so far this week:

Boston-area waste-to-energy startup Ze-Gen announced a $4.5mm Series A led by Flagship Ventures and including participation by VantagePoint Venture Partners.

SAGE Electrochromics, which has developed windows with the capability to quickly darken (to block light and heat, for significant energy savings) or clear up (for visibility) announced a $16mm Series B, led by Good Energies. Applied Ventures and Bekaert also participated in the round. The deal includes provisions for an additional $13mm in financing.

VentureWire reported that ImageTree, which is developing technology for forest inventory and management, has taken in $2mm in debt financing from BlueCrest Capital. The company's technology has applications in sustainable forestry and potentially for land-based carbon sequestration project monitoring.

UK-based Metalysis, which has proprietary technology for the production of specialty metals (for a number of applications including some in cleantech areas), raised a GBP 13mm round of financing from Environmental Technologies Fund, 3i, QinetiQ, Seven Spires, Chord Capital and Cambridge Capital Group.

Other news and notes: Most of this is outside of any VC's investment horizon, but it's a fascinating vision... Here's a useful presentation (note: link opens a pdf) describing Virgin Fuels' investment strategy, for those interested... Another relevant bplan competition -- the Oxford University 21st Century Challenge... Yet another article on why watertech is poised to attract VCs -- but VCs are having a tough time finding backable ventures (calling all entrepreneurs, we need you in watertech!!!)... Perhaps an unexpected problem for centralized utility-scale PV developers... Finally, your tax dollars at work, on a pretty nifty tech idea.

REMINDER for tomorrow's REBN-East networking event:
July 19th, at Flat Top Johnny's in Kendall Square, 6:30pm.
(Sponsored by Flagship Ventures)

Big week for cleantech deals

2007-07-13T18:45:00.000-04:00

Lots of deals to catch up on here at the end of the week:

Energy efficiency is the new "IT" sector (apologies for a very bad pun): Computer/server efficiency software provider Verdiem has raised a $8.33mm round of financing led by Kleiner Perkins, and including participation by The Westley Group, Phoenix Partners, Falcon Partners, Catamount Ventures, Angeleno Group, and Trevor Traina (angel). The company's software allows computer system administrators to remotely override PC users when they re-set their efficiency settings (turning off "sleep" mode, for example).

Thin-film (CIGS) solar developer SoloPower raised a $30mm Series B, led by Convexa Capital, and including participation by Scatec AS and Spencer Energy AS. Existing investors Crosslink Capital, Firsthand Capital Management and Musea Capital also took part in the financing. VentureWire noted that the team had had a term sheet with a "very reputable" (note: VWire's quote marks) U.S. VC before going with this mostly Norwegian group of backers.

Another thin-film solar startup (this time using amorphous Si), MWOE Solar, announced a $7mm Series A led by Emerald Technology Ventures, and including participation by NGP Energy Technology Partners.

Linking themselves with the energy efficiency angles of RFID and sensors, Germany-based Nanotron announced an EUR 10mm round of financing led by zouk ventures, and including existing investors Polytechnos, Danfoss, and IBB Beteiligungsgesellschaft - VC Fonds Berlin.

Another sensor company, SpectraSensors, which manufactures tunable diode laser-based sensors for gas analysis, announced a $14mm Series C. Nomura's New Energy and Clean Technology Ventures group led the round, which also included CTTV Investments (Chevron's venture capital arm) along with existing investors American River Ventures, Blueprint Ventures, and Nth Power. The firm has been making strong strides in the optical sensors space and is one of the best examples of telecommunications tech being re-purposed into advanced sensing technologies with cleantech applications. The deal is also one of the first public announcements for Nomura's new cleantech group, whose team includes cleantech venture veterans Russell Pullan and Whitney Rockley. So cheers all around...

6N Silicon, which is developing a method for less expensive production of solar grade silicon, made a public announcement of their C$6mm Series A. Ventures West and Yaletown Venture Partners led the round. The company also announced that they've taken in C$4mm from SDT Canada to help build out a demonstration line.

Cerion Energy, which is developing a diesel fuel additive with efficiency and pollution reduction benefits, announced a $1.2mm Series A financing. Braemar Energy Ventures led the round, which also included Excell Partners.

VentureWire reported that Korean brushless DC motor developer SNTech has taken in a $1.2mm or $1.5mm (some discrepancies in the article) seed round of financing from SAIL Venture Partners, which took a 25% ownership stake in the company. The company had $2.5mm in revenue in 2006 and offers cheaper and more efficient motors versus incumbent designs. VWire also revealed this past week that SAIL is in the process of raising their first institutional LP-backed fund, and that the firm has several European such backers committed to what is targeted to be a $100mm total fund raise.

Other news and notes: Speaking of VentureWire, Jonathan Shieber and the rest of the team there have launched a new daily news service focused on cleantech... Is private equity/ venture capital souring on solar? (this week's funding announcements notwithstanding, we assume)... A useful update on BPL... Neal on the ongoing "cleantech" vs "greentech" debate... For the job-seekers out there, one blogger's take on 13 socially-responsible careers in finance... A nice profile of Southwest Wind Power and micro-wind in general... Finally, even when you spend all your time paying attention to energy markets and the like, you still come across the occasional graphic that takes you aback. Wow.

REMINDER for the next REBN-East networking event:
July 19th, at Flat Top Johnny's in Kendall Square, 6:30pm.

Five questions: Ron Pernick and Clint Wilder

2007-07-09T11:38:00.001-04:00

For readers who haven't picked up a copy yet, Ron Pernick and Clint Wilder's recent book The Clean Tech Revolution is a very good primer on the sector. Even regular readers of this website might find it a very useful read -- and especially might find it a great gift for that special someone (your boss, your father in law, etc.) who doesn't quite get this whole cleantech "thing" yet...

So we thought it would be good to subject Ron and Clint (who also are a principal and contributing editor at Clean Edge, respectively) to be the next victims, er, participants in the overwhemingly popular ongoing series, "Five Questions". And they were kind enough to share their thoughts...

Q. When did you make the decision to write this book? Was there a particular triggering point in the market when you realized your potential audience had gone mainstream?

A. Back in late 2002, when Clean Edge was helping define the clean-tech industry, we felt that the sector was ripe for a book aimed at a broad business audience. We worked on our first book outline and the idea percolated – then went on the back burner as Clean Edge’s business expanded and took all of our attention -- but it never really went away. In late 2004, we decided to get serious about the effort, hired an agent, wrote a formal book proposal, and finalized a contract with Harper Collins in the summer of 2005.

What was the trigger?

There have been so many ‘tipping points’ in the mainstreaming of clean tech – the growth of clean-tech investing by seasoned VC firms, the sale of Toyota’s millionth hybrid car, California’s landmark greenhouse gas legislation, just to name a few. We’ve seen the momentum just build and build. To be honest, as we saw the clean tech revolution become Page One news and the topic of national magazine cover stories in recent months, we were a little worried that our book release date in June might ‘miss the window.’ Clearly those worries were unfounded, as clean tech, and global mainstream awareness of all things green is only gaining momentum.

As we point out in the book, the move towards clean technology -- in energy, water, transportation, and materials -- will take decades to accomplish -- so it really takes a long-term perspective. Indeed, one of the most common things we hear from friends and colleagues is, “The timing of your book couldn’t be better.” We believe that's because we really are just at the inflection point for clean technology.

Q. While the book is suited for a lot of potential audiences, who’s the prototypical reader you wrote the book for?

There are a number of prototypical readers. Current and potential investors in clean tech, ranging from individuals looking at single stocks or mutual funds, all the way up to pension fund investment managers and venture capitalists. People considering a career in clean tech, whether freshly-minted B-school grads or mid-life career changers. Public-sector officials looking for the next engine of economic growth for their city, state, or nation.

We wrote the book with a lot of different ‘entry points’ – Breakthrough Opportunities, Clean-Tech Consumer Tips, and especially our Ten to Watch lists of leading companies in each technology sector – so that everyone from clean-tech veterans to newbies will find something of value.

Q. Is there a cleantech investment bubble? Why, or why not?

A. Any high-growth investment sector, especially those involving cutting-edge technology, will have a host of losers among the winners. That’s how the capitalist system works. And of course, there will be irrational exuberance in some clean-tech sectors at various times.

But we are often asked ‘the bubble question’, and our simple answer is no; the broader clean tech sector will not be a bubble like the dot-com industry. Why? Because clean tech companies, for the most part, are providing technologies that the world truly needs – those that deliver energy, transportation, potable water, materials. We love John Doerr’s quote that really encapsulates this opportunity – the fact that we’re talking about businesses that are involved in atoms, not just bits.

We’re talking about the largest industries on earth – electricity, automobiles, water – opportunities in the trillions of dollars. And the clean tech revolution will need to serve the needs of both the developed world (to replace aging, crumbling, dirty infrastructure) and in the developing world (where 1 billion people lack access to electricity and 2 billion are without access to clean, potable water).

In the dot-com run-up, many companies put something out in the market and then tried to create the demand for it. No one needs to create a demand for energy use or clean water – or more reliable and efficient use of both – we really are talking about the new industrials when we look at clean tech...

Q. How much is the market growth you project in clean energy tech predicated on new favorable policies coming into effect? How much is this industry threatened by random acts of politics or inconsistent policies?

A. We like to point out that there is no energy industry on the planet that is subsidy or policy independent. Just look at the oil, coal, and nuclear industries. None of them would be where they are without government support. So to answer your question – policy that supports clean-tech growth and development is tantamount to its success.

But as we point out in The Clean Tech Revolution, the shift is already well underway. From Frankfurt to Sacramento to Tokyo to Beijing – government entities of all sizes are now viewing clean tech as a main driver of job creation, economic competitiveness, energy independence, and in battling climate change and meeting carbon challenges. Dozens of cities, states, provinces, and federal governments are lining up behind the transition.

Even in the U.S., where national policy has been lackluster, to say the least, states have stepped in to fill the void. There are now two dozen states with RPS and cities around the nation are vying for the jobs being created in the manufacturing of solar panels, smart grid devices, advanced lithium ion batteries, and wind turbines. In fact, California Governor Schwarzenegger most likely won reelection in 2006 by running on a clean-energy platform that has positioned California as a global leader in clean energy.

We’re generally optimistic that this shift in policy will continue – because we see it as an imperative for governments that wish to remain relevant. Those regions that don’t embrace clean energy and clean tech, and provide supportive policies and a shift away from the polluting, volatile energy industries of old, will lose out to those regions that do.

Q. What technology has the highest potential-to-visibility ratio right now? (In other words, what’s your favorite unknown technology that investors should be more aware of…)

A. You ask an interesting question. There are so many untapped areas – some with relatively high visibility and others that are currently being overlooked by the investment community and the broader market.

Without sounding coy, we’d like to recommend that people pick up a copy of our book. Within The Clean Tech Revolution we showcase “breakthrough opportunities” in each of the eight technology chapters. We highlight some of the areas that we think offer the best near- to mid-term opportunity for investors, entrepreneurs, and corporate executives. Everything from next-generation lithium ion batteries and renewable-energy powered desalination plants to closed-loop biorefineries and smart appliances. The answer to your last question is, quite literally, in the book.

What's going on at GreenFuel, and other news

2007-07-08T14:17:00.000-04:00

News came out last week that GreenFuel Technologies is having to lay off half of their staff and have a changeover of management. According to Jonathan Shieber in VentureWire, the algae-to-biofuels startup has had issues in figuring out a couple of key aspects of the technology, such as harvesting the algae. Venture investors, one of whom (Robert Metcalfe) is taking over as interim CEO, sound optimistic about the long-term prospects, but in the meantime the company has pulled back their fundraising efforts and will likely take in some bridge financing from insiders.

Cleantech venture deals in the news:

Next generation spark plug replacement developer ENERPULSE has taken in a Series B of at least $5.5mm from SAIL Venture Partners and Altira Group. The company's products promise performance and efficiency benefits for gas-driven vehicles, and they aren't the only company targeting this relatively unknown fuel efficiency idea...

ChapDrive AS, a Norwegian developer of wind turbine technology, has taken in a $3.1mm round of financing. NorthZone Ventures, Hafslund Ventures, and Statoil New Energy are providing the financing. The company is field testing a prototype.

Techtium, an Israel-based battery system developer for use in consumer products, has raised a $10mm Series B from Pitango Venture Capital and Poalim Ventures. The company's products allow a disposable battery to charge a rechargeable battery for these kinds of applications, so it's no surprise that Energizer had previously put $5mm into the company. In total, the company has raised $25mm to date.

Cleantech investors around the world: Israeli cleantech venture firms Aqua-Agro Fund (the cleantech venture arm of B. Gaon Holdings) and Wanaka Capital announced progress toward their fundraisings and fund launches... Here's an interesting article on VCs starting to address the "bottom of the pyramid" -- note the financing of Cosmos Ignite Innovations by Vinod Khosla and perhaps 3i and Omidyar, and the mention that Walden International and NEA are looking at investing in $100-PC developer Novatium... And here in the U.S., IBM Venture Capital is getting more into cleantech (or at least energy efficiency).

Other news and notes: Putting cleantech venture capital in perspective... Another green car company launches -- Gordon Murray Design (word of their venture backers came out back in April)... Neal's not the only one confused by everything going on in Washington... Sure seems like some kind of cap and trade is no longer an "if" question but instead "when and how"... Meanwhile, here's more big news on the policy front for the solar industry... Here's another sign that energy efficiency is the next big thing in cleantech... The next round of funding announcements by Sustainable Development Technology Canada... Cleantech-focused recruiters Hobbs & Towne have opened up a west coast office... Finally, in this nice summary of a recent panel discussion, it's worth noting the statistic that 40 hedge funds are already trading in emissions.

An update on the second law of thermodynamics:

2007-07-08T12:35:00.000-04:00

...It still applies.

With the recent rise in interest in alternative energy technologies and other breakthrough clean technologies has come the inevitable rise in questionable business ideas promising unbelievable benefits: "free" energy, "free" electricity, etc. Let's just call these the "Huh" companies -- they typically invite people to sign up to be an early customer for free (just, hey, you will need to write a big deposit check, but you know, you'll get that back, no worries...), so what's not to like?

Any venture capital financing deal is typically the result of a very thorough diligence process, where any business model or technology that can't withstand deep scrutiny will not pass muster. And VCs are by nature pretty jaded on all this kind of wild-eyed stuff. So the "Huh" companies typically don't get venture funding, and cleantech VCs don't pay much mind to them. But as the cleantech sector grows, VCs are going to need to be concerned about the "Huh" companies, simply because when they inevitably implode it can have negative impacts on the overall market acceptance of related, serious approaches -- many of which the VCs have actually backed.

A few illustrative examples:

1. CitizenRe is a solar financing play that promises to let you rent a solar array that they'll place on your home's roof. Here's the great part -- you only have to pay the same rate for electricity that you are currently paying your local utility, for the life of the rental (up to 25 years). They make this claim for most parts of the country. Here's the rub -- how can this possibly work for the several signed-up customers in North Dakota, for example? There, you have extremely low power rates and pretty low government incentives. Even with a breakthrough solar PV technology, it's going to be impossible for CitizenRe to make any profit offering solar power at around 6 cents per kilowatt hour for the life of a 25 year contract.

Furthermore, CitizenRe has previously claimed that they're going to be able to offer these tremendous economics on the basis of "vertical integration" -- they're going to make their own solar cells and panels. Because, you know, coming up with an extremely low-cost PV manufacturing approach that beats the rest of the industry should be pretty easy...

Here's the best part: The most visible member of the leadership team, Rob Styler, has written a book about his previous eye-opening experiences as a trainer for a company called Equinox International that used so-called "multi-level marketing" (a version of a pyramid scheme) in ways that were later deemed fraudulent, resulting in the company being shut down. After successfully promoting his book about these experiences, Rob is now the SVP for Direct Sales at CitizenRe, and is helping them develop their multi-level marketing approach, which is actively soliciting new part-time "Sales Associates", to add to the more than 1,200 who have already signed up... I guess one lesson he learned was that it's important to be at the TOP of the pyramid...

The company claims that they don't make anyone pay for any power that isn't produced. But as it explains on their website, you will owe a deposit when they come out and design (note: not implement) the solar system for your rooftop. CitizenRe sales associates appear to go around the internet slamming critics of the company, so expect the same here. But the above info is all based upon what's available from the company itself on their website.

Who knows, maybe this is a serious effort. Several solar industry insiders don't think so, and they have some pretty damning evidence.

But even if it's a serious effort, signing up customers in places like North Dakota and Montana with this business model suggests they're going to face some pretty stiff challenges in making this all work as promised. And the bad thing is, while they've pushed the solar financing model to an extreme level, there are other solar financing startups that are very serious about similar-sounding approaches (power purchase agreements, etc.) to getting solar out there into the market. Some of these efforts have received significant amounts of venture capital lately.

If a CitizenRe blows up, what impact will that have on downstream solar markets in general, and thus on the overall industry? Especially after such an intense PR effort...

[7/13 update: Here's a very good podcast from Inside Renewable Energy on CitizenRe and the difficulties in matching up their promises with reality]

2. How about an electric vehicle that can carry seven people, goes 350 miles on a single charge, charges up in 10 minutes, and can go from zero to sixty in under five seconds? Sign me up!

According to Forbes.com (cited on Wired's Autopia), California-based ZAP is offering all of this to customers willing to put down a $25k deposit. The catch: The car isn't being made yet. And, btw, the above specs appear to be beyond the capabilities of anything available anytime soon in terms of battery performance. And the company has already gone through one bankruptcy.

[7/9 edit: Inside Greentech is more charitable towards ZAP than I've suggested. They've done homework on ZAP and its suppliers, and believe it's entirely feasible for the company to build what it's claiming. Read Inside Greentech's Look out Tesla... ZAP building electric supercar, Altairnano power play, and PML FlightLink gets wheel for more info.]

Again, maybe this is a serious effort, who knows. ZAP is a publicly-traded company with a serious-looking management team and board. And they are offering more feasible-sounding products than the above wonder-car. Autopia asks if the company is "a flim-flam outfit," but cleantech VCs who have backed other electric vehicle startups have to be asking themselves, "what happens to our industry if ZAP's wonder-car promises blow up in their face?"

3. We've mentioned Steorn before. That's the Irish company that claims to have used a unique configuration of magnets in a motor to be able to achieve "free energy." They even put out a big ad in the Economist and invited scientists to examine their claims.

The company was going to be making a big public unveiling and demonstration of their technology this week. Unfortunately, heat from the display lighting apparently caused them to have to delay things a bit... Funny, wouldn't you think "free energy" experts would be able to predict something as basic as the fact that lights emit heat? Maybe use some of that free energy to power an air conditioner, or use LEDs? Or maybe there were other reasons for the delay...

Let's make one thing clear: The second law of thermodynamics holds true. You can't get "free energy", nor can you make a perpetual motion machine. If you have an enclosed system that appears to provide you with more than the energy you put into it, something's adding energy into the system, you haven't violated the laws of physics.

That having been said, there has been a lot of chatter lately about the use of magnets to provide very good efficiencies based upon certain configurations of electric motors. It's entirely true that a lot of smart engineers are figuring out new ways to use magnets to provide more effective motors. That by itself can be valuable. It's even potentially feasible (we suppose) that the energy being added into an enclosed system is embodied energy being released from the magnets themselves, so that magnets could be used to "fuel" a motor. If so, then the effect should fade over time, and the magnets would have to be replaced -- and where did the magnets come from in the first place, and how much energy was expended in making them? The scientists looking over the Steorn system and others will be drawing their own judgments.

What's clear is that all the hyperbole surrounding "free energy" and the like isn't helping the adoption of any such efficiency-improvement technologies. It's making potential customers even more skeptical, and holding back adoption for these and any other similar-sounding approaches. And thus, VCs are forced to consider the Steorns of the world when they see a new electric motor concept promising significant gains...

The above examples may be legitimate efforts by well-meaning people. Not having done any diligence on any of them, I make no claims either way, and I expect a few flames for having used these examples. But they serve as good illustrations of the kinds of reputation-endangering activities out there in the broader world of cleantech that VCs are having to pay attention to. Because serious or not, when such overly-aggressive claims are put out there it competes with more sober claims being made by VC-backed startups. And if and when these companies fall flat on their face, it could hurt overall market adoption of next generation technologies, making it that much more difficult for VC-backed startups to get traction in the marketplace.

MDV's biofuels bets, Heliatek, Mobius Power, and Solaire Direct

2007-07-02T08:04:00.000-04:00

Mohr Davidow took the wrapper off of a couple of biofuels investments yesterday, with initial investments in Catalin (which is developing a "tea bag" catalyst for biodiesel production) and ZeaChem (which is developing waste-heat, biochem-driven approach to cellulosic ethanol). The Catalin Series A was $3mm, and the ZeaChem Series A (which VWire reports happened back in July of last year) was $4mm and included participation by Firelake Capital.

Germany's Heliatek, which is developing organic solar cells (note: opens pdf) with a targeted cost of EUR1 per Wp, raised a round of financing greater than EUR 3.2mm. BASF and Bosch are each putting EUR 1.6mm into the round, and other investors included Wellington Partners and the High-Tech Grunderfonds (not to be confused with the Royal Tenenbaums). The company earlier raised EUR 600,000 in seed financing from High-Tech Grunderfonds and one of the company founders.

Mobius Power, which is developing an undisclosed battery technology, has raised a $4.5mm round of financing, according to VentureWire. Lightspeed, Sigma Partners and Walden International all participated in the round, according to Peter Nieh of Lightspeed, who will be joining Wade Woodsen of Sigma and Andrew Kau of Walden on the company's board.

France-based Solaire Direct, a solar PV developer and installer, raised a EUR 6.1mm round of financing from TechFund, Schneider Electric Ventures, and Demeter Partners.

The looming Demand Response consolidation

2007-06-28T12:39:00.000-04:00

Perhaps the hottest market few have heard of right now is Demand Response, which we've discussed -- often -- here (but which I find more often than not is still unfamiliar to anyone who isn't a big cleantech geek like yours truly)... Negawatts-on-demand is proving to be an important new tool for generation- and transmission-constrained utilities.

The recent successful IPOs of Comverge and EnerNOC have raised the profile of the sector a bit, and brought in a significant amount of capital available for potential acquisitions. What is less well-known, furthermore, is that two additional factors are poised to drive a wave of consolidation in the still-emerging industry:

1. While a couple of the DR companies have gotten all of the attention lately, the DR capacity aggregator segment (the companies like Comverge and EnerNOC that are contracting with utilities to provide the negawatts-on-demand) is actually a pretty crowded space, with a lot of other companies (some quite large and established with good existing utility relationships) angling to get in on the action as well.

2. While there has been a bit of a "land rush" among DR capacity aggregators lately, their actual technical ability to automate the delivery of capacity on demand has fallen behind a bit -- when the utilities call for the negawatts to be provided later this summer, there will be a lot of frantic phone calls and text messages flying around, in a very manual attempt to get each building's facility managers to go turn down thermostats or turn on backup diesel generators. [I would be remiss if I didn't mention that @Ventures has a vested interest in seeing more automation technology roll-out in the demand response space, as our portfolio company Powerit Solutions is especially well-positioned in this regard, so: "Self-promotion alert"]

Putting it all together, you've got well-capitalized players in a fast-moving space -- players who will seek to grow in terms of both scale and technical capabilities by doing acquisitions. So it's no surprise to see the wave of consolidation get started with yesterday's announcement that Comverge is acquiring Enerwise... Expect more news along the same lines over the next year or so.

In other deals announced this week:

Stion, a PV startup formerly known as NStructures (Michael Kanellos discusses some rumors about the technology here, and Jonathan Shieber also discussed the nanotech aspects of the company's approach in yesterday's VWire), announced a $15mm Series B led by Lightspeed Venture Partners. General Catalyst also joined the round, as did existing investors Khosla Ventures, Braemar Energy Ventures, and Moser Baer Photovoltaic. The company raised a $6.3mm Series A about a year ago, and is targeting silicon-like efficiencies without the high cost of silicon.

SDCmaterials, which develops alternatives to precious metals used in catalyst applications, raised a $6.3mm Series A led by Emerald Technology Ventures, and also including BASF Venture Capital and two other unnamed investors.

Marine Current Technologies, an ocean energy startup in the UK, has raised approx. $15mm in financing from Troidos Bank and AM2, a hedge fund. The capital will be used to build a commercial tidal energy farm in the next 3-5 years.

GaAs triple-junction PV cell developer QuantaSol has raised a GBP1.35mm seed round of financing from Low Carbon Accelerator, Numis Securities, Netscientific Ltd., and Sheffield University Enterprise. This type of PV cell is most appropriate for use in concentrator-based solar power systems.

VentureWire reported that UK-based food-waste biomass-to-energy developer Inetec has raised GBP2.5mm, led by Oxford Capital Partners, and with participation by existing investor Finance Wales and undisclosed other new investors.

According to today's VWire, Konarka has engaged a banker to help raise a $40mm round of financing. Meanwhile, Howard Berke has stepped aside as CEO and will be taking a Chairman role going forward -- and is additionally signing on with Good Energies to help with portfolio management.

Cleantech investors in the news: Battelle Ventures has taken in another $70mm from the mother ship... and Rustic Canyon has raised $185mm of a targeted $350mm fund.

Other news and notes: Had the pleasure of speaking on the "Carbon as Currency" panel at the Red Herring East 2007 conference yesterday; the panel was artfully moderated by Nick Parker of the Cleantech Group -- here is a write-up of Nick's plenary talk earlier in the day... The New England Energy Innovation Collaborative (NEEIC) has launched a CEO Council of regional renewable energy business leaders to help continue to build the local cleantech cluster, and to provide a common voice for the sector on regional policy issues... We mentioned Mr. Cleantech before, but now it's officially launched... A solar powered motorbike?... And finally, here's perhaps the harshest critique yet of biofuels.

SAVE THE DATE for the next REBN-East networking event:
July 19th, at Flat Top Johnny's in Kendall Square, 6:30pm.

Recurrent Energy, EPV and other news

2007-06-25T18:37:00.000-04:00

Last week, VentureWire broke the news that solar financing startup Recurrent Energy has raised a $10mm Series A, led by MDV and including JEN Partners. The round was actually closed back in March, but had been only recently publicly confirmed by the company. CEO Arno Harris also wrote about the round on his blog today -- he's been talking about Recurrent there for a while... The solar financing space has been pretty hot lately, with a lot of startup groups pursuing the large market of empty rooftops out there...

Solar thin-film modco Energy Photovoltaics has raised a $77.5mm round of senior secured notes as part of a Series B round of financing. Unnamed VCs and other institutional investors participated in the financing.

Other news: Speaking of solar, Ed Gunther has a nice writeup of the Intersolar conference in Germany (including a trade ad that brings new meaning to "balance of system")... Tom Konrad shares his refined thoughts on the ethanol market... The California Clean Tech Open has put out a call for submissions... A useful overview of Fuel Cell 2007... Nanotech sector update: DuPont is teaming up with Environmental Defense to come up with safety guidelines for nanotech -- and some are expecting upcoming exits to re-invigorate venture interest in the space... Finally, it was a tough past week for cleantech investors on the policy front -- while many other VCs have been focused on the proposed tighter taxation treatment of carried interest, cleantech VCs are probably more disappointed in Congress' inability to follow through on anticipated policy support for clean energy technologies (more details here)... Maybe someone can rent these guys out and send them to Capitol Hill, clear out some of the deadwood holding back economic progress.

Reader feedback

2007-06-19T13:41:00.000-04:00

As always, readers are encouraged to submit comments or even email feedback (I can't promise to be super-responsive, however, since this isn't my day job)... Received the following thoughts from a fellow cleantech investor in response to last week's post on engine re-designs and auto drivetrains:

I just wanted to say I agreed completely with what you said about auto technology deals. I have seen a bunch of them and turned them all down for the reasons you mentioned - it is just intrinisically not a good space for VC investors. If anything I think you were overly diplomatic! Takes forever to get to market, very capital intensive, low margin business, and then even if you get to market, selling into auto industry OEMs simply sucks, no two ways around it. And particularly anything related to power plant/drive train. The two other negatives you didn't mention are constant pricing pressure and onerous vendor requirements - selling to the Big 3 (and their ilk) is brutal - constantly playing you off your competitors, demanding your cost data and then pricing you down to the bone, terrible payment terms, etc etc... Personally I won't touch anything designed to sell to Big Auto OEMs with a 10 foot pole.

The only comment I would make is that things can look a little different for a) aftermarket; and b) trucks and buses. Trucks and buses tend to have shorter commercialization cycles, more retrofit activity than passenger vehicles, and recently more stringent regulatory requirements, so there might be some opportunities there. For instance we have seen a number of emission control technologies aimed at complying with the next gen European diesel regs, which are strict and coming fast. Still lots of intrinsic problems in these deals, but there is a sense of urgency from the OEMs, which helps a little bit. Though not enough in my opinion!

Good follow-on comments worth sharing, thanks much... It would be good to share a response from someone in the investment community with a different perspective as well, please feel free to drop me a line...

Also, missed mentioning ReVolt's EUR 10mm insider Series B. The Norwegian developer of zinc-air batteries last raised an EUR 7mm Series A in 2005, and plans on raising an EUR 30mm round next year, according to VWire.

Advent Solar, SV Solar, TrafficCast, Cyber-Rain and other news

2007-06-19T09:48:00.000-04:00

[Self-promotion alert] Very pleased to ~~share the announcement~~ acknowledge the scoop by Jonathan Shieber of Venture Wire today, that Advent Solar has raised a $70mm Series D, led by ZBI Ventures (the private equity and venture investment subsidiary of Ziff Brothers Investments), with participation by other new investors Sun Mountain Capital and Globespan Capital Partners, and also including existing investors Battery Ventures, EnerTech Capital, @Ventures, New Mexico Co-Investment Partners and Firelake Capital. The bulk of the financing will be used to expand the company's capacity from 25MW to approximately 70MW.

Other deals to note:

In the last posting, we briefly mentioned Silicon Valley Solar has acquired NuEdison in a combination of solar concentrator plays. Today comes word that facilitating this acquisition was a $10.2mm round of financing led by Bessemer Venture Partners.

Traffic prediction startup TrafficCast has raised a $2mm Series A led by Phenomenelle Angels Fund I LP and NEW Capital Fund LP. Women Angels and a syndicate of individuals also participated in the round. Anything that reduces the number of idling engines stuck in traffic is a good thing...

Smart sprinkler system manufacturer Cyber-Rain has raised an undisclosed amount of financing from Momentum Venture Management.

Also, the Cool Earth Solar convertible note financing we referenced back in May is revealed by Ed Gunther to be now closed at "almost $1 million"... And it's interesting to note the money Google is putting into RechargeIT and PHEVs.

Sector updates:

Biofuels are getting mixed coverage these days... Corn-based ethanol won't be profitable after 2008?... Don't tell these guys... Fascinating to note that the oil giants' reputations may be lower than the tobacco industry, according to the SVP of Technology at ConocoPhillips... Plus -- confusion at the pump?

Solar: Solar industry to continue amazing growth path -- grid parity by 2014? So says RBC Capital Markets... Green buildings: Nice overview of cutting edge approaches here... Smart grid: Nice two-part article (part 1 / part 2) on some of the looming changes to the grid.

Other news and notes: Here's part two of the interview with Erik Strasser that we mentioned last week, including a very good argument in favor of thesis-driven investing... Cleantech is "old stuff"? Sure, and those grapes were probably sour, too... It's tempting to be skeptical of all of the breathless coverage about "free energy" from magnets these days (thanks, Steorn), but perhaps with so much smoke there's a little fire of some kind -- although certainly there's no such thing as free energy, maybe some useful mechanical efficiency gains are hidden in these kinds of results... Finally, here's a pretty good point.

The challenges of re-inventing the engine

2007-06-15T07:04:00.000-04:00

There continue to be a lot of great ideas out there for re-inventing the internal combustion engine ("ICE"). From small tweaks to major redesigns, engineers have been coming up with innovative approaches that promise efficiency gains and other benefits. And yet, with all these better mousetraps, the world hasn't yet beat a path to their doors. It's surprising to many of these entrepreneurs that new engine technologies haven't gotten more venture capital attention than they have so far.

The story of the next generation ICE helps illustrate the market and financing challenges facing many startups.

First and foremost, introducing a new ICE to the market is very difficult. Performance is one factor for success, but so is cost and manufacturability. Many of these new design efforts would have difficulty scaling up to mass production levels that are necessary for business success. And the buyers of the technology are big (and slow-adopting) auto makers and capital equipment manufacturers who are very risk-averse and cost-focused. There's some anecdotal evidence that the "not invented here" dynamic is easing up a bit at some of these big OEMs, but even if they're open to trying new things it's going to take a long time for them to adopt any new outside technology at scale. Especially when the supplier is small and lacks manufacturing capacity.

Furthermore, the business models for capital equipment components (which is what ICEs are, in the end) are always challenging for early-stage funders like VCs. Facing slow market adoption, the entrepreneurs are often tempted to attempt to ramp up their own manufacturing capabilities, or even to use their engines in the development of their own end products. But this is typically a very capital intensive and (relatively) low margin path, with low exit multiples. Alternatively, some nextgen ICE entrepreneurs pursue a pure licensing business model. But a licensing-based business model is generally disliked by VCs, who assume that the company will end up having to give away most of the value of the technology in the pursuit of signing up a key customer, and furthermore that any successfully licensed IP will have a big bullseye painted on it by the customers and others out there who will seek to undermine patents, etc., anyway they can.

Ironically, the plethora of good nextgen ICE ideas out there is also hindering investor interest -- it makes it that much tougher for a VC to get convinced that the individual startup they're looking at really has the silver bullet idea as compared to all the other good ideas out there. So there's a vicious cycle of good idea creation hindering the financing of good ideas, leading to a big backlog of inventions out there. A simple patent search for internal combustion engine designs is a daunting exercise...

So all of which is why it's more difficult than many might expect for great new engine designs to become exciting businesses and investments... All that having been said, with current ICEs only about 20% efficient, there's certainly a lot of room for improvement. And as more VCs get comfortable with engine technology, it's the kind of big market pain and big market potential that usually attracts investors. We're already starting to see the beginnings of such VC activity. And as mentioned above, anecdotally it appears that the big OEMs may be more open these days to innovative new approaches. So the challenges may yet be overcome.

For another good take on this topic (albeit focused on electric motors and not ICEs), see this article (note: opens pdf).

New cleantech deal news:

Speaking of engines, Stirling engine startup Infinia has raised a $9.5mm Series A round of financing. Khosla Ventures, Vulcan Capital, EQUUS Total Return and Idealab participated in the round, which also included existing investor Power Play Energy LLC. The company's technology has a number of applications, including solar power generation. As part of the transaction, Infinia also acquired another company -- Stirling Cycles -- from Idealab, for an undisclosed sum. John Cook has more coverage here, as the cleantech cluster in the Pacific Northwest continues to heat up.

Power Air Corp (PWAC.OB) has raised a $5mm PIPE with Korean investors. The company is developing zinc-air fuel cells for backup power.

Austria's Cycleenergy has raised a 6.7mm euro round of equity financing (note: pdf) to support the company's biomass and biogas power plant build-out efforts in Europe. 3TS Capital Partners led the round, providing 4.3mm euro, and founding shareholder Ventacc provided the other 2.4mm. The company eventually expects to raise over 100mm euro in equity and debt financing.

UK-based fuel cell motorbike company Intelligent Energy has raised a GBP 8.5mm round of financing, according to the CEO. Credit Suisse Securities and Black River participated in the round, which also included existing investors Meditor Capital Management and Evolution Placements Corporation, who had participated in the company's October, 2005 GBP 11.3mm previous round.

According to PE Week Wire, TerraPass has raised a $5.8mm Series A, with investments by Maveron and Nth Power. The company also has brought on board a new CEO, Erik Blachford.

Bull Moose Energy, which is developing biomass power plants near urban centers, has gotten an agreement from Morgan Stanley to back the company's efforts with up to $60mm in project financing.

Jonathan Shieber at VentureWire revealed earlier this week that AMR developer Silver Spring Networks has raised a $39.9mm Series C. Only existing investors Foundation Capital and JVB Properties are known participants in the round. It's also unclear if this financing is related to a $10.5mm debt and warrant financing the company filed earlier this year.

Cleantech investors in the news:

An insightful interview with Erik Strasser:

Pleased to share the announcement that Andrew Friendly has joined the Boston cleantech venture community, joining Advanced Technology Ventures. Andrew and yours truly will be pulling together the next REBN-East networking event on July the 19th in Cambridge.

SJF's David Kirkpatrick on the emergence of demand response as a hot investment area.

Brief sector update -- fuels: T. Boone Pickens is convinced we're already at Peak Oil... Meanwhile, another voice of reason in the ongoing ethanol net-energy-balance debate (basically, corn-based ethanol is marginally beneficial at best, but alternative feedstocks are the key)... And ethanol continues to be the lawmakers' darling... But biodiesel is coming on strong -- farmers and biofuel processors are catching on, and automakers are providing the cars. Biodiesel is poised for strong uptake.

Other news and notes: A nifty new site for doing cleantech searches -- Mr. Cleantech... Promising results from efforts to use waste heat for coal drying... Massachusetts continues to get friendlier to the region's cleantech cluster -- but the fact that $9mm of PV projects will increase the state's solar capacity by 50% shows how far the state has to go to catch up with other regions... Speaking of the Mass cleantech cluster, check out how much activity there is in the MIT community on clean energy, as evidenced by this recent newsletter (note: pdf)... "Energy farms are the future"?... A merger of solar concentrator startups: NuEdison and SV Solar... Finally, Neal Dikeman explains why you're not powering your laptop with micro fuel cells when you get on an airplane -- but these guys hope that airplane might itself be powered by fuel cells.

CleanFish, and Braemar's next fund

2007-06-11T12:25:00.000-04:00

CleanFish, a distributor of sustainably-produced seafood, has raised a $2.1mm Series A, according to PE Week Wire. Mindful Capital Partners led the round.

VentureWire reported this morning that Braemar Energy Ventures has set a target of $200mm for their second fund. Braemar invests across a wide range of energy sectors, including clean energy technologies, and according to the VWire article the firm still owns 10.2% of EnerNOC.

Other news and notes: Here's a useful illustration of how supportive public policy to boost demand for solar is having a near-term effect of increasing PV panel prices... Speaking of solar, it's interesting to see Nanosolar losing their chief scientist... Meanwhile, the Vatican is going solar... "Cleantech Venture Capital: How Public Policy Has Stimulated Private Investment"... Neal Dikeman on the bubble in cleantech journalism... Finally, WiTricity looks pretty nifty.

Envision Solar, Ze-Gen, Verari

2007-06-06T06:33:00.000-04:00

Public mentions of planned cleantech financings this morning:

According to VentureWire, Envision Solar has raised $600k of a targeted $2mm Series A round. The company is building "Solar Groves", which are PV-covered parking lots, based on Kyocera solar panels. The initial $600k has been in convertible notes, and current investors were undisclosed.

According to Martin LaMonica of News.com, waste-to-electricity technology developer Ze-Gen is "in the process of securing $4.5 million in financing from venture capital firm Flagship Ventures." The article is worth reading for a general survey of the waste to energy space.

It's a good example of the ways that the cleantech investment thesis can extend to other investment sectors: "Green" data center systems developer Verari has raised an "over $20mm" round of financing, that is targeted at $25mm when closed. Carlyle Venture Partners has led this round, which also includes investments by Voyager Capital, Sierra Ventures, and a strategic investor. Energy efficiency at data centers is a lesser-known but big cost issue, as significant energy has to be expended not just in operating the servers, etc., but also in cooling down the data centers themselves to counteract the major waste heat produced by all those powerful processors. Speaking of the green impacts of IT equipment, David Douglas of Sun Microsystems has a sometimes provocative blog on the subject.

Other news and notes: A new study released by The Carbon Trust suggests that in Europe, clean energy venture capital has been "on a par with European IT, biotech and semiconductor venture capital investment levels," at nearly 2B euros from 2003-2006... Meanwhile, in Israel there's concern that cleantech venture capital is not keeping up with interest... Finally, are the oil companies placing their more serious bets on biofuels instead of hydrogen?

If at first you don't succeed...

2007-06-05T10:42:00.000-04:00

Jon Shieber at VentureWire had the scoop today about Tioga Energy's $10mm round and launch. Investors in the round included NGEN, DFJ, RockPort, DFJ Frontier, and Kirlan Ventures. Tioga is a solar financing effort akin to SunEdison, but aimed at smaller customers (small commercial and residential). The interesting thing about the Tioga story is that the company was originally known as CerOx, and was developing a waste treatment technology, after having raised $17mm. The redirect of the business model from a waste treatment equipment manufacturer to a solar project financing shop is intriguing to see.

Other news and notes:

If you enjoyed the John Doerr TED talk video, here's another one -- Vinod giving his biofuels talk at Google. It's an hour long, but full of content. (Cheers to Mark Wendman for the link)...

The second California Clean Tech Open is up and running -- Edgar Gunther has a nice overview of the goings on at the launch... He also worries that the paperwork for the new California solar incentives are too stifling...

Speaking of solar, Business 2.0 had a nice update on developments in the sector, and others are pointing out that Silicon Valley is becoming a strong solar cluster... Such clusters, it's now increasingly understood, are also strong engines for jobs growth... Speaking of Clusters, Tyler has a good column covering a recent speech by the Governator, and urging more cluster-building efforts in his neck of the woods... More cleantech investors -- this time it's two large Dutch pension groups... Asia, not North America or Europe, is driving cleantech spending (not to be confused with investments)... And with the two biggest recalcitrant carbon emitters (see here and here) now finally getting with the program, it's no longer a question of "if", but instead when a US cap and trade scheme for carbon will be implemented...

Wind power is doing very well...

Cleantech continues to go regional: A look back at the recent Austin conference, with award winners listed... And an upcoming cleantech conference in Georgia...

Fun items: It's true, it's a good thing no one has yet started using the phrase "Green 2.0", but it's gonna happen... I'm sorry, I can't hear you over the sound of my waste heat being turned into electricity... And finally, nice to see good recognition for good ideas like this one.

When you have 19:43 free...

2007-06-01T23:50:00.000-04:00

...it's well worth checking out this video of John Doerr's powerful speech at TED. (thanks to Dan Primack for the link)

The emerging Boston cleantech cluster

2007-06-01T09:13:00.001-04:00

We thought we might get a couple of dozen people to the inaugural REBN-East event last night.

Somewhere close to 100 renewable energy businesspeople and researchers showed up.

Looks like we'll have to have another Boston-area event soon...

Powerit, LiveFuels, Southwest Windpower, INI Power, and NanoH2O

2007-05-31T17:23:00.000-04:00

Lots of deal announcements over the past couple of days.

To begin with [self-promotion alert], Powerit Holdings, which provides automated solutions for energy demand management, announced a $7.1mm Series A led by @Ventures, and including participation by Expansion Capital Partners, as well as existing investors Stellar Holdings and company management. Powerit's technology is uniquely able to help large industrial and commercial energy users to achieve significant savings on their electricity bill without any negative impacts on productivity or comfort, and with very strong payback periods. Since industrial buildings consume 27% of all electricity produced in the U.S., it's a big market. Also, Powerit's technology fills in a big missing piece of the demand response market (see the recent IPOs of EnerNOC and Comverge), by providing automated solutions for large industrial sites to become participants in those company's programs.

Other deals to note:

LiveFuels, a self-described "mini-Manhattan Project for algae-to-biofuels", announced a $10mm Series A led by David Gelbaum of the Quercus Trust. Jonathan Shieber at VentureWire reports that the company is trying multiple strains of algae and multiple processing technologies. "We are trying them all," he quotes from Lissa Morgenthaler-Jones, the CEO, "We're not biased. We'll use any one that works." [6/1 update: InsideGreentech also has a very good column on the company]

Southwest Windpower, a developer of small-scale distributed windpower products, announced a $6.5mm round of financing (VentureWire describes it as a "second tranche of its Series B financing") led by NGP Energy Technology Partners. Existing investors RockPort, Altira, and CTTV Investments (Chevron's VC arm) also participated.

INI Power, which is developing direct methanol fuel cells for portable power, announced a $4mm Series B led by MHI Energy Partners, who also led the company's $3mm Series A in 2004. Other unnamed investors also participated.

NanoH2O, which is developing nanomaterial-based membrane technology for water purification, announced a $5mm Series A round of financing (note: link opens pdf) from Khosla Ventures.

"Cleantech venture bubble" watch, pt 3: Biofuels

2007-05-30T10:00:00.000-04:00

As we discussed before, it's tough to declare a "bubble" across all cleantech sectors, especially when looking only at venture investments (versus the public markets).

There remains the possibility of small bubbles within certain sub-sectors, however.

One such sub-sector that is frequently called out as potentially seeing overinvestment is biofuels. Some investors, such as CMEA's Maurice Gunderson, have gone on record as saying so. And in the public market, previous high-flying ethanol stocks have been experiencing a bumpy ride lately. In the same article linked in the last sentence, Lux's Michael Holman declares that: "The herd mentality has begun to take over in the venture capital community and there is probably some not very wise money that is flowing into the ethanol segment in particular." Moo. Meanwhile, big major entrenched oil companies are also aggressively moving in.

As Nth Power's 2006 energy tech VC funding tallies showed, biofuels did indeed dominate last year, with more than a third of all VC energy tech funding going into the segment.

The argument for a bubble is simple: Even by optimistic forecasts of demand for ethanol going forward, there is a glut of announced future capacity. And thus, the high amount of money flowing into the sector won't be able to find a good home.

But as always, it's not quite so simple. Even just going by the above critiques, the data points to some distinctions within the biofuels sector from a venture perspective. The notable distinctions to make are tech versus capacity investments, ethanol versus other biofuels, and incumbent versus cellulosic technologies.

As the CleanEdge/ Nth Power report showed, a lot of the heft behind the hefty biofuels totals was due to VC participation in "capacity deals" -- essentially, venture equity used alongside project finance funding, inflating the "VC" numbers. And if you read what Maurice was describing, he was mostly concerned about this kind of investment as well (it's important to note that CMEA remains active in biofuels investments). Also, most critiques focus on ethanol, whereas biodiesel, biobutanol and other more exotic bio-based alternative fuels are rarely singled out as suffering from overinvestment.

Furthermore, while most of the publicly-traded ethanol stocks being criticized, as well as most of the capacity deals being funded privately, are based on incumbent technologies (basically: corn as feedstock)... Technologies to enable the use of non-food and cellulosic feedstocks are what continue to get the most VC attention these days. Vinod is particularly clear on this point, despite having taken part in some capacity investing himself -- in the various debates he's taken part of around energy balance and the market potential for ethanol, he always makes the clear distinction that cellulosic will overtake corn-ethanol (he believes this will happen within 10 years -- the below graph of his forecast comes from Wired from last October, btw). And we have only talked about the processing portion of the biofuels value chain -- there has been even less investment activity into upstream and downstream approaches.

None of the above says that there is NOT a bubble across the full spectrum of VC biofuels investments (and this site doesn't deal with public markets, so let's pass the buck there...). But if you had to rank the order of likelihood of potential overinvestment within the biofuels sector, pointing out capacity deals in corn-ethanol as a likely prime suspect would make the most sense. And it seems less likely, given the opportunities down the road, that there is a bubble in technology development for next generation feedstocks and next generation biofuels -- but given the timeframes we're talking about, it's still possible. Certainly, if these technology development startups all try to build their own processing capacity, that could exacerbate the glut -- but trade sale exits to capacity players is a more likely scenario for many of them.

The anecdotal evidence, for what it's worth, is mixed: There are definitely some biofuels deals that have been out there with very high valuation expectations, and some of those expectations have been met by VCs in a couple of cases. But also, there continue to be other opportunities where the entrepreneurs recognize the long, risky road ahead and have realistic expectations, where the VCs are bringing value-add strategic value to help early companies grow, and it's a win-win. (Hopefully...)

In other words: Is there a bubble in biofuels venture investments? A solid "maybe". Some instances where VCs have stretched themselves, mixed with indications that there are still some promising opportunities in lesser-invested areas of the biofuels value chain and in new technologies. As the market continues to develop, naturally there will be winners and losers, and those in between.

But is all the upside currently being priced out of the biofuels investment sector, across the board? ...It just doesn't feel like it.

In other news:

Electro Power Systems, an Italian developer of fuel cell-based power systems, announced a 5mm euro round of financing by 360° Capital Partners. The company claims that it's the biggest venture round in Italy in the past 12 months.

Other news and notes: Another reason to continue to be excited about cleantech investments -- the fact that a lot of proven entrepreneurial talent is now rushing into the space... The debate over the role for coal continues... Cleantech as a national security issue... "Efficiency is the steak, renewables are the sizzle"... And demand response/ demand management is a huge potential market... The challenges facing electric vehicles -- but Tesla's got a Plan B, as a battery distributor... Finally, for all the Amish readers of this website, you'll be glad to know that solar power is now an option.

Happy Memorial Day

2007-05-28T22:31:00.000-04:00

GE has announced that they plan on doubling their cleantech venture capital investments from $25mm this year to $50mm in 2008. It's yet another sign of the importance of cleantech for such large capital goods providers, who are also likely to be major acquirers of clean technologies as the space continues to mature -- and thus providing exits for many cleantech venture investments. It's also interesting to note that GE had previously moved away from direct venture investments in the past, and this announcement is further indication that the company is getting more comfortable getting back into a corporate VC business model...

Deals from the past week:

SunLink, a manufacturer of proprietary mounting systems for solar panels, announced a Series B financing of undisclosed amount. The round was led by Clean Pacific Ventures.

Greentech Media, a new cleantech-focused media firm, announced a $1mm Series A round, led by Northport Private Equity and Lightspeed Venture Partners. Several strategic angel investors also participated in the raise. As we previously mentioned, Eric Wesoff's Venture Power newsletter has also joined forces with Greentech Media...

E-waste processing company Intechra announced a $30mm equity round, led by Richland Ventures, Oxford Bioscience Partners, and First Avenue Partners. Intechra has raised $50mm over the past two years. Jonathan Shieber at VWire had a nice column last week discussing this deal and others in the recycling space...

An interesting play by Khosla Ventures and Venrock -- Transonic Combustion, which is developing a fuel injection system with fuel efficiency benefits for internal combustion engines, announced a Series B of undisclosed amount, with both venture capital firms participating (Venrock led the round). Advanced internal combustion engine designs and components can be a very difficult play for venture capital firms to get comfortable with (slow adoption cycles, a plethora of alternative designs out there sitting in engineers' garages, and potentially difficult exits are all factors), but there's no disputing that it's a huge potential market for any firm that can successfully address the challenges facing such efforts.

Petra Solar, which is developing advanced BOS to improve solar PV efficiencies and provide greater flexibility, announced a $14mm Series A led by DFJ Element and BlueRun Ventures.

Cleantech investors in the news: OnPoint, which has been pretty active in cleantech, is losing some of its funding... Southern Cross, a new Australian venture capital firm, announced they have raised A$170mm first-time fund, and that clean energy investments in Australia and New Zealand will be part of the fund's focus... Nancy Floyd, of Nth Power, wants better clean energy policies in Oregon.

Other news and notes: Biodiesel producer Imperium Renewables, which has raised over $200mm in funding, filed for a $345mm IPO... In the ongoing discussion of cleantech clusters, the Economist adds this column worth checking out... A good overview of Cleantech 2007... The Cleantech Venture Network and Weber Shandwick are teaming up to promote the Cleantech Venture Fora... Finally, sounds like they're doing some neat things up at Dartmouth these days.

"Cleantech venture bubble" watch, part 2 -- Five Questions: Matthew Nordan

2007-05-24T14:36:00.000-04:00

Last week we started a series of posts on the subject of investment bubbles in the cleantech sector -- and in the process, we used a recent research report by Lux Research as a centerpiece of the discussion. (We also, admittedly, took a little bit of a swipe at the PR announcing the report's release... All in the spirit of constructive informal dialogue, of course.)

This past friday, I had the pleasure of sitting down with Matthew Nordan, President of Lux Research, to discuss all matters cleantech. We discussed the various historical analogies to the emergence of the cleantech sector (IT, biotech, materials science), dealflow aggregation methodologies, and -- of course -- the potential for a bubble in the sector. Many points of agreement, and some thought-provoking areas of divergence...

It's clear that Lux has been doing a deep dive in this sector, and I felt Matthew's first-hand perspective would likely be of interest to readers of this site. So, with thanks to Matthew for graciously agreeing to participate, here are Five Questions:

1. Lux Research recently released a detailed report covering the cleantech sector. What was the motivation behind doing this report, and how long has Lux Research been investigating the cleantech space? Was this a one-time project?

Our mission is to help senior executives make strategic decisions about emerging technologies. We focus on the physical sciences – new materials and processes, and the things you can do with them – because we honestly think this is what will drive competitive advantage and economic growth over the next several decades.

We founded our business in 2004 with a first practice area in nanotechnology. As we built relationships with CTO/CSO types at large companies and became a trusted advisor to them, they started asking us to investigate other emerging technologies, many of which clustered around energy and the environment. So we started advising clients on what most people now refer to as cleantech around mid-2005.

After several of these engagements, we realized the market was telling us something about what our second practice area should be, and we formalized our efforts. We put together a team of researchers in May 2006 and set out to map the cleantech universe. We started by building taxonomies of cleantech segments across energy, air, waste, waste, and sustainability, and then began counting and categorizing the activity in the field, including scientific publications, patents, active companies, start-up creation events, VC deals, IPO and M&A transactions, etc. – tagging all of the things we inventoried back to our taxonomy. This research base underlies our practice, and it also drove The Cleantech Report, which is designed as a primer and reference guide for executives and financiers active in the field.

2. The report mentions 930 energy tech startups worldwide, and 1,500 cleantech startups overall. Your team also tracked the dramatic rise in venture funding in the space. What was your group's methodology for tracking down all of these companies and deals, and how might that have varied from other totals that have been publicly announced by other groups?

There are a couple of questions embedded in there, and both of them come down to definitions.

For the purposes of the report, we define cleantech as “innovative technologies specifically designed to optimize the use of natural resources and reduce environmental impact.” “Innovative technologies” rules out companies that are active in energy and environment but without any significant new technology – carbon offsetting services would be a good example. It also rules out project finance for, say, corn-based ethanol plants based on established processes. “Specifically designed” rules out companies that deliver energy and environmental benefits only as a pleasant side effect rather than the focus of their business, such as transport optimization software companies. “Optimize the use of natural resources” and “reduce environmental impact” rule out companies that have something to do with energy or the environment, but that primarily help speed up “dirty” consumption: Oil and gas proppants would be a good example. You can split hairs on lots of segments – are enhanced oil and gas recovery technologies cleantech? (we would vote no) – but the important thing is to be consistent throughout the analyses, which we feel we’ve done.

With those definitions in mind, the identification of companies and transactions happens through lots of means – tapping our network, querying information services, cross-checking with other people’s inventories, etc. All of our data sets are global to the extent that reliable data is available (for example, it’s really tough to discern between institutional venture capital and project finance in China, and many capital flows aren’t reported).

For many of the data sets we’ve assembled there are no comparables, but in the one place that they do exist – namely venture capital – our definitions make our numbers differ from other sources. We’re higher than Dow Jones/E&Y because of the global factor and we’re lower than Cleantech Venture Network because of our more restrictive cleantech definition. The sources of variance are detailed in the report.

3. The press coverage has naturally focused on the report's conclusion that there might be a looming bubble in energy tech. The report, however, appears to differentiate a bit between a) different sectors within cleantech; and b) different types of investments. What specific categories of energy tech investments seem most susceptible to bubble-like conditions right now? Why are these sectors attracting such an imbalance of attention, in your opinion?

It’s certainly true that the press loves downside stories. We’ve tried to be pretty specific about the two subsegments where we see an excessively high ratio of money and enthusiasm to opportunity: solar and biofuels. It’s hard to look at, for example, New Enterprise Associates’ pursuit of SolFocus and not see flashbacks to the Internet in the late 1990s. While some of our findings are counterintuitive, I don’t think this one is: I spoke at the Austin clean energy VC conference last week, and Maurice Gunderson who founded Nth Power gave a great presentation that honed in on these two subsegments in “bubble watch” mode.

Solar and biofuels get outsized attention because they are easy to understand (everyone’s seen a solar cell and everybody’s pumped gas), they’re both experiencing big technology shifts (crystalline silicon to thin-film and corn/cane to cellulosic), they both have government incentives and news flow working in their favor, they both have established valuation comparables (you’re not creating a new category), and they both have enormous headroom for growth – solar was 0.02% of U.S. energy last year! There aren’t many other subsegments where all of these factors line up. Coal gasification and supercapacitors are not easy to understand, water filtration is not undergoing a big technology shift, news flow doesn’t favor waste remediation…

4. The worldwide energy and water markets are as big or bigger than the market for Information Technology, for example. And yet cleantech appears to still be only 5-10% of venture capital investing totals, behind IT and biotech. How should we reconcile the magnitude of the market opportunity and these relatively low investment levels with the idea of a looming energy tech bubble?

Energy and water are huge markets but they’re nowhere near as accessible as IT, they require manufacturing and testing and shipping and servicing physical products at high volume, and the adoption cycles are a lot longer.

Think about water for a minute. More than $500 billion every year is spent on water, and the secular trends are really attractive: Access to clean water is already a limit to economic growth from China to the American southwest, and there’s no good alternative – you can replace gasoline with ethanol but you can’t replace water with anything. But the average municipal water facility literally uses Victorian-era technology: coagulation and flocculation that add salts to the water. The facilities are frequently publicly administered, have almost no operating free cash flow to invest in new technologies, and replace their infrastructure on cycles measured in decades. And the qualification and test cycles for installing new equipment can themselves take years even with accelerated testing regimes! That’s about as far as you can get from, say, web-based software where channels to market aren’t an issue, you don’t have to manufacture anything, and switching costs are very low.

Energy segments aren’t immune. Take rooftop solar cells – the solar shingles that are the apotheosis of many a business plan. If you wanted to install solar roofs on only one out of ten new U.S. houses constructed – no retrofits and no commercial installations – and it took two guys one week to string one up and test it out, you’d need 8,000 installers working full-time. That’s more than twice most estimates of the total number of installers in the U.S. You wouldn’t encounter this channel construction problem in IT or biotech.

5. What's the single biggest misperception about clean technologies that you'd like readers to gain a better understanding of by reading your report?

I think we touched on it earlier – it’s the thesis that cleantech is the next Internet or the next biotech. From the perspective of public offerings, wealth creation, and impact on society, this may very well be the case. But the investment dynamics and times to market are really different.

While there are plenty of exceptions like demand response services, a great share of clean technologies derive from new materials. And no matter what past example you want to look at, be it carbon fiber or nanoclays or polyetheretherketone, new materials simply take a long time to develop, scale up, and bring to market – it typically takes 20 years to get from invention to first commercialization and 20 more to mass adoption. That’s a long time – a lot longer than a 10-year closed-ended fund.

Demand response gets another comp

2007-05-21T20:01:00.000-04:00

It would appear that the cat's out of the bag regarding energy efficiency/ smart grid technology, and particularly its subsector demand response. First, the successful IPO by Comverge (COMV), and now DR rival EnerNOC (ENOC) has made a similarly big splash in the public markets.

Both companies are venture-backed efforts in the DR space, so it's a good sign to venture investors that the public market exit option should be open to "boring" energy efficiency technologies going forward. It probably reflects a recognition of the strong economics presented by energy efficiency -- the best way to make a kilowatt-hour is not to use one in the first place (admittedly, we've been beating this drum for a while now, apologies for being repetitive). Hopefully these companies continue to provide strong comps going forward.

The thing to note about both companies and their competitors is that they will need to continue to build an ecosystem of smart grid/ energy automation technologies in order to support their growth. DR services are gaining acceptance by major utilities (and no less importantly, their governing Public Utility Commissions). But right now, most DR services (speaking only about all such providers overall) entail literally picking up a phone or paging or emailing a facility manager, who then individually turns down power usage (or turns on a backup generator) during the period of the "event." It's a relatively low-tech ESCO-like approach that will need to become more automated over time in order to access more than early adopter markets. I would expect a period of some consolidation -- both horizontal and vertical -- as the freshly-capitalized DR industry seeks to put together a truly integrated, comprehensive, tech-enabled service offering for utility customers.

Other deals:

Solar thermal electric technology developer Sopogy has raised a $2.3mm Series A led by Tradewinds Capital, according to the CEO. The company, which is based in Hawaii, is targeting their products at both centralized and rooftop installations.

PEWW today revealed that TriAlpha Energy, a nuclear fusion research company, has raised a $40mm Series C-2 round of financing. Funders included Goldman Sachs, Venrock, Vulcan Capital, Enel Produzione SpA and PIZ Signal. It also appears that NEA is a backer, since Dick Kramlich is on the board. Some interesting background on the company and a critique of their technology can be found on this site. [5/22 update: VWire mentioned this raise earlier on 5/21, it should be noted. rd]

PEWW also reported that Dutch filtration system developer Fluxxion has raised a 6.4mm euro second round of financing, led by Emerald Technology Ventures and including Capricorn Cleantech Fund, WHEB Ventures and Koninklijke Philips Electronics NV.

Arch Rock and Ice Energy

2007-05-17T21:45:00.000-04:00

Arch Rock, which is developing hardware and software for wireless sensor systems, announced a $10mm insider round this week. NEA led the round, which also included existing investors Shasta Ventures and Intel Capital. This follows on a $5mm round announced a little over a year ago.

Ice Energy, which uses ice-based air conditioners to shift energy usage from peak periods to non-peak periods (freeze the ice at night, use it to cool a building during the day) raised a $25mm round of financing. The round had been in the works for a while, and ended up being led by Goldman Sachs, with participation by Good Energies and existing investors Second Avenue Partners and Sail Venture Partners.

VentureWire reported that AdaptivEnergy, which is developing piezoelectric devices for applications like thermal management and fuel cells, signed a development agreement with the CIA's In-Q-Tel -- and is seeking a $5-10mm venture round. The company has raised $5mm to date.

VentureWire also reported this week that, according to a regulatory filing, Nth Power's fourth fund has now reached at least $132mm, toward a target of $200mm.

It's not really a venture investment, but it's interesting to note Google.org gave a $200k grant to CalCars.org.

Lots of conference updates to discuss:

It's perhaps the most-blogged cleantech conference ever. The first Austin Clean Energy Venture Summit was oversubscribed, and has gotten rave reviews. Tech Confidential wrote a series of blog posts (see here, here, here and here). There were quite a few good articles by Martin LaMonica and Michael Kanellos on News.com. A nice little column can also be found here. But I thought the best review of sorts was a text message I got on my cell phone from a colleague on-site: Grt conf down here. Woolsey said govt move twd fmly car hydrogen fuel cells "stupidest thing govt has done in energy policy ever." That was the complete message, beginning to end... Anyway, sounds like many kudos to Joel Serface and his team on a solid event.

Also getting a lot of coverage was the latest Cleantech Venture Forum in Frankfurt, thanks in part to Bill Joy's declaration that "A global response to climate change will spur a bigger business revolution than the internet." A lot more detail on his remarks can be found here, and Wired's blog has their perspective as well. Speaking of the Cleantech Group, they've taken a very interesting step in backing a joint venture to launch a cleantech business park in China.

Last week in Pasadena, California, the Clean Innovation Conference 2007 took place as well -- sounds like it was yet another strong, oversubscribed cleantech event.

Sectoral updates:

Lots of talk recently about the solar market. Mark Coker writes about another new solar startup, Signet Solar -- interestingly, this one is 100% dependent upon Applied Materials' equipment, and not any proprietary technology. And solar moves one more step toward commoditization... Joel Makower has the story about Wal-Mart's recent RFP for solar on 340 store rooftops -- and their subsequent pull-back to covering only 22 locations... And here's a BusinessWeek article on the current state of play in solar... Finally, is there a Chinese solar company out there that isn't IPOing?

Carbon markets: Charles points us to an interesting climate change/ cleantech series on MarketWatch... He also has a very useful update on carbon trading markets... Meanwhile, Arno has some interesting thoughts on "carbon neutral".

Other news and notes: Cleantech investors in the news -- OVP's David Chen... Here's a nice IT pundit's take on the fundamentals behind the emergence of cleantech as an investment area... Get your VC performance benchmarks here... Peak coal???... Finally -- Bill gets it.

REBN comes to Boston

2007-05-17T09:33:00.000-04:00

Long-time readers of this site will know about the Renewable Energy Business Network (REBN), which has been bringing clean energy business professionals, investors and researchers together for informal networking sessions in the bay area...

Now REBN is coming to Boston! REBN-East will hold their very first renewables happy hour on Thursday, May 31st at Flat Top Johnny's in Kendall Square. Advanced Technology Ventures is graciously sponsoring the event, which will start at 6:30pm.

Cleantech Investing readers in the Boston area are all encouraged to attend -- looking forward to seeing everyone!

"Cleantech venture bubble" watch, part 1

2007-05-16T00:54:00.000-04:00

Thanks to some recent research and commentary by Lux and others (such as this article), the potential for a cleantech venture bubble has been getting a lot of attention.

It's always a fascinating media topic: When does an investment sector get "too hot"? So expect even more attention will be paid to this topic in the future.

Two vital facts to keep in mind (and which the general media coverage most often loses sight of, it seems):

1. There is a big difference between public market investment trends and venture capital investment trends.

Yes, for obvious reasons the two markets are often somewhat linked. But the public market is open to many more retail investors, is focused on near-term (quarter to quarter) results, and operates within the context of benchmarks like the S&P 500 (8.2% average annual returns over the past 10 years).

Whereas the venture capital market is open to a different pool of private investors, is a market of long-term (multi-year) investments, and operates within the context of high hurdle IRRs (~20% average annual returns over the past 10 years). Different returns requirements will drive different valuations.

2. There is no single "cleantech" sector. It is multiple sectors.

A solar cell looks nothing like a fuel cell which looks nothing like a desalination unit, etc. "Cleantech" as a buzzword is often criticized as being too broadly defined. That breadth also means that the technologies covered by cleantech VCs aim for different markets, compete with different incumbent approaches/ commodities, are produced in entirely different ways, etc. In other words, Cleantech (a/k/a "greentech", "environmental tech", etc.) is actually a collection of numerous separate investment sectors, under a common investment thesis around looming natural resource scarcity.

When taken together, the above two points bring out two key conclusions:

1. If one technology sector starts to see inflated values, it won't necessarily "infect" other cleantech sectors at the same time.

The Lux Research report was actually very specific on this point:

The warning signs of a bubble are appearing in the energy segment, where IPO value rose from $1.6 billion in 2005 to $4.1 billion in 2006 and venture capital raised went from $623 million to $1.5 billion, primarily on solar and biofuel deals. At the same time, the air, water, and waste segments present hidden opportunities that are relatively starved for investment.

So... There's a danger of an energy tech bubble, but other cleantech sectors... not so much. Realistically, we have to evaluate over-investments for specific subsectors than simply looking at all energy tech as a whole. Thus, the most relevant question is: Are there bubbles in solar and biofuels?

2. If multiples among publicly-traded stocks seem high, that doesn't necessarily reflect venture investments, even in the same sectors.

Anecdotally, it seems like there might be a supply/demand imbalance right now in the public equity markets, reflecting pent-up retail investor interest in high-profile sectors like corn-based ethanol and solar PV. Which is why these sectors have seen the most IPO activity.

There are good arguments to be made on both sides of the "are publicly-traded solar share prices too high" or "are publicly-traded ethanol share prices too high" questions, and this site isn't the place for such a discussion (stock-picking is not a core skillset here). But it should always be kept in mind that these investment classes are very different from the kinds of investments venture capitalists are typically evaluating.

Ethanol is a great example. Most of the publicly-traded stocks in ethanol are for companies using corn-based, well-understood processes. Whereas most of the current venture investor activity in the space (not counting "capacity" deals) is focused on finding alternatives to corn as a feedstock (such as waste-to-ethanol or cellulosic feedstocks), with breakthrough technologies. The economics, timeframes, and technical issues are completely different.

There could be a "bubble" in ethanol venture investments at the same time as a "bubble" in publicly-traded ethanol share prices. But it's not necessarily the case.

As we continue to track the bubble coverage in future posts, we'll delve into specific sectors and try to read the signs. But the above breakdown should establish some necessary context beyond the headlines, in advance of these discussions.

One last note for today's column... The Lux Research report has provided a wealth of useful data and smart analysis, and looks to be pretty valuable. One statement I would quibble with, however, was from the press release:

"...There’s no way that more than a fraction of the 930 energy start-ups operating worldwide can possibly succeed."

Define "succeed"? And define "fraction"? Venture capital is necessarily investing at a risky stage where companies will fail. That's true of all VC sectors whether they are evidencing bubbles or not. Furthermore, "success" shouldn't be defined by high-profile Google-esque exits -- only about 10-20% of all venture-backed companies IPO, for example. The majority of successful venture exits are industry trade sales as part of ongoing sectoral consolidations, at reasonable valuations.

When you consider the enormous magnitude of the energy market worldwide, and the many incumbent sectors that are ripe for creative destruction... It's not a stretch to argue that, yes, a significant share of the venture-backed portion of those startups (hopefully the VCs aren't picking a random sample from the overall pool of available investments) will grow and find successful exits in some form. And anyway, how does anyone know how many startups in a sector are too many? 930 (which I believe is a low count anyway)? 1,500? 15,000? This study claims that renewable energy will be a $200B market by 2015... There's a lot of available value to be created, somehow.

But admittedly, technically-speaking, since even 99/100 is "a fraction", the statement isn't wrong per se. It's just more hyperbole...

Tesla's $45mm and other deals

2007-05-11T08:48:00.000-04:00

Tesla Motors today announced a $45mm Series D, led by Technology Partners and Elon Musk. TP's Ira Ehrenpreis will be joining the company's board. Capricorn Investment Group also participated, as did all previous investors (including Vantage Point Venture Partners, Draper Fisher Jurvetson, JP Morgan Bay Area Equity Fund, Valor Equity Partners and Compass Venture Partners). I'm ready for my test drive anytime, Ira...

VentureWire reported today that MBA Polymers, which is developing plastics recycling facilities, has raised "at least" $20mm in financing from Benchmark Capital Europe, Doughty Hanson Technology Ventures, and existing investor AsiaWest.

Also in VWire this week: Solar concentrator play Cool Earth Solar has apparently raised a $750k seed round of convertible notes. You can read more about the company here... And LumaSense, a venture-backed effort to roll up various sensor technologies, has apparently raised between $50-100mm in debt and equity (this press release suggests that at least $25.5mm was debt) to finance their continued acquisition activity. Oak Investment Partners and Element Venture Partners provided the equity, and Comerica provided most or all of the debt.

In one of those "capacity deals" that's tough to classify as a venture investment, Shunda Holdings, a Chinese PV-silicon production company, has raised $82mm to finance expanded operations. Shunda provides silicon to Suntech. Actis provided $40mm of the financing, and local investors Jolmo and Waichun made up the rest.

Other international dealflow, as highlighted by New Energy Finance: Israeli LED startup Oree raised a $7mm Series A, of which ~$6mm was provided by Belgium's GIMV, the remainder being provided by Genesis Partners... Also in Israel, CoreFlow -- which has developed "aeromechanical" approaches to the handling and transportation of substrates (such as for solar applications) -- raised a $3.2mm round of financing led by Ofer Hi-Tech and including Dagesh FK Ltd... Finally, Australian wave energy developer Oceanlinx raised a $12mm Series A, and "may look at an IPO next."

Other news and notes: A nice overview of a recent cleantech investor "what's hot/ what's not" panel... Finally, expect high gas prices again this summer.

Catching up

2007-05-08T09:57:00.000-04:00

Deals and news from the past week or so:

Silicon production startup Solaicx announced a $27.1mm Series C. DE Shaw led, Mitsui Ventures also joined in, and existing investors Applied Ventures, Firsthand Capital Management, Big Sky Ventures, and Greenhouse Capital Partners participated as well. Jonathan Shieber at VentureWire reports that the company current has less than $5mm in revenues.

New Energy Finance reported last week that PV thin-film and project developer Optisolar had taken in $10.2mm in "venture capital funding" from Gardiner Group Capital, Richardson Ventures, and four other private investors. Gardiner Group and Richardson Ventures each holds >10% of the company after the funding. The company was also in the news regarding a 40MW project development deal in Ontario.

Two green chemistry deals to note: Marrone Organic Innovations closed a $3.75mm Series A round, led by Clean Pacific Ventures, in one of the cleantech-focused firm's first announced deals. One Earth Capital, Saffron Hill Ventures, Calvert Social Investment Fund, Wavepoint Ventures, and strategic and angel investors all also participated. Marrone develops organic alternatives to pesticides and weed management.

The second deal in the category was Segetis, which is developing bio-based plastics, adhesives and solvents. Khosla Ventures is providing $15mm in funding in three tranches, with the first $5mm in Q1 this year. Fun quote: "Vinod is like a rock star in the venture capital world" (from a gushing Minneapolis growth forum leader).

Other deals: Ethanol technology developer TMO Renewables has been taking in "pre-IPO" placements, such as the one described here... Swedish distribution transformer designer Hexaform announced they raised 30mm SEK (approximately $4.4mm) from InnovationsKapital... PEWW reported that telecom-focused backup power system manufacturer Purcell Systems has raised $7.23mm of a $10mm Series B-2, building on a $9.27mm Series B from 2005. Weston Presidio participated... VentureWire reported that hybrid drivetrain developer Hybra-Drive has raised $350k in seed and "pre-seed" financing, and is looking to raise a $10mm Series A... Finally, high-temp superconductor developer Zenergy raised a GBP 6mm PIPE (note: link opens a pdf).

Other news and notes: A good interview with Emerald's Scott MacDonald... A nice column on the challenges of being a female entrepreneur in the (very unfortunately, hopefully temporarily) male-dominated cleantech space... As we've been talking about for a while, the solar consolidation phase is getting underway... India needs more cleantech venture capital... The Lux Report really did talk about a lot more than the "bubble" media coverage would suggest to a casual reader -- here's a useful presentation of some of the data in the report (including a tally of $8.6B in cleantech IPOs and M&A last year)... NEF has some interesting news (note: site doesn't work in all browsers) on an uptick in cleantech IPO activity -- and here's one take on why one IPO didn't go so well... Some useful advice for cleantech entrepreneurs... An update on carbon market developments... Yet another take on the attractiveness of water tech... Finally, it's a better kind of "oil can": If you drink enough Foster's this summer when you throw some shrimp on the barbie, you just might power a house in Australia.

Five questions: Eric Emmons and Jay Fiske

2007-05-04T16:07:00.000-04:00

Today we are introducing a new regular feature on this site, "Five Questions", where we ask cleantech investors to share some of their perspectives firsthand. With so many different investment strategies out there in the cleantech space, readers may be interested to get a peek into the mindset of some of these leading VCs -- how they're seeing the market develop and what they're looking for...

To kick off the idea, Eric Emmons and Jay Fiske, Principals with the Massachusetts Green Energy Fund have generously offered to tell us a bit about their Bay State approach, and their perspectives on the sector in general:

1. Why don't you tell Cleantech Investing readers out there a bit about the Massachusetts Green Energy Fund.

The MGEF is a private early-stage fund started in June 2004 to invest in the renewable energy technology companies doing business in the Commonwealth. One of our biggest LPs is the Renewable Energy Trust, a state organization that promotes the development of Massachusetts’ cleantech industry.

As a smaller fund, our model is to spend time in the region’s leading labs, know all the early technologies coming out of the state’s public and private universities, and to do 2-3 good deals a year. Generally, our bite size is anywhere from $200K to $1M in the first round. We tend to lead the due diligence effort and once we’ve reached terms, we help to syndicate the deal to larger funds who might not have had the bandwidth to spend a lot of time with the company.

2. Generally speaking, what strikes you about current cleantech dealflow?

Dealflow is strong, but this is an industry in which it pays to do deep due diligence. Unlike the software, IT, and biotech sectors, cleantech and renewable energy are industries generally characterized by expensive assets that have to reliably generate a very cheap product for a very long time. Margins are usually thin in the out years. A good CEO should have a clear plan up front for achieving the requisite cost, reliability, and durability, and investors need be able to understand the key assumptions. If they are predicated upon a supply of cheap unobtainium or a dramatic shift in US consumer behavior, you have a problem.

Because these challenges are so significant, many of the more interesting opportunities actually lie outside the traditional energy profile (e.g., portable power and portable energy storage vs. large-scale energy generation)

There’s now a tailwind in cleantech coming from the public markets which was certainly not around 3 years ago when we started the fund. We generally think strong, sustainable cleantech companies are a good thing, and we hope the investment industry doesn’t take its eye off the ball re: forming companies with strong fundamentals.

3. Without getting into specifics...thinking about cleantech deals you’ve looked at closely before passing on, what made these opportunities challenging, and what lessons do you wish cleantech entrepreneurs would take away from such experiences?

As we mentioned before, we take a long hard look at the opportunities that we consider, and spend a lot of time working with the company to review the science, the customer demand, and the business model. Sometimes we end up passing on the deal because we can’t get comfortable with one of those components, but we hope that the entrepreneur benefited from the process. The best entrepreneurs will use the experience of raising capital to refine their plan and approach.

4. What was the most recent investment you made and what did you like about it?

We have recently led a Series A round in PoroGen Corporation, which is a Woburn, MA company developing polymeric membrane filters for gas and liquid separation / purification in those high temperature or corrosive environments in which conventional polymeric membranes can’t function. PoroGen’s technology pushes the envelope significantly as to where high performance membranes can be commercially used, and allows producers of several high value fuel products to replace commercial distillation and cryogenic separation processes.

What we liked about the deal was a) an expert team with 25 years of relationships in the field, b) a proprietary technology platform with a lot of market reach, and c) strategic investors willing to put in capital to accelerate the commercialization of a product they clearly want.

5. PV is attracting a lot of interest. What are you seeing in this area?

Like everyone else, we are seeing a lot of no- or low-silicon solar technologies using various band gap materials in different low-cost architectures. Generally, we think this R&D direction is exciting and that a couple of these are going to cross the $1/watt threshold.

However, before getting deep into the specific design and its benefits, we like to take a reality check and start with the estimated balance of materials and production process so as to calculate the materials and allocated capital equipment cost per square meter. That way, we have a yardstick with which to evaluate all subsequent information.

Conventional solar modules cost about ~$375/sq.meter to manufacture, and will likely reach $325 or so in the next couple of years. If the new process will cost ~$1000/sq.meter in full production, we will need to see a way to get to 3x current module efficiency (or a different addressable market.) It is all too easy to get wrapped up in the novel physics and forget that these new products will be competing against a multi-billion dollar polycrystalline industry that is steadily coming down the cost curve.

Putting cleantech VC in perspective

2007-04-30T10:29:00.000-04:00

From a study released today by Lux Research, here's a picture that's worth a thousand words...

A pdf of the press release can be found here, and there's much more to the report than the above graph. But it's always interesting to see how the scale of VC investment in cleantech, in relation to other forms of funding, stacks up against the attention VCs get in the media and elsewhere...

Arcadian's $90mm Series A

2007-04-27T16:40:00.000-04:00

"Smart grid" M2M wireless network developer Arcadian Networks announced the closing of the last tranche of their $90mm Series A round with an additional $30mm from Goldman Sachs. Other participants in the full round included Gilo Ventures and Clal Industries and Investments. For those with VentureWire subs, Jon Shieber had a nice write-up about the deal today, where he points out that Goldman Sachs has been doing a lot of smart grid investing lately.

In other news today, Michigan's non-profit group NextEnergy announced a mutual sourcing and support relationship with Nth Power. As part of the agreement, each group is pledging to send dealflow to each other, and NextEnergy will be helping any Michigan-based Nth Power portfolio companies to access in-state financial resources and business relationships. It's an interesting announcement, and shows one investment firm's answer to the challenges of coastal VCs interacting with more geographically-distributed clean technology startups. There are good clean technology solutions to be found all over...

Lamina Ceramics, Power Efficiency Corp, eMeter, Gordon Murray Design, LanzaTech

2007-04-26T21:35:00.000-04:00

LED "light engine" developer Lamina Ceramics announced a $7mm round of financing, led by Easton Capital, and including existing investors Morgenthaler Ventures, Granite Global Ventures, RedShift Ventures, and CID Equity Capital. The solid state lighting industry has seen increased interest lately thanks in part to recent regional efforts to ban incandescent bulbs -- here's a good example... Lamina's focus is on bringing LED lights to market with sufficient brightness to replace incandescent bulbs for general illumination.

Power Efficiency Corp., which offers "cruise control"-type energy efficiency solutions for electric motors, raised a $4.2mm PIPE. Individuals, insiders and hedge fund Marathon Resource Investments provided the funding.

AMR software vendor eMeter announced a Series C financing, led by Foundation Capital. The amount of the round wasn't disclosed, but PE Week Wire reported it earlier this week as $11.79mm.

Gordon Murray Design Ltd. raised a $10mm+ Series A from Mohr Davidow and the Caparo Group. Matt Marshall has the scoop on what the venture is all about...

Speaking of scoops, Tyler Hamilton has had cleantech bloggers abuzz with the news that A123 appears to have purchased hybrid-retrofitter Hymotion. It will be interesting to see how the roll-ups in the alternative vehicle value chain happen over the next few years...

LanzaTech, which is pursuing a bacteria-based approach to the conversion of waste flue-gas carbon monoxide into ethanol, raised a $3.5mm Series A led by Khosla Ventures. Since the bacteria can process CO, syngas is also a potential feedstock. LanzaTech is based in New Zealand, and two local investors also joined the funding.

Useful sectoral updates: Progress on plug-in hybrids... A good summary of the potential for wave energy and the challenges for venture investors... The latest update on nanotech's potential regulatory and market challenges... And a good report from a recent MITCNC panel on energy storage.

Other news and notes: Check out the upcoming California Clean Innovation 2007 conference, coming up next month in Pasadena... Here's a great summary by Joel on some recent polling on Americans' attitudes toward environmental issues... The Cleantech Group continues to expand, opening up an office in London... Finally -- Amen, brother.

Q1 2007 numbers

2007-04-26T16:05:00.000-04:00

Over the past week or so, many of the various groups who track venture capital investments put out their Q1 numbers. Below is a brief re-cap, for those interested. (For those interested in a discussion of the differences in the various approaches, see this previous posting)

As previously noted, the Cleantech Venture Network announced this week that Q1 totals for cleantech investing were $903mm across both North America and Europe, representing a 16.5% increase versus Q4 numbers and a whopping 42% increase on Q1 2006. In both regions, energy generation technologies were the largest category, with a little more than half of all capital going into that segment of the market.

Eric Wesoff's Venture Power newsletter reported $760mm of clean energy venture capital in Q1. Eric's always-insightful commentary notes that: "Q1 looked a bit like last year -- with a mix of investment sectors and a disproportionately high biofuel figure skewed by a few very large deals... [three of the deals] account for nearly half of the total. It is arguable that these deals don't qualify as VC investments despite the fact that they have VC investors -- they look more like project finance." Eric also notes that Venture Power has "joined forces" with Greentech Media, so "look for big changes in the coming weeks."

As provided by Dan Primack at PE Hub, the Moneytree (PWC/ NVCA/ Thomson Financial) survey for Q1 was also released. In the Industrial/Energy category they counted slightly more than $500mm of venture capital financings, a 20% increase on Q4, and a 75% increase on Q1 2006. This would make the category the fifth biggest category tracked, behind biotech, software, medical devices, and telecom. Across 44 tracked deals, the average deal size was higher than $11mm, which is an interesting contrast with the category's $6.2mm average deal size for 2005. 44 deals, however, is less than Q4's 50, and not that much higher than Q1 2006's 39. One useful feature of the Moneytree data is that they also track "first-sequence" financings (the first institutional investor money into a company). Among these first-time financings, Industrial/Energy was actually the third biggest category, at $176mm -- 13% higher than Q4 totals, but 145% higher than Q1 2006 totals. Intriguingly, the average deal size for these 19 earlier rounds was also quite high, at $9.3mm, versus 2005's average of $5.6mm. This suggests that while capacity deals may be inflating the sectoral totals as Eric descrbes, there may also be some significant additional rise in valuations...

E&Y and VentureOne also put out their quarterly survey results. Unfortunately for them, most cleantech still appears to be categorized as "Other" in their survey (really? still?). So we'll just leave it at noting that Q1 "Other" total investments were the highest for any quarter they've tracked since beginning in 2001. How much of that is cleantech is impossible to say... This press release seems to suggest that about 64% of the category total was in 10 "alternative energy" and 8 "environmental technology" deals. [4/26 update: Note additional info on this survey appended below]

We previously noted NEF's numbers here. They counted $2.2B total private equity financings into clean energy worldwide in Q1. That's 58% above Q1 2006 totals and 60% higher than Q4 2006. Helpfully, they note that the big totals were driven in large part by three major transactions: Silicium de Provence ($394mm) and Solyndra ($79mm) in solar, and Imperium Renewables ($113mm) in biofuels. Differentiating between VC and private equity, "early stage venture capital" was tracked at $303mm (23% higher than Q1 2006), with Series A and seed tracked at $80mm -- "almost double" Q1 2006, but around half of Q4 2006's $159mm. Interestingly, PIPEs grew sharply, at $446mm, about triple from a year ago. Also a little bit of a dampening in the IPO market, with $899mm raised in initial offerings.

[4/26 update: Received a very fast reply from Michelle Jeffers at Dow Jones VentureOne who reminded me that they do indeed break out cleantech venture capital in a separate set of reported numbers. In fact they are attempting to address the overlapping nature of clean technologies and other technologies via their methodology, something we've written about before on this site. So I wanted to post Michelle's email, since I hadn't done justice to the Dow Jones approach in the original column:

Hi Rob

Saw your post regarding our quarterly data.

I thought your parenthetical comments indicated that perhaps you thought we were not taking Cleantech investing seriously.

In fact we are extremely serious about our methodology and the recognition of the importance of cleantech investing and release an entirely separate report on cleantech investing with Ernst & Young on a regular basis, in addition to this quarterly data.

This quarterly report breaks down the rounds (and companies) into very specific single industries – in fact into approximately 140 different industry sub-segments, and from there even into even more subcodes. The companies we identified and made mention of in the press release in the cleantech field were in our Energy or Environmental segments, which, because they do not meet the exact criteria we set for IT, Business, Consumer and Retail products and services, or Healthcare, are considered an OTHER category. Of course, there are always judgments that must be made for the appropriate sorting when dealing with the volume of financings that we track.

That is why I want you to know that when we release our Cleantech data, we look at all companies throughout every industry from IT to Healthcare to Products and Services for aspects of cleantech in their business. I think you’ll find if you look at all our data releases that we take a very thoughtful and careful look at each venture-backed business—and we research them with direct primary contact with the companies themselves, to verify their financings and their business descriptions—before determining how they should be categorized, in our effort to provide the most accurate tracking of the venture capital industry.

... Thanks to Michelle for a very helpful and thoughtful reply. To see an example of the reporting she is referring to, see this write-up of their 2006 totals. rd]

Cleantech investors and carbon and RECs (pt 3)

2007-04-20T15:52:00.000-04:00

It's been more than a week since the second installment on this topic (and you can find the first installment here), but if anything, it's an even more relevant topic after a week's worth of news developments. After all, as Kevin, a "serial entrepreneur", says in this WaPo column, "The venture capital community's appetite for green-tech deals has skyrocketed since the Supreme Court ruling."

Given the emerging momentum behind carbon and REC markets, and if it's true that carbon credit markets are particularly well-poised for significant growth in the US, what are investors doing about it?

Some are, naturally, investing directly into carbon sequestration-related technologies and startups like Kevin's. And not just into the sequestration technologies, but some investors are also investing directly into some of the financial service companies (see Sterling Planet's March funding announcement) that are looking to take advantage of the development of trading markets for RECs and credits.

Other cleantech investors are figuring out how their portfolio companies can position themselves to capitalize on these markets when they become more developed. In some cases, the venture firms are looking to partner with the financial traders who will eventually be active in these commodity markets, once they reach a viable point. One good example from last year is EnerTech's strategic partnership with Cantor Fitzgerald (note: link opens pdf).

Finally, cleantech investors are drawing their own judgments about how the shifting landscape in carbon credit and REC markets will impact the sectors they are interested in. At a high level, the emergence of a strong REC market favors electricity generation technologies, since that is the primary focus of renewable portfolio standards. On the other hand, the emergence of carbon emissions reductions credits may favor energy efficiency technologies, since the reductions are easier to quantify, monitor and verify than any reductions associated with "green" generation projects that may or may not be cannibalizing "brown" generation capacity.

The short answer is that both markets are developing, as we've discussed. But in the long run each investor's view of the strength of the eventual market for each type of financial product may color their perspectives on the technology sectors that will be looking to those markets as an additional source of value.

Either way, the inevitable emergence of carbon credit and REC markets is a major factor that all cleantech investors are focusing heavily on these days.

Deals announced this week:

Semprius, a North Carolina-based semiconductor manufacturing process startup, raised $4.1mm in venture financing from Intersouth Partners and Arch Venture Partners. The company's printing approach to semico manufacturing has potential applications in other similar types of devices, such as solar cells.

Superprotonic, a developer of solid acid fuel cells, closed the first tranche of a $16.2mm Series B round. The round was led by US Venture Partners, and included Dow Venture Capital and existing investors CMEA Ventures, Nth Power, Hydro Technology Ventures, Battelle Ventures, Innovation Valley Partners and OnPoint.

VentureWire also reported that solar test and measurement equipment vendor Solmetric raised a $250k angel round. Such equipment may be increasingly in demand with the implementation of performance-based (versus capacity-based) governmental incentives for solar.

Cleantech investors in the news:

The Cleantech Venture Network announced this week that Q1 totals for cleantech investing were $903mm across both North America and Europe, representing a 16.5% increase versus Q4 numbers and a whopping 42% increase on Q1 2006. In both regions, energy generation technologies were the largest category, with a little more than half of all capital going into that segment of the market. Other coverage this week suggested that European cleantech investments are falling behind U.S. activity. We'll dive more into the numbers next week...

The Keiretsu Forum, a well-known angel investor group, announced the formation of a Cleantech Investment Committee. Early stage angel investors can be a critical resource for new cleantech startups.

Kleiner's Randy Komisar is predicting billion dollar cleantech IPOs soon. One of the first may be Imperium Renewables, which Venture Wire today reported is gearing up for a ~$1B public offering.

A couple of smart cleantech investors with some cautionary words about the challenges to investing in the sector and the dangers of the "fad of the month" (er, carbon?), in this article.

Other news and notes: For those following the "smart grid" market and its implications for cleantech, the news of IBM's new coalition effort around the technology was another strong validation point... And GM may be taking the old "think locally, act globally" saying to a new level.

Smart energy gets a comp: Comverge IPO

2007-04-13T11:52:00.000-04:00

For those (like yours truly) who find "Smart Energy" (IT-enabled energy efficiency and demand automation) technologies to be a compelling investment space, it will be very interesting to watch today's IPO by Comverge.

So far, so good -- trading in the early hours is above the $18/share pricing, which itself was a revision upward from earlier guidance. Apparently not everyone is convinced... But even if the price doesn't hold up over time, the exit is still a good validation for the entire smart energy space.

Cleantech with your latte

2007-04-11T15:55:00.000-04:00

- Thanks to Kristian Hanelt for scanning in his mid-morning Starbucks receptacle...

Cleantech investors and carbon and RECs (pt 2)

2007-04-11T02:14:00.000-04:00

In the last post, we described the differences between carbon offsets and RECs: How the former are financial instruments based upon physical commodities, and the latter are more of a bundled concept.

But what impacts do these differences have in the burgeoning markets for these somewhat competitive products?

Regulations and restrictions (whether governmental or self-imposed) are having a significant impact on the early evolution of the markets for carbon offsets and RECs.

In Europe, where they are operating under the requirements of the Kyoto Protocol and other climate change-focused mandates, an EU Emissions Trading Scheme has been implemented. This is essentially a region-wide "cap and trade" carbon emissions scheme, with specific requirements as to what kinds of emissions credits can be traded, and with limits as to the total amount of region-wide emissions. Thus, in the EU carbon emissions rights are a scarce commodity. As Charles Morand at AltEnergyStocks has described in this very helpful column, the EU ETS market was estimated to be about $27B in 2007.

In the U.S. the major mandates made to date are on utilities, and are geared around "green energy" generation requirements. Most states are adopting Renewable Portfolio Standards (RPS) which require local utilities to source up to 25% of the electricity they sell from renewable sources by certain dates ("20 by '20" appears to be a popular political phrase in state legislatures right now). As utilities scramble to find those sources, the market for RECs has taken off.

In terms of carbon markets, on the other hand, the U.S. still remains at a very early stage of development. The Chicago Climate Exchange has been making headway, and efforts like the Regional Greenhouse Gas Initiative (RGGI) are starting to come together. But in the absence of commonly-acknowledged definitions of acceptable carbon emissions reductions projects, not to mention the absence of a national limit on carbon emissions, offset credits are not a scarce commodity. Thus, the price remains significantly lower for a ton-reduction of carbon emissions in the U.S. versus much the same ton-reduction in the EU ETS. That seems strange, given the fact that carbon is a global pollutant, but as the experts at last week's NEEIC event pointed out, it's not really an apples-to-apples asset comparison, since there are different standards/ definitions/ certifications/ etc.

So does this mean that in the US investors should pay more attention to RECs, while in the EU they should pay more attention to carbon emissions credits? There are several reasons to believe that the long-term end point for both regions is a vibrant carbon emissions credits market and a less trafficked market for RECs.

First of all, RECs are subject to a lot more subjective definitions than are carbon emissions credits. Granted, right now definitions vary widely for both. But in the end, a ton of carbon is a ton of carbon -- it's a physically-defined commodity. Whereas RECs bundle together a lot of other factors. Therefore it will be harder for large-scale stakeholder negotiations to arrive at commonly held definitions of RECs (say, at a national level) than for carbon. While regional carbon emissions trading schemes are coming together even in the US, RECs remain a state-by-state defined market, dependent upon the specifics of each state's RPS definitions. For example, in some markets waste coal is counted as a legitimate source of RECs, whereas for other states that's not allowed. Such fragmented markets stymie efforts to create a large, liquid market. Europe helps prove this point -- there are national RPS schemes there and a variety of REC markets that all pale in comparison to the EU ETS.

Secondly, carbon emissions are easier to offset (yes, an offset of an offset) against all existing forms of electricity generation. Heat rate, utilization and fuel mix are all well-understood factors by energy traders, and when a viable consistent financial product which can be geographically arbitraged against transmission-constrained generation assets is available to these traders, they will jump on such assets and drive up the liquidity in such markets. It's tougher to think about such traders being able to trade off a solar REC against utilization of a coal-fired plant. Liquid fuels markets are also easier to integrate into a carbon market than a REC market, further lending potential liquidity to a future carbon market. And the thing about financial markets is that liquidity drives even more liquidity, due to positive network externalities.

Thirdly, given all the emphasis now being put on climate change at a federal level, it's becoming more likely that industry will soon have to operate under some form of cap-and-trade scheme or other limitations on carbon emissions, whether it's a national mandate, a region-level mandate, or even voluntary schemes within certain industries. As these limitations gain more teeth, carbon emissions will become a scarce commodity in the U.S. as it has been in Europe.

Finally, RECs have a hard time dealing with energy efficiency "sources" of carbon emissions reductions. So-called "white tags" have been established in some RPS systems that would allow for a separate set of products for negawatts via energy efficiency projects, but it's tough to gel these different green tags and white tags, etc., into a single viable market (is there going to be an exchange rate for green tags versus white tags?). But again, a ton of carbon emissions reduction is a ton of carbon emissions reduction. And energy efficiency is perhaps the most feasible form of carbon emissions reductions, so it can't be an ignored factor.

So it would appear that, given the increasing concerns about climate change and the resulting political pressures, we can start to plan for a long-term market for carbon emissions credits that will grow more quickly than the market for RECs. Maybe. Of course, this is all based on assumptions that might change -- a national RPS with federal-level definitions for RECs, for example, could change a lot of the analysis from above. But you can see why investors are paying close attention to the development of the carbon market in particular, even if RPS schemes and other incentives have driven adoption of green generation technologies to date.

In the next post, we'll see what all this means for investors.

Also in the news:

More information on the Solyndra financing first scooped by New Energy Finance.

VentureWire reported that hybrid vehicle manufacturer Aptera has raised "under $20mm" in a new round of financing from Idealab and an undisclosed angel investor. Nifty-looking car, expected to be available sometime in 2008...

Other news and notes: Interesting thoughts from Paul Holland of Foundation Capital... Interesting thoughts from David Hochschild on the solar market... And interesting thoughts from Xzibit and the Governator... Finally, a Fortune article on the "green bubble".

Cleantech investors and carbon and RECs (pt 1)

2007-04-06T10:09:00.000-04:00

Investors and entrepreneurs have been having a lot of conversations lately about the carbon offset and green tag markets and where they're headed. For example, last week NEEIC organized a very well-organized event at Foley Hoag's Waltham office with several expert speakers, who addressed a room full of investors about the general topic. It seems like most cleantech investors are trying to get smart on what exactly carbon credits and RECs are, and what they could mean for their investments. This week's supreme court ruling on the subject (note: pdf) just added further fuel to the fire (so to speak)...

To start with -- what are carbon credits, and what are RECs, and why are they different? It's a confusing issue right now. You can get some useful descriptions here, but let's break it down into the differences from an investor's perspective:

Carbon credits ("offsets") are a representation of a physical commodity (albeit in this case a "negative" one). If you own a 1 ton carbon emissions reduction credit, you literally own that physical attribute -- one ton of avoided emissions of carbon into the air. In this way, they're similar to NOx, SOx and other pollution emissions credits. Or like selling a ton of corn or metals or any other physical commodity. Now, measuring and verifying an absence of a physical commodity like atmospheric carbon emissions is tougher than measuring a ton of corn or metal, but the principle remains the same.

Renewable Energy Certificates ("RECs" or "Green Tags") are a representation that the electricity you are using came from green power. That's a very different proposition -- essentially, the REC is a way of branding the electricity. Indeed, in most cases the kwh you actually consume came from a blended mix of fossil fuel-based and renewable sources (mostly the former), so buying a REC is a way of paying extra money that then gets transferred back to the renewable generators in particular (and through other hands along the way...). It's not a physical commodity you're buying. You're buying a label that shows your money went toward something you want to encourage.

It may seem like an esoteric difference, but one way to think about it is this: Carbon credits are related only to climate change; RECs bundle in a lot of other issues as well, such as local air pollution, energy independence, etc. The various differences (physical commodity versus labeling, and climate change-focused versus broadly conceptual) are important for investors, as we'll discuss in the next post on this topic. (Part Two) (Part Three)

In other news this week:

We've talked before about the rise of online green media. This week came announcements of two more fundings in the space: PE Week Wire reported that SustainableCircles (d/b/a SustainLane) raised a $3.5mm Series B. Also announced this week was that PointOV (d/b/a EthicalSuperstore.com, which aims to be the "ethical Amazon") raised 800k GBP -- 500k GBP from the NorthStar Equity Investors, and 300k GBP from angels. NSEI had previously backed the company with a 200k GBP investment in June, 2006. PointOV reports that they now have a 1mm GBP annualized gross revenue rate.

Jon Shieber at VentureWire reported earlier this week that Biodiesel Technologies has raised "under $5 million in an institutional round of funding." Adirondack Venture Fund and Roberts Mitani LLC provided the financing, and the company expects to raise a larger round later this year. The company estimates their modular approach could provide 4mgpy biodiesel plants at a cost of $1.25mm per plant (full production costs were not provided).

In a bit of corporate restructuring, publicly-traded cleantech investor GreenShift is merging with GS (for "GreenShift") Cleantech Corp. and GS Carbon Corp.

SJF Ventures (f/k/a Sustainable Jobs Fund) announced successful fundraising, with $28mm of new capital, about half of which is to be devoted to cleantech investments. Interesting quote from David Kirkpatrick on the topic of rising cleantech startup valuations: "That's why I'm glad we're not cleantech only."

In other news of cleantech investors, here are some nice profiles of several leading investors in the space -- although I've never seen Tucker with "lab coat in hand!" Someone should explain to the reporter that the semi-mandatory, unofficial VC uniform is grey slacks, blue shirt, blue jacket... Other "people" news: Wilson Sonsini is expanding their cleantech practice... And Steven Turner has joined Ventures West with a specific focus on cleantech.

Other news and notes: Upcoming conferences to take note of -- Cleantech Forum XIII in Frankfurt, Germany... and the Clean Energy Venture Summit in Austin, TX... Congrats to the Kellogg MBA team in the recent Sustainable Venture Capital Investment Competition... And finally, the quote of the week: Rex Tillerson, CEO of Exxon Mobil, on the subject of biofuels: "I don't know much about farming, I'm not an expert on biofuels and there's not a lot of technology I can add to moonshine."

Akermin, Thin Battery, United Villages

2007-04-02T20:32:00.000-04:00

Only a few announced new deals over the past week:

Enzyme-based fuel cell developer Akermin raised $3.5mm in funding (VentureWire indicates that it was the second tranche of a Series A) to add to a $3mm round from 2005. The company's alcohol-based system has been proven out at a lab level. Someday you might recharge your laptop's fuel cell power supply at the airport bar... Investors in the round included Chrysalix, OnPoint (see more on them below), Prolog Ventures, and the St. Louis Arch Angels.

The appropriately-named Thin Battery, which is developing ultrathin carbon zinc batteries, raised a $6.2mm round of financing. SunBridge Partners led the round, which also included Early Stage Partners, Key Capital, Orix Capital, and individual investors. Powering RFID tags and medical devices are the first targeted applications for the company's technology, which can use "traditional printing equipment". The company, which was spun out of Eveready in 2002, has raised "nearly $8mm."

Here's a neat marriage of solar power and IT: United Villages is using wifi-enabled buses (or motorcycles, or even a donkey, according to AlarmClock) to drive through rural areas, downloading and delivering emails to and from solar-powered computer kiosks that have been installed in isolated villages (residents pay per use of the kiosk). Omidyar Network, Cambridge Light & Power, and Gray Matters Capital Foundation provided $2mm in Series A financing for the endeavor.

Cleantech investors in the news:

Emerald Technology Ventures announced a final close on their 135mm euro cleantech-focused venture fund. LPs in this latest fund included Caisse de dépôt et placement du Québec, GIMV of Belgium, Rabobank of The Netherlands, Axpo Holding of Switzerland, Springbridge Limited (Advised by Consensus Business Group) of UK, Credit Suisse of Switzerland, Deere & Co., DSM Venturing of The Netherlands, Dow Chemical Co., KPC Energy Ventures, Inc. of Kuwait, Piper Jaffray Private Capital, Suncor Energy Inc. (Canada), Unilever Technology Ventures Advisory Company LLC, and Volvo Technology Transfer AB of Sweden. Emerald has already made two investments out of the fund, in Identec Solutions AG and Vaperma.

It may be impossible to find a conference these days that Vinod Khosla isn't keynoting, but you have to admit he's putting his (firm's) money where his mouth is. Here's a helpful list of his 26 portfolio investments thus far. It's especially interesting to note the internal distinction made between "sugar/corn fuels", "cellulosic", and "future fuels."

A new venture group, Physic Ventures, is being formed, according to VentureWire. And as part of the new group's functions, it will be taking in the venture investment efforts of Unilever Technology Ventures, which has been investing in clean technology startups (in addition to other categories) such as Pionetics and Kreido Biofuels.

Regular readers of this site will have noticed how active OnPoint Technologies has been in the energy technology space recently. So it's interesting to note the top column on this PE Week Wire from Tuesday...

Major i-banks haven't just taken notice of the cleantech revolution -- they're actively putting money at play. Here's a good column on Goldman Sach's efforts. And here's Morgan Stanley getting in on the action (tip of the hat to Sahir Surmeli of Mintz Levin for the heads up on that one). Speaking of Goldman Sachs, they've already had their first cleantech exit -- and it was a very successful one ($2mm per MW of installed capacity, $100k per MW of projects in the development pipeline).

A new nanotech-focused firm, NanoDimension, closed on a $60mm first fund. Nanotech, as we've discussed before, has a lot of potential cleantech-related applications.

"Venture capitalists will destroy value in alternative energy"... Oh, but "venture capital is behind a lot of the innovation happening in alternative energy." More hyperbole from mass media coverage of cleantech investing...

Other news and notes: More good analysis of the challenges of water tech investing... More and more students looking to get into cleantech (which probably explains why readership of this site is pretty high these days) -- so check out this column, which is still pretty relevant... Finally, here's a good cleantech April Fool's Day joke.

NEF's Q1 global cleantech private equity numbers

2007-04-02T12:20:00.000-04:00

Interesting numbers released today from NEF, who track dealflow alongside other efforts we've discussed here before (Cleantech Venture Network, Nth Power, etc.):

$2.2B total private equity financings into clean energy worldwide in Q1. That's 58% above Q1 2006 totals and 60% higher than Q4 2006.
Helpfully, they note that the big totals were driven in large part by three major transactions: Silicium de Provence ($394mm) and Solyndra ($79mm) in solar, and Imperium Renewables ($113mm) in biofuels.
Differentiating between VC and private equity, "early stage venture capital" was tracked at $303mm (23% higher than Q1 2006), with Series A and seed tracked at $80mm -- "almost double" Q1 2006, but around half of Q4 2006's $159mm.
Interestingly, PIPEs grew sharply, at $446mm, about triple from a year ago.
Also a little bit of a dampening in the IPO market, with $899mm raised in initial offerings.

Lots more info found here (note: opens a pdf).

The week that was

2007-03-25T21:55:00.000-04:00

Tough week for posting this past week -- here's the overdue catch-up:

PE Hub is reporting that Advanced Electron Beams (AEB) has raised a $17.5mm Series B, led by RockPort Capital, and including existing investors Atlas Ventures and General Catalyst. This follows a $10mm Series A in 2005. The company's technology has applications in sterilization, polymer treatment, and pollution (VOCs) abatement.

Smart-grid technology developer Serveron announced a $5mm inside round of financing. The company's investors include El Dorado Investment Company, Nth Power LLC, Cascadia Pacific Management, Oregon Life Sciences LLC, Perseus 2000 Expansion LLC, Siemens Venture Capital and Ventures West Management LLC.

inge AG, a Bavarian ultrafiltration technology developer with applications in water treatment, raised a 6mm euro round of financing. Stonefund NV and Dutch Entrepreneurs Fund BV were new investors that came in as part of the round, and existing investors Siemens Venture Capital, Emerald Technology Ventures, SPG Private Investments Ltd., and Taprogge Watertech GmbH also participated.

Siemens Venture Capital also announced an investment in energy monitoring company Prenova, with a $3mm round of financing. The company's systems predict failures in energy-related assets.

The Brazilian Renewable Energy Company, or BRENCO, raised a $200mm financing via placement of common shares. The company will be developing sugarcane-based ethanol production facilities. According to Goldman Sachs, Vinod Khosla, Steve Case, Ron Burkle, James Wolfensohn, and Steven Bing were all investors in the placement. While $200mm was raised in this placement, "$2 billion is the target."

General Compression, which is developing compressed air energy storage systems for wind power turbines, raised an initial financing of "over $5mm." The company plans to announce technology development milestones over the next several months.

More on water technology and venture capital: Here's a good RH article on the subject, and a related column by Tyler.

Other news and notes: An interesting column on how the growth of cleantech venture investing has led to a big uptake in related IP legal work... More momentum building behind climate-related policy shifts... An article on the role of business plan competitions and cleantech startups... B-school student readers take note: Lightspeed's Summer Startup Grants... Are gas prices going to be even higher this summer than in recent years?... The latest on the hydrogen highway -- 2025 target for fuel cell cars -- in the meantime, VCs are backing electric vehicles... Finally, Tim Draper on cleantech, and Tim Draper on The Riskmaster.

MIT Energy 2.0 and other updates

2007-03-14T20:49:00.000-04:00

Had the pleasure of attending the MIT Energy 2.0 conference this past weekend, which was really a sign of the times -- a rough count appeared to be 500 people in the room on the main day, which was officially sold out, and rumors were that the previous night's open poster session had brought in 700 participants.

Jeff Immelt, the CEO of GE, gave a compelling keynote in which he described GE's rationale for getting into cleantech, and some of their strategies for targeting the market. Good coverage of his speech here and here. Notably, Immelt wrapped up his talk by making a plea for students at MIT and elsewhere to join GE: "Entrepreneurship and venture capital may be fun, but we see how the story ends. Come with me, and you'll have a front row seat to history."

It was a very good conference, but one hopes that next year's will provide panels with more depth, or even separate "tracks" for research, policy and business -- it's too tough to cover all three disciplines across a broad market category such as biofuels or solar with four or more panelists in just one hour. But it's easy to play Monday morning quarterback even on a terrific event like this one -- many kudos to the organizers.

The New England Energy Innovation Collaborative (NEEIC) took the opportunity to announce the winner of their first annual $150k Business Creation Competition -- StarSolar Corp., which is developing technology for the enhancement of solar panel efficiencies, won the prize and the funding from sponsors General Catalyst, ATV and Atlas Ventures. NEEIC is ramping up their efforts and is building a strong network of cleantech investors and startups in the region.

Other cleantech venture financings this week:

LS9, which is developing advanced biofuels production technologies, announced a $5mm Series A by Flagship Ventures and Khosla Ventures. Jim Fraser speculates that the company is working on biobutanol or a competitive fuel, but the company website only describes the targets as "proprietary biofuels".

Solar installer Akeena Solar raised a $4.1mm PIPE with participation by the Westly Group. Speaking of Steve Westly, here's a nice update since we last discussed the formation of the Westly Group.

A few deals scooped by VentureWire over the past few days: Microwind developer Mariah Power raised a $750k seed round from Sierra Angels and the Keiretsu Forum -- Neal Dikeman recently spoke with the CEO... AgraQuest, which is developing bio-based pesticides, raised an $8mm insider round... and NextDiesel raised a $9mm Series A to help build their first B100 production facility.

Backup power storage device Gaia Power Technologies announced the close of a first tranche of a $2.9mm Series B, led by GHO Ventures and the NJTC. The company has raised over $5mm (including the full Series B) for their battery-based energy management system.

Other news and notes: Future Energy, which gives a good overview of the ongoing transformation of the energy industry, is an interesting read -- especially for any readers who are looking for publicly-traded investment opportunities, since there's a very helpful list of them in the book... A nice picture of Andrew Beebe and some of EI's solar concentrators... Maurice Gunderson wants you to suppress your inner lemming... Clean technologies may not be completely dependent upon favorable governmental policies for success -- but the first country-level legally-binding CO2 emissions targets could be a sign of big shifts to come, with positive implications for cleantech investors... Less positive news overall (but still favorable for cleantech investors) are indications that energy prices will continue to rise... An interesting account of GM's recent battery-related announcements... Finally, somebody pointed me to Ecorazzi recently -- for those who want to combine a passion for cleantech with the guilty pleasures of the checkout line tabloid genre.

Cleantech investing this week -- CleanEdge/ Nth Power survey

2007-03-09T09:52:00.000-05:00

Extremely pleased to share this announcement (self-promotion alert): Waste-to-ethanol producer Earthanol has announced a $7.1mm Series A round, including a total commitment of $2mm from @Ventures alongside other investors Nth Power, Sail Venture Partners, and Calvert Funds. The company focuses on technologies for the production of ethanol from alternative feedstocks to corn.

Algal biotech developer Solazyme has raised an $8mm+ Series B, plus $2mm of debt, according to VentureWire. The Roda Group led the financing, and Harris & Harris contributed $500k of the round (with other undisclosed investors also involved). The company's technologies have applications in biofuels and other areas.

CIGS PV developer SoloPower was revealed by VentureWire on Monday (here's a good article from News.com as well) to have raised a $10mm round of financing from Crosslink Capital, Firsthand Capital Management and individual investors. According to the very informative VWire column, the company's differentiated approach is to use electroplating of the thin film layers rather than sputtering. The company also claims that NREL testing has demonstrated an efficiency of greater than 10%...

Atraverda, a Wales-based developer of biopolar lead acid batteries using advanced ceramics, raised a $12mm Series A round of financing (note: pdf), with participation by EnerTech Capital, OnPoint, Sagentia Group, Scottish Equity Partners and Wales Fund Managers. The Energy Blog did a very good job of explaining the company's technology in this column from a while back. [3/25 update: Fixed the previous error in spelling of the company's name, apologies]

AES has made a $3mm "strategic" purchase of Altairnano stock. Altairnano is a developer of lithium battery technology -- Inside Greentech has good coverage.

Jonathan Shieber of VentureWire has been on a roll lately -- this time the scoop is that Khosla Ventures has made another stealth biofuels investment, into Gevo... Shieber suggests that the company's approach is possibly related to the microbes termites utilize to break down cellulose. There's also more information in the column about another recent Khosla Ventures investment, LS9...

CleanEdge and Nth Power released their 2007 survey of clean energy markets and venture investments this week. The market survey tallies clean energy markets in 2006 at $55B, and they forecast growth to $227B by 2016. The big three three techs (wind, biofuels, and solar) are all sized at $15-20B, with CAGRs of 13-16% over the period in question. Fuel cells and hydrogen techs are expected to grow more quickly, but off of a smaller base ($1.4B in 2006, "primarily for research contracts and demonstration and test units), reaching $15B in ten years. Good coverage and discussion of the report can be found here, here and here.

Interestingly, for those tracking the numbers, Nth Power's tally of energy tech investments in 2006 showed more than a doubling from the previous year, up to nearly $2.5B for year. That represented, by their total, almost 10% of total venture investments across all sectors (and note that it doesn't include non-energy clean technologies). They counted ~$800mm into biofuels, and almost $500mm into "energy intelligence" (ie: efficiency techs), along with $264mm into solar. There's also some fascinating details about the data, and the following section should be especially highlighted (apologies for it being so long, but it was all worth noting), which go directly to some of the issues we've talked about before on this site (and which Rodrigo and I have discussed before, so thanks and kudos, R!):

Although the number of companies that received VC investments grew from 84 to 140, the average deal size in 2006 took a more dramatic leap, to $17 million, up from $11 million a year earlier. The 2006 average was slightly higher than the 2000 record of $16.8 million per deal.

Should investors be concerned about an energy-tech bubble? Probably not. Aside from a few known deals where valuation was played to the company’s advantage or where some near-term liquidity could be reasonably expected, it appears that investors in the energy-tech category remained realistic about valuations. Our venture data shows that the median deal size grew only slightly from $6.5 million in 2005 to $8 million per deal in 2006. This is consistent with recent data from the overall venture capital markets showing that later-stage deals are showing some valuation inflation, but that early-stage deal valuations have remained flat.

Probably the most curious trend in 2006 was the willingness of early-stage investors to write checks to fund the build-out of ethanol, biodiesel and solar production. While some of these deals had elements of technology development, most were pure infrastructure. Investors poured more than $1 billion into steel, cable, and concrete rather than into intellectual property.

The implication may be that returns for all but the earliest of investors in some of these deals (particularly biofuels) are not likely to be in line with typical early-stage venture investing. Large capital raises typically leave companies with high post-investment valuations that, in theory, come with a lower exit-value expectation, albeit with accompanying lower risk. This kind of risk/reward scenario is appropriate for some investors, but typically not venture capital.

So in other words, a lot of the massive influx of investment dollars has gone to a few late-stage infrastructure-funding deals. I would add that Rodrigo has elsewhere described these infrastructure-related financings as "capacity deals", which seems like a useful phrase (which we will henceforth steal, thanks much), and that it's instructive to note that often these deals include many non-venture players (ie: hedge funds, etc.).

In another interesting survey, Jefferies released the results of a questionnaire given to participants in the recent Cleantech Venture Forum. Unsurprisingly, the participants held bullish views about the overall prospects of sectoral growth. Surprisingly, 40% of the participants indicated that they expect solar to be the biggest contributor of global renewable energy supplies by 2020. It's a fascinating result, but a bit hard to believe, given that solar is currently about .039% of global energy supplies, wind is .064%, and hydro is 2.2% (2004 numbers, from this source pdf). According to one Jefferies team member, this would require solar to grow at a 30%+ CAGR over the entirety of the next 13 years. Note the CleanEdge data from above... Seems a bit optimistic. But these are optimistic times.

Cleantech investors in the news: James Kim has joined CMEA Ventures as they expand their energy and materials efforts... The Cleantech Group (d/b/a the Cleantech Venture Network) is launching another new service, an executive search offering, to be led by Ray Fortney. Another strong move by the Group to expand their capabilities and build on their cleantech sectoral expertise (you may be reading this column on their website, e.g.).

Other questions from the week: Will the next phase of manufacturing of clean technologies be driven out of the bay area?... "Are America's capitalist titans really going green?"... Is wave energy ready for prime time?... Should we read anything into the fact that the recent DOE grants for biofuels were double those for solar?... Can the importance of this commitment -- especially for the emergence of markets for carbon-related financial instruments -- be overstated?... Finally, what list of questions would be complete without asking, "Is clean tech a bubble?"

Cleantech around the web

2007-03-04T13:58:00.000-05:00

Just a few news items of potential interest:

John Cook of the Seattle P-I laments the lack of a cleantech investment community in the Pacific Northwest.

The latest "bubble"-talk: Going Private makes the mistake of lumping "green investing" in with SRI (socially-responsible investing) in arguing that there's a bubble of sorts, but it serves as a nice way of once again highlighting the differences between SRI and the "cleantech"/"greentech" kind of investing that John Doerr and others are convinced is a long way away from bubblicity.

Here's a very thoughtful piece from Sunil Paul about why he's in cleantech for both the value and the values.

Liquid fuels news: Insurance company CEO to the oil industry: You're at risk... Demand for ethanol is driving up prices for farmland... And T. Boone Pickens thinks we're at "peak oil".

From now on, this website will (probably ineffectively) attempt to straddle the coal debate by referring to it as "cleaner coal." Readers are invited to draw their own conclusions about what it is relatively cleaner than -- but it would be hard to argue that it is not a strong potential market opportunity.

The latest on the carbon offset/ REC discussion (see the second bullet of this link for more background): The Economist's blog has a good discussion of the "rebound effect", whereby purchases of green power-subsidizing RECs would increase energy supplies, leading to lower energy costs and thus increased consumption of all energy types. The problems with the analysis are:

a) the authors assume the standard smooth supply curve shifts outward under the assumption that the blended marginal cost curves of new sources of supply mirror existing sources, but in the real world, since solar/ wind/ etc. continue to have higher costs than baseline coal, the marginal cost curve is kinked, differentiated by source, with "cliff" effects as demand grows and higher-cost technologies come online. So, for near-term equilibrium purposes, the marginal cost curve flattens higher up the curve, it doesn't shift out. Yes, that can also end up with a new equilibrium point further down the demand curve (ie: more consumption of electricity), but when the baseline coal load is usually 100% maxed out anyway, such increased consumption comes from the higher cost (ie: cleaner) power supplies. Furthermore, the charts used in the Economist column are misleading, in that they fail to show how inelastic the energy demand curve is in short-term timeframes (most power loads are driven by long-term capital purchases) -- if the charts were drawn more accurately, it would be more obvious that you have to shift the supply curve a lot in order to get a small increase in Q at equilibrium. To put it more plainly: Unless the purchase of a REC leads the buyer to consume more power (less guilt = more lights on?), there's no overall shifting of the demand curve, only supply curve effects felt only in the "clean energy" portion of the curve. Any resulting incremental increase in power consumption comes from the subsidized sources, not the already maxed-out coal baseline plants. Will this increased consumption lead to long-term negative effects of more coal-fired plants being commissioned? ...Maybe, but there are going to be a lot of other long-term effects as well, such as the fact that the REC subsidy helps drive down costs for these emerging clean energy technologies, and accelerating the beneficial effects of the experience curve. At some point, our electricity marginal cost curve may reflect more of a blended mix of low-cost dirty and low-cost clean energy sources, in which case the rebound effect would be much more relevant, but that would be a nice problem to have...

b) Note the passing mention of "unless they are implemented under a cap and trade system" in the Economist column. Why? Such systems are increasingly envisioned in public discourse around climate change. So under a cap and trade system, what would the rebound effect be? Irrelevant. Under such a regime (for purposes of simplicity, let's assume one that caps carbon emissions by the power industry at existing levels), as demand increases, it couldn't come from increased carbon emissions overall.

c) The column's authors also only address carbon offsets where the purchase price is directed toward subsidizing green power production. But in fact, the most cost-efficient offsets right now come from subsidizing energy efficiency investments or other non-supply-related carbon emissions.

d) Finally, as alluded to above, the authors make the specious assumption that buying offsets will lead you to consume more electricity than you would otherwise. In fact, all you're doing when you purchase an offset is imposing an energy tax on yourself, and raising your personal price of power -- and that should decrease your consumption, at least according to the same textbook-level microeconomic theory being deployed by the Economist columnist...

In other words, if you are so inclined, go ahead and purchase your carbon offsets. The Economist article makes some good theoretical points, but as with most economic theory, real world application runs into a lot of complications. In the real world you're subsidizing favorable economic activities, any rebound effect that results in increased carbon emissions is very minor in the near term, and over the long term you're helping to establish a US market for offsets that is already a $3B market across the rest of the world.

Finally, not to get into politics or policy issues, but this just seems like an obviously correct solution to all of our problems. The first step will be relocating NREL to Roswell, NM...

Catchups

2007-03-01T21:44:00.000-05:00

Recent deals in the news:

VentureWire reported earlier this week that CoalTek raised a $33mm Series C, led by Lightspeed Venture Partners, with participation by existing investors Braemar Energy Ventures, Draper Fisher Jurvetson, Element Venture Partners, Technology Partners, and Warburg Pincus. There's been a bit of controversy lately over whether coal-related technologies can be considered "cleantech" or not. However one cares to classify it, in the case of CoalTek, Jonathan Shieber reports in VentureWire that "according to the company, the coal it treats has a BTU content that is up to 33% higher than normal coal, while at the same time has 70% less sulfur dioxide content than untreated coal."

REC retailer Sterling Planet raised a $7mm Series B financing. Low Carbon Accelerator of the UK provided the funding. Sterling Planet supplied green power certificates to the recent SuperBowl. ...And on the general topic of RECs and carbon offsets, here's a very educational give-and-take prompted by a column by Adam Stein of TerraPass (read the comments section as well). For more useful reading on the topic, here's another good article as well.

ACAL Energy, which is developing "low temperature fuel cell cathode" technology, raised GBP1.6mm from Synergis Technologies, Rising Stars Growth Fund, the North East Co-Investment Fund, and the Carbon Trust. The company claims their technology will allow fuel cells to operate five times longer than currently possible.

Cleantech investors in the news:

CalPERS announced last week that they are committing $400mm to Pacific Corporate Group, with the funds to be specifically targeted to cleantech investments.

Nomura International plc recently announced that Whitney Rockley has joined the firm as Principal of New Energy and Clean Technology Ventures.

The Cleantech Venture Network is starting a new effort called the Cleantech Innovation Initiative, to tackle key transformational efforts. The first such effort? Smart financing solutions for getting more hybrid taxis on the streets...

Other news and notes:

Looking forward to seeing everyone at the MIT Energy 2.0 Conference next weekend!

Most readers are probably already aware of the critical role of green power issues in the recently announced TXU buyout. For venture-stage investors, the importance is that it demonstrates just how seriously utilities are taking cleantech these days -- these technologies aren't just on the fringe anymore. Wind power, broadband over powerline, clean coal ("cleantech" or not) are all emerging energy technology areas that have played a major role in the transaction...

The latest on cellulosic ethanol and biodiesel.

Finally, here's a very thoughtful piece on clean water technology investments, by Neal Dikeman. Out of the various limiting factors he identifies, price is probably the most important one right now...

More energy tech dealflow info

2007-02-28T10:27:00.000-05:00

Here's a very useful chart of specific energy tech deals from Q1 through Q3 of last year, courtesy of Eric Wesoff, the publisher of the very useful newsletter Venture Power...

Looking at the numbers

2007-02-27T03:18:00.000-05:00

Ernst & Young/ Dow Jones VentureOne today released their 2006 totals for cleantech venture investments [2/27 update: link to PR here], and the results (illustrated above) confirm the trend of overall strong growth. They counted $1.3B in investments in the US, Europe, Israel and China, with 140 transactions.

They didn't break the dealflow down by sector in their public release, but they did cover a broad definition of cleantech. In the US, they counted 87 financings, with the total of $883mm. Interestingly, cleantech venture investments in China took a big leap, from $7mm in 2004 to $220mm in 2006.

As we've discussed before, counting cleantech investments is tricky. Alert readers will have already noted that the VentureOne numbers are significantly lower than the Cleantech Venture Network's $2.9B total for 2006 in North America. These kinds of differences (seen across other surveys as well, such as the Moneytree and Nth Power/ CleanEdge surveys) raise a few questions:

1. Why are the numbers so different?

We've talked a bit about this before. There are three basic reasons why numbers vary across surveys: Completeness, inclusiveness, and definitions.

In terms of completeness, there's the possibility that some of these surveys are missing deals that others spotted. But, without doing a line by line comparison, it's tough to make a case that such errors of omission might be a major factor, given the strong reputations of the various groups.

In terms of inclusiveness, however, there are some pretty major differences across surveys, as dictated by their varying needs. For a group like the Cleantech Venture Network, they need to be as inclusive as possible -- that's part of their role as thought leaders in a fast-emerging space. Many clean technologies straddle sectoral categories -- how do you bucket software to manage energy assets, for example? In the software category or the energy category? For groups like the CTVN, it's an easy answer: If it's relevant to cleantech, it's in the tally. But for groups like VentureOne, they need to add up not just the cleantech numbers, but also the IT numbers, etc. And they need the counts to be mutually exclusive, so they don't end up counting that hypothetical energy software company twice. So given the different mandates, when asked to come up with a list of cleantech investments, some groups' tallies will be a lot longer than others.

Definitions also vary across these surveys. Some take a narrower view of cleantech ("Sure, we got both kinds of cleantech, solar AND biofuels!"), some take a broader view. Some include private equity of any stripe, some take a narrow viewpoint of what is a "venture backed firm." In the specific case of the VentureOne numbers, they appear to be taking a broad view of cleantech, but a very narrow view of eligible companies. They don't include any private investments into public entities (PIPEs), angel rounds, etc. This by itself shortens the list quite a bit. Also, it's important to note that the VentureOne numbers exclude investments in Canadian-based companies, whereas the CTVN numbers include those in their North America totals.

The net result? VentureOne counted 87 cleantech venture financings in 2006, while the CTVN counted around 250.

2. How much are the numbers getting skewed by project finance-related transactions?

As we've discussed before, a handful of very large deals that seem to be more project finance-related than classic venture capital have played a signficant role in the dramatic growth in the total dollar tallies for cleantech investing. But how much of a role?

The VentureOne numbers help shed some light on this question. And the answer appears to be that such mega-deals are skewing the numbers somewhat, but not enough to be the biggest factor in the sector's strong top-line growth.

Yes, mean deal sizes have risen. In US cleantech investments tracked by VentureOne, the mean deal size rose from $6.25mm in 2002 to $10.16mm in 2006. But most of that growth actually occurred a while back -- 2004 mean deal size was $9.68mm. It should also be noted that median deal size did rise over the past year, from $2.6mm in 2005 to $6mm in 2006.

But what really appears to be driving the growth is dealflow in general. The number of deals tracked in cleantech by VentureOne has risen from 90 in 2003, to 103 in 2005, and jumping to 140 in 2006. So from 2005 to 2006, what drove the doubling in cleantech venture dollars? Deal sizes did get bigger, including more impact from mega-deals, but the overall dealflow also significantly grew.

3. Why do investors care about all this to-do about numbers?

Simply because they help us get a better handle on what's going on in the market.

The various surveys all consistently confirm that this is a fast-growing sector. Some folks have argued (mostly in private grumbling) that the top-line growth in the sector was really mostly a result of an overly generous set of definitions -- that there have been a few spectacular deals that drove the numbers up, but overall the sector has stayed pretty flat. But the dealflow numbers show this argument to not be true. A very few others have privately suggested that groups like the CTVN may have made the growth look bigger than it really has been, by casting their definitional net wider and wider over time. But as the VentureOne numbers show, CTVN isn't the only group pointing to the very strong growth in VC interest in the sector. The sector has been growing quickly, there is no real debate over that.

However, there continues to be a constructive debate over the possibility that cleantech investments have saturated the sector, the "Is it a bubble yet?" question that the media loves to talk about. And that's where it's important to know the differences between the surveys.

Because there's a big difference between "Cleantech is the third biggest investment sector," and surveys like VentureOne's which suggest that cleantech remains a relatively small portion of overall venture investments -- VentureOne tracked 3,748 financings totaling $34B in 2006, which would put cleantech at about 3.8% of venture capital investing. The first interpretation can be a bit daunting. The latter interpretation, however, is a bit encouraging for cleantech investors. Also encouraging? The fact that VentureOne's survey estimated that median valuations for cleantech VC investments were 75% of median valuations across all VC investments... None of which, of course, answers the saturation question. But it is suggestive.

2007 Cleantech Venture Forum recap

2007-02-26T21:52:00.000-05:00

We were lucky to have Matt Horton, a colleague at @Ventures, agree to write up his reflections on last week's Cleantech Venture Forum:

This week saw another successful Cleantech Forum in San Francisco. Attendance was rumored to be over 800, serving as another obvious indicator of growing interest in the sector. While the Cleantech Forum is still the premier cleantech networking event, the ratio of check-writers to other interested parties is on the decline. Here are a few of the highlights from the week:

Company presentations – There were a total of 18 companies that presented at this conference in rapid-fire succession, each company was only allotted 5 minutes to present. The presenters included interesting companies like Fat Spaniel, Green Catalysts, Flex Energy, Orion Energy Systems, Solexant and NanoH2O. The big winner, however, was a company called Serious Materials, who was named the “Most Promising Presenter”. What does it say about the state of the cleantech market when the most promising company makes drywall?

Speakers and panels – The conference was packed with outstanding panel discussions and speakers, including Steve Jurvetson, Amory Lovins, John Denniston, Neel Kashkari, Governors Mark Warner and Ed Rendell, Steven Chu, and Mayor Gavin Newsom. The discussions at the conference ranged from biofuels, solar, and smart grid applications to public policy, real estate and climate change. It appears that key public policy makers now understand that the government’s role is to establish a framework that sets the rules for competition and allows the market to decide how best solve our energy problems.

Key messages from the conference – 1) Plug-in hybrids seem to have captured the industry’s imagination for our transportation future, although next-gen electrics are gaining momentum. 2) Water opportunities continue to receive lots of interest, but few investment dollars. 3) A national cap and trade program is gaining currency among both investors and politicians.

Limited Partners event – The final event of the Cleantech Forum was focused on LP’s and their interest in the cleantech market. Attendance at the event made it clear that there is a lot of institutional and private money that is looking to gain exposure to the cleantech market. Many of these LP’s are currently debating whether to invest in pure-play cleantech funds, or traditional venture funds that are dabbling in the sector. Stoking that debate, Nick Parker pointed out that forecasts call for $20B of investment in cleantech over the next five years, and that all of the current pure-play cleantech firms only have about $2B to invest. Who will fill the void – traditional VC’s, or new cleantech managers? Time will tell...

Bonus round – After the Limited Partners portion of the Cleantech Forum, the Commonwealth Club held their annual awards dinner honoring contributors in the clean energy industry. Art Rosenfeld, Michael Peevey, Dan Kammen, Tim Draper, Denis Hayes, and the Energy Foundation were all honored. The best quote of the evening was given by Denis Hayes, when he said, “In Silicon Valley, there is a saying - ‘One company’s margin is another company’s market.’ Exxon Mobil earns around $100 million in profit every day. Go get ‘em!”

Matt also noted this big announcement from the city of San Francisco...

Altra, H2Oil, BPL Global, Imperium, and other news

2007-02-20T20:49:00.000-05:00

Jonathan Shieber of VentureWire reported yesterday that ethanol production startup Altra has increased the size of its Series B investment another $63mm, up to $183mm. The additional capital will be used to accelerate construction of the firm's three new plants, which we discussed at the time of the last mention back in August. Another quasi-venture/ quasi-project finance round (...and keep reading a few items below).

Extremely happy to point out (self-promotion alert) that @Ventures has made a $3mm investment in H2Oil Recovery Services, as part of an overall $4.7mm Series B. The company uses a patented technology to reclaim valuable petroleum and clean water from the oil and natural gas exploration and production processes, cost effectively treating two of the industry's most common waste products - tank bottoms and produced water.

Broadband over powerline developer BPL Global announced a $26mm Series C round, with $5mm of the investment from Morgan Stanley. It's unclear how this announcement relates to a similar announcement from the firm back in September, which was also described as a Series C round. We've discussed before why such "third pipe" efforts are relevant to smart grid and other cleantech-related sectors.

More follow-up on the previously discussed financing round for Imperium Renewables... Turns out it was a bit more than the anticipated $100mm, with the announcement that the company has raised $113mm in Series B equity and is raising $101mm in debt. The company expects to have 400mm gpy in capacity by the end of next year. "Existing investors Technology Partners and Nth Power were joined by a number of new investors, including funds affiliated with: Ardsley Partners, Attractor Investment Management Inc., BlackRock Investment Management (UK) Ltd., Capricorn Management, LLC, Ecofin, Robeco C.V., Silver Point Capital, Southport Energy Alternatives, Stark Biodiesel Investments, Ltd., and Treaty Oak Capital Management."

More news and notes: The latest MoneyTree survey is out, and apparently "no one had paid attention to [cleantech] before recently," but now the "secret" is out, I guess -- shhhhh... Finally, an interesting story about lightbulbs.

The rise of online green media

2007-02-18T13:32:00.000-05:00

With the rise in general public interest in issues like climate change, alternative energy, green purchasing, etc., it's no surprise that investors are starting to look for ways to tap into this trend. In many ways, they are following the rise of green marketing, as large consumer products companies and others increasingly vie for the dollars of consumers who want to direct their purchasing toward more environmentally-friendly products and services -- where the ad dollars go, investors will follow.

For many investors, online media models are something with which they have some familiarity, so online green media and green purchasing tools have been getting some VC attention lately (as VentureWire covered last month). While some such investments haven't been publicized yet, VentureWire reported this past week that Joel Makower's Greener World Media has raised over $250k in seed financing from seven angels, including Andrew Shapiro of GreenOrder, Lisa Gansky of Ofoto, and others. There's a good profile of Joel's efforts here, from a while back.

Anecdotally, there's no shortage of entrepreneurs also looking at getting into the game right now, as this one example helps illustrate. Usually the efforts appear to be green applications of previously successful startup models ("the green craigslist," e.g.). Such evident low barriers to entry can be a challenge for investors looking into the space, but network externalities (ie: the more people who come to a website, the more valuable it becomes, and so it attracts even more visitors) can create compelling businesses if things work out... Especially as online ad revenues are on the rise, especially for sites that provide good targeted demographics...

Other deals to note from the past week:

Holographic concentrator PV developer Prism Solar raised another $1.15mm of its ongoing Series A round of financing, bringing the total size of the round (the first tranche of which funded in 2005) above $2mm. CounterPoint Ventures again participated, as did Phoenix-Fire II LLC, Magnesium.com, and individual investors.

Sindicatum Carbon Capital, which is developing greenhouse gas abatement projects, signed a private placement with Citigroup Venture Capital International and Black River Asset Management. Another example of private equity backing for project finance in cleantech, in this case the investors are tapping into the emerging markets for carbon credits.

P21, a German developer of fuel cell-based backup power systems, raised a Series C of undisclosed amount. Goldman Sachs led the round, alongside existing investors Target Partners and Conduit Ventures. The company's products are targeted at backup power for telecoms.

Clean Energy Systems, which is developing an advanced power turbine technology, raised a $13mm Series A. Paxton Corporation and Quadrise Canada Corporation provided the financing.

VentureWire reported this week that smart metering system developer SmartSynch raised a $10mm Series D insider round. Existing investors all participated; they include Battelle Ventures, J.P. Morgan Partners, Siemens Venture Capital, Kinetic Ventures, Nth Power, Endeavor Capital Management, OPG Ventures, Lime Rock Partners, Cinergy Ventures and GulfSouth Capital.

Other news and notes:

Following up on an earlier story, the Cleantech Venture Network released updated figures for their tally of 2006 cleantech venture investments, following on their initial figures released last month. The story remains largely the same: US and European totals of $3.6B, with 72% of that in energy technologies. Again, it will be interesting to see the number of deals that this represents, beyond just the dollar totals.

Cleantech investors in the news: Index Ventures announced that their latest fund, at more than $400mm, will be investing in cleantech... Jonathan Shieber of VentureWire reported this week that MissionPoint Capital has closed a late-stage cleantech venture fund with $335.5mm -- SunEdison is the company's first publicly-acknowledged investment... Dennis Costello has joined Braemar Energy Ventures -- he'll be opening up the firm's new Boston office (it's really the place to be these days)... Vinod says coal is doomed, but solar thermal is hot... Chevron's Don Paul says that cleantech is like alchemy (he means that in a good way).

Other small items: A couple of interesting events coming up -- Energy Crossroads 2007 at Stanford, and the Cleantech Innovation Challenge in Colorado... Corn-based ethanol continues to come under market pressure -- but remember, venture investors are typically backing nextgen biofuels technologies (alternative processes, feedstocks, or biofuels)... Finally, SustainLane Government has announced the top five US cities for clean technology (yes, Boston made the list), as Joel discusses.

Targeted Growth, EoPlex and other news

2007-02-12T21:19:00.000-05:00

Targeted Growth, which is pursuing genetic enhancement of biofuels feedstocks, announced a $22.3mm Series D. The company claims their approach can increase yields by 20%. Capricorn Management and AllianceBernstein led the round, and GrowthWorks Canadian Fund, Integra Ventures, WRF Capital, and Investment Saskatchewan also participated.

An advanced materials company, EoPlex, announced an $8mm Series C, led by ATA Ventures. DFJ, Labrador Ventures, and Draper-Richards also participated. The company's 3D ceramic-metal miniaturized devices have energy-related applications, such as fuel cell reformers, self-powered sensors, LEDs, and others.

Other news and notes: Vinod is moving -- perhaps in a green limo?... With all the controversy about ethanol, here's a good overview of where the technology is in its development cycle... And on the same topic, one cellulosic ethanol player is buying another -- could more consolidation be looming?... Here's Tyler's take on the Gore-Branson $25mm atmospheric carbon sequestration prize... Finally, first Willie, now Merle -- could Kenny Rogers be far behind?

Bright Source, Zolo, and others

2007-02-08T06:31:00.000-05:00

Bright Source Energy, a solar concentrator startup aimed at centralized (ie: for wholesale power, not rooftops) generation, using high temp solar thermal, raised "under $50mm" led by DFJ and the JP Morgan Bay Area Equity Fund. Previous investor VantagePoint (where CEO John Woolard was an EIR prior to joining the company) also participated. Jonathan Shieber of VentureWire wrote a useful description of the company's processes that is worth checking out -- he points out that Bright Source's hybrid approach (which uses a gas-fired turbine in addition to solar concentration) allows for the production of energy on cloudy days as well. Shieber writes that the company already has a 500MW PPA with PG&E starting in 2010.

Zolo Technologies, which uses tunable diode laser spectroscopy to monitor combustion gases for efficiency optimization (ie: for boilers in power plants and other applications) raised a $12.5mm Series D. Siemens Venture Capital and El Dorado Investment Company co-led the round, which also was participated in by existing investors. The company had previously raised $51mm in funding, mostly in a previous telecom-related incarnation.

ECO2 Plastics, f/k/a ITEC Environmental Group, closed a $10mm convertible debenture round of financing (the company is publicly traded at ITEC.OB). Roaring Fork Capital and angels provided the financing. ECO2 Plastics is looking to apply their proprietary plastics recycling technology via the ownership and operation of recycling plants worldwide.

Hanger Networks, a developer of "in house" advertising (they print ads on the hangers your dry cleaners give you with your shirts), raised an $8mm Series A co-led by Kodak Venture Partners and Sigma Partners. Why is the company listed here? Because the hangers they use are 100% recycled content, and biodegradable, and apparently wire hangers add 200mm tons of steel to landfills every year, according to the CEO (tip of the hat to Jonathan Shieber again for that nugget).

Other news and notes: When consolidation inevitably begins in earnest in the solar market, the acquirers will have very deep pockets (and large existing production plants)... Here's an interesting back and forth (read the comments section) on the topic of state support for green startups... Very interesting words from Joel on the topic of the fickle green-ness of the American consumer (and Joel, I echo your Kermit reaction)... Jefferies sees no signs of slow-down in the alternative energy investment ramp-up (but such rosy banker statements have been made at the peaks of many past investment cycles)... The Cleantech Venture Network is expanding to China... Here's an interesting, but familiar, story about the re-purposing of previously fuel cell-targeted technology... Finally, Al Gore brings his message to Silicon Valley.

HydroPoint and Metafoam

2007-02-01T21:04:00.000-05:00

"Smart irrigation" system provider HydroPoint announced a $19mm Series C, led by RockPort Capital, with participation by Chrysalix, Firelake Strategic Technology Fund, Monitor Ventures, Shea Ventures, and the Toro Company. The company's products and systems not only help increase water usage efficiency; the resulting water savings also have significant energy savings impacts.

Metafoam Technologies announced a C$3.4mm Series A, by BDC Venture Capital, FIER ID, MSBi Capital, and M&M Investments. The company's metal foam products claim higher specific surface area and lower costs versus current approaches -- such products would have applications in water treatment, hydrogen production (via electrolysis), and other potential clean technologies.

Those with access to VentureWire got to read some very cautionary words from Greylock's Bill Helman today, on the subject of overcapitalization in venture capital in general, and cleantech in particular. Referring to the ramp-up in funding for biofuels, solar, and other energy tech, "It's a group-think mentality beyond belief," Bill was quoted as saying. The full article is good food for thought, worth tracking down.

Contrast the above with another VentureWire column from yesterday, discussing Robeco Private Equity's $500mm cleantech fund of funds currently being raised. Robeco looked at 80 to 100 applicable cleantech funds last year, and they see the industry shifting from an "R&D" (long time to market) stage 5-7 years ago, to a period now where the backed technologies take 3-5 years to commercialization. Two smart perspectives, one pessimistic, one optimistic, but they aren't necessarily divergent from each other either.

Other news and notes: This is big news for any cleantech companies looking at WalMart as a potential channel or customer... And the public consensus on climate change continues to come together.

Imperium's $100mm raise, and a lot of other news

2007-01-30T19:25:00.000-05:00

Following up on an item from last month, it appears that Imperium Renewables (f/k/a Seattle Biodiesel) is set to announce a $100mm raise of equity and debt. Several hedge funds and a pension fund are new into the deal -- the city of Seattle's employee pension fund is participating (apparently putting in $10mm of the round), with Stark Investments, Ardsley Partners, and Sound Energy Partners also involved. It's unclear how much of the raise is equity, and to what extent existing investors (including Vulcan Ventures, Technology Partners, Nth Power and Ignition Partners). [Other past news on Imperium here, here and here]

DayStar, a publicly-traded developer of thin film PV technology, has raised a $5mm PIPE from a group of six investors, with Millennium Partners the largest funder. The money is intended to help bridge the company (which lost $15mm during the first nine months of 2006) while it raises significantly more capital toward the building of a production line in Malta.

Enerkem Technologies, which is developing syngas production technologies for both tar sands and waste feedstocks, has raised a C$8.6mm round of financing. New investors Rho Ventures and Braemar Energy Ventures led the round, which also included participation by existing investors Solidarity Fund QFL and Innovatech Sud du Quebec.

UltraCell, a micro fuel cell developer, has raised a $10.3mm Series C, according to a press release by BASF Venture Capital, which is providing $3mm of the raise. Other investors in the round aren't disclosed in the release, but existing investors include Sevin Rosen, OnPoint, Star Ventures, BankInvest Group, and ES Tech Ventures.

Kreido Laboratories, which is developing biodiesel plants based upon its proprietary technology for the flexible use of multiple feedstocks, has gone public in a reverse merger as part of a $25mm private placement. Wellington Asset Management led the investment group involved in the raise; the company plans to open their first plant in 2007, and two others are also in development. The company is also changing their name to Kreido Biofuels.

Lehigh Technologies, a rubber recycler and powder developer, announced an $18mm equity round from new and existing investors, with NGP Energy Technology Partners leading the round.

VantagePoint and Volvo Technology Transfer have invested an undisclosed amount of equity into Chemrec, a Swedish developer of technology for the production of syngas from pulp and paper waste.

Other cleantech investment sector news: The Cowen Group has launched an Alternative Energy Group, to be headed by Skip Grow... Piper Jaffray closed their cleantech fund-of-funds at $60mm. They have already made commitments to DFJ Element, VantagePoint, Nth Power, Expansion Capital Partners, and others, and have a commitment "pending" with Technology Partners. According to Piper's Danny Zouber, the fund was oversubscribed even at the $60mm level -- yet another indication of strong LP interest in the sector right now... Here's a fascinating interview with David Aslin, who's a bit skeptical about all the VC activity in biofuels right now... And here's an interesting column by Pearl Chin of Seraphima Ventures, on investing in nanotechnology.

This site doesn't delve much into the political angles of cleantech investing, but it's impossible to ignore that politics and cleantech VC have seen their boundaries increasingly blurred recently. Here's one article on VCs getting into policy and political discussions... and now here's another example of a politico getting into investing (of course, it's hardly a stretch to think about Steve Westly getting involved with technology investing, although it's interesting to see him co-habitating with Kleiner). This blurring of the lines illustrates that political and policy analysis skills are increasingly important for VCs and other investors looking to be active in the energy technology space.

Other news and notes: Here's a nice general "state of the sector" piece... An interesting critique of lithium ion as an energy storage technology by Tyler (time to start buying up Bolivian salt pan rights?)... A nice overview of the ongoing shift of political and business attitudes around climate change policy... More on the ongoing hydrogen highway debate... Finally, a small encouraging piece of news about sustainable energy research -- but mostly, I just enjoyed the mental image of a "nanocollege."

MIOX raises $14.5mm Series B

2007-01-26T11:09:00.000-05:00

Water purification equipment manufacturer MIOX Corp raised a $14.5mm Series B, led by Sierra Ventures and including participation by Tao Capital and the New Mexico Community Capital Fund, Flywheel Capital and existing investors. The company last raised a $12mm Series A in 2005. VentureWire (no link) reports that 2006 revenue was "under $20mm", and that the funding will be used to finance a "very aggressive growth path."

In other cleantech news, VentureWire also reported (again, no link) today that Technology Partners (including cleantech champion Ira Ehrenpreis) is expected to close on $200mm of an anticipated $250-300mm Fund VIII by March. The firm now focuses on health care and cleantech... And according to the article, they're looking to hire another cleantech partner to work with Ira.

Way behind

2007-01-26T02:34:00.000-05:00

Apologies to those who regularly check this site for news and updates on the industry (and there are more of you than I ever would have expected...). A major relocation is always tough, and being without internet access for several days makes things like blogging that much tougher. Nevertheless, greetings now from (VERY) chilly Boston -- and hopefully we'll be able to be more timely and active going forward.

So, here are more than a week's worth of items and thoughts in rapid-fire fashion, in hopes of somewhat catching up:

1. Battery developer A123 announced a $40mm round of financing, with GE Commercial Finance leading the round and P&G (makers of Duracell batteries) also involved, along with existing investors (including Alliance Capital, FA Technology Ventures, North Bridge Venture Partners, Sequoia Capital, OnPoint, the Massachusetts Institute of Technology (MIT), Motorola, Qualcomm, and A123Systems Chairman Desh Deshpande). This fourth round of financing brings the company's total venture funding up to $102mm. More info is found here and here.

2. German solar cell company Sulfurcell has received a new round of financing (amount undisclosed) from the Masdar Clean Tech Fund and existing investors. The company claims efficiencies of 7.5% on their product, and they aim to quintuple production capacity by 2009 and to increase efficiencies to 9%.

3. Waste gassification tech developer Nexterra has raised a C$6.8mm third round of financing led by ARC Financial Corp. The round brings total investment in the company up to C$16.6mm. The company has completed their first commercial facility.

4. Canadian solar PV company Day4 received a C$11mm round of financing, with existing investor British Columbia Discovery Fund taking part. VentureWire reported that the deal was led by Goodwood Capital Fund.

5. Cleantech investors in the news: Israel Cleantech Ventures has reportedly made a first closing at $15-25mm. John Balbach has joined the Cleantech Group as a Managing Partner. And here are Vinod's bold predictions for 2007 (including predictions on Supreme Court rulings, among other topics)...

6. More solar financings: Organic PV developer Plextronics has raised $750k from the Sustainable Energy Fund of Central Eastern Pennsylvania ("The SEF"). The company raised a $13.1mm Series A in the fall of last year.

7. A wonderful example over the last couple of weeks about how simple news items can be covered in widely divergent ways: See here and here. Of course, then there's this further indication of the overall annual growth in clean energy financing. So what's going on, has there been a big pull-back, or even a "correction" in cleantech venture investing? Or is the unprecedented growth still underway? Observant readers are undoubtedly ignoring the hyperbole on both sides -- reporters and PR folks have a way of making things "newsworthy" when the basic reality is that (as we discussed just last week) a few mega-deals drove total tracked dollar amounts up dramatically last year, but the underlying trend has (so far) pointed toward continued growth in investor interest in the sector. "An underlying positive trend in dealflow" is not really a newsworthy description, unfortunately, so the dollars grab the headlines. But cleantech investors will be paying more attention to the number of deals done, rather than the total investment sums, when there are so many quasi-VC/quasi-project-finance deals skewing the dollar amounts each quarter. Of course, we still expect to see total cleantech VC dollar amounts go down in 2007 -- but overall dealflow is more of an open question. Stay tuned...

9. Jet-lagged cleantech investors around the world: Cleantech investing is on the rise in China, and Europe continues to be attractive -- although the European automated meter reading market isn't looking good... or is it? Meanwhile, the anti-ethanol pro-tortilla lobby has made inroads in Mexico.

Other news and notes: The public sentiment is clear, but the SOTU wasn't. The impacts on cleantech investments won't be nearly so clear-cut as they were from last year's speech, but clearly ethanol and other alternative fuels and fuel efficiency technologies are looking up, politics-wise... Finally, a nice take on "why now?" by Neal Dikeman.

2006 Cleantech investments total $2.9B... and other catch-ups

2007-01-15T00:12:00.000-05:00

The Cleantech Venture Network released early data last week on 2006 sectoral venture investments, and they tracked deals totaling $2.9B. Of that, $2.1B was in energy technologies; and of that, $1.3B was in energy generation. The group stated that energy investments nearly doubled from 2005, and that sectoral investments overall went up 78%. These represent just the dollar amounts, and it will be even more interesting to see the number of deals this represents, and what the median deal size was, for all of the various cleantech sectors.

A small prediction: The total amount of cleantech venture dollars invested will likely go down in 2007. Why? Because the significant growth in "venture dollars" invested in energy generation technologies from 2005-2006 was in many ways driven by non-traditional investments, such as fundings of solar companies intended to help build out their production lines. While some VCs may have participated in these financings, they do somewhat skew the total dollar figures, since the rounds are necessarily much larger than your traditional venture financing -- we saw back in Q3 that a mere 5 deals out of 47 made up 60% of the "venture dollars" tracked in cleantech in that quarter. Such mega-financings have mostly gone into solar and biofuels. And it's only an educated guess, but while there will be more such large fundings in solar and biofuels in 2007, it will probably be a smaller number.

Note that this only refers to total dollar amounts. The number of deals done in cleantech may continue to go up, as LP interest is still strong and more and more investors are getting into the space in one way or another.

Chemical detection system developer Innov-X Systems announced a $27mm round of financing from Summit Partners. The company's handheld chemical detectors have environmental monitoring applications. Revenues are now "approaching the $50 million mark."

VentureWire last week reported on the recent financing of electric car manufacturer Think Global. Here's an excerpt:

It seems the rumors of the death of the electric car have been greatly exaggerated.

A resurrected Think Global AS, which told VentureWire it secured a $15 million funding commitment from existing investor InSpire Ventures, is only the latest in a line of venture-backed companies raising new capital to bring electric cars or hybrids to the masses.

Late last year Draper Fisher Jurvetson co-led a $20 million round for the Bangalore-based REVA Electric Car Company Pvt. Ltd. alongside the Global Environment Fund. And in June 2006, a consortium of venture firms and individual investors came together to back a $40 million round for San Carlos, Calif.-based Tesla Motors Inc. co-led by VantagePoint Venture Partners and the founder of PayPal Inc., Elon Musk.

And the big automakers are warming to hybrid electric vehicles. General Motors Co. recently unveiled a hybrid electric concept car, the Chevrolet Volt, at an auto show in Detroit, while Toyota has been marketing its gas-electric hybrid vehicles for several years.

"We are very happy now that GM and others have announced that they believe in the electric car," said InSpire Ventures Chairman, and Think Global Chief Executive, Jan-Olaf Willums.

And in other electric car news, here's more info on the Tesla Roadster...

Other news and notes: Here's a nice profile of The Acumen Fund, a unique non-profit that makes venture-type investments in developing countries, often in cleantech applications... A fuel cell venture exit: BASF Future Business is buying PEMEAS, with terms undisclosed... Here's an interesting interview on the general topic of smart metering and demand response... On the topic of solar investing, here's another interesting 2007 prediction... Phil Angelides is starting an investment group that will be partially directed at green building projects... Finally, is there anyone who isn't launching a solar project financing or development firm these days??

Happy new year!

2007-01-04T17:47:00.000-05:00

Things are a bit hectic right now, so let me simply point to a few interesting articles and news items from the last few days...

1. A couple of interesting articles in VentureWire over the past couple of weeks. The first one was on the topic of green buildings. VentureWire continues to stymie efforts to promote their good work by not providing links to their articles, but here's an excerpt:

In the last two quarters of 2006, investors including DFJ Element, NGEN Partners, Nth Power and Rockport Capital Partners have invested in companies that are looking to create more ecologically and economically efficient tools for the construction industry.

"Because of the turnover in buildings, and the demand for new buildings, there are a lot of opportunities in the sector," said Peter Grubstein, a founder and managing partner for energy and materials investment firm NGEN Partners.

"Is the green building business a revolutionary business? I don't think it is," he said. "But there are evolutionary changes in a large market that is ready to change."

Helping pull investors into the construction market are reports like the one from McGraw-Hill Construction and the National Association of Home Builders published in June. That study indicated that the residential green building marketplace is expected to boost its market share to between $19 billion and $38 billion by 2010, up from $7.4 billion in 2005.

"We're going to industrialize the next 40 million people on the planet, and they're going to take a big step up in housing," said Erik Straser, a general partner in the energy and materials practice group at Mohr Davidow Ventures.

2. Another interesting VentureWire article (also by Jonathan Shieber), on the topic of green media. Again, an excerpt:

The market for consumers seeking lifestyles of health and sustainability is about $226 billion, according to an industry tracking non-profit group called Conscious Wave Inc. Of that, the projected market for environmentally sustainable products and services is projected to be about $187.6 billion, including organic foods, environmentally sustainable products and green building.

"There's a lot of investment interest in who is going to be the Amazon.com of green," said Joel Makower, the co-founder and principal of Clean Edge, a research and publishing company focusing on cleantech markets, and a senior adviser with the sustainability strategy firm GreenOrder.

Makower also serves as an adviser to billion-dollar venture capital firm VantagePoint Venture Partners, one of the first investors to back a green presence online. According to Stephan Dolezalek, a managing director with VantagePoint and the co-head of the firm's cleantech practice, VantagePoint has invested in the Beam Inc. Based in Cambridge, Mass., the Beam is a start-up whose first online property, GreenBuildingBlocks.com, is a directory for architects, developers and suppliers who work with green materials.

3. We've talked recently about the role of the London AIM for cleantech investments (link req's scrolling down a bit). Now comes an interesting study from New Energy Finance on the subject. Click here for a pdf summary of the study.

4. Other interesting news items: A useful update on ethanol production figures, and some provocative thoughts as well... A stronger IPO market is good for all venture investment sectors, including cleantech... Finally, here's a great summary of green business stories in 2006 -- haven't seen any 2007 predictions of relevance anywhere yet, however.

Codon Devices and other news

2006-12-27T12:46:00.000-05:00

Codon Devices, which has developed a platform for the rapid design and genetic sequences, announced a $20mm Series B led by Highland Partners, with existing investors Alloy Ventures, Flagship Ventures, Khosla Ventures and Kleiner Perkins Caufield & Byers also participating. As with last week's mention of ERA Biotech, one of the potential applications of this technology is in the development of enzymes and other inputs to biofuel production.

Other news and notes: Here are a couple of good overviews of recent discussions around ethanol and clean coal... A local perspective on cleantech venture capital in New Hampshire... Energy Innovations' Andrew Beebe burns his grilled asparagus... Finally, cheers to Blueprint Ventures for a cute holiday video (note the subtle cleantech references).

[12/27 update] Also, check out this very interesting scoop by Joel Makower -- it's a very good example of how the commercial sector is starting to pick up demand for clean technologies even in the absence of major regulatory change...