Friday, March 31, 2006

Cleantech investor news

  • Garage Technology Ventures, which has invested in several cleantech startups including Hoku Scientific and Miasole, announced the formation of a new seed-stage fund. Backers include Thomas Weisel Global Growth Partners, DFJ, Silicon Valley Bank, and E-Trade. The new fund will co-invest alongside the firm's original fund. Good quote from managing director Bill Reichert: "The world doesn't need another $250 million fund chasing the same billion-dollar startups. Our mantra is, 'Small is Beautiful.'"
  • Idealab, which has backed solar concentrator startup Energy Innovations, has agreed to pay off the $50m personal loan of founder Bill Gross. Here's a long article with some details.

Thursday, March 30, 2006

A useful chart

We already talked several weeks ago about the latest CleanEdge clean energy market data, but here's a great chart, courtesy of Red Herring. Perfect for cutting and pasting into your latest PPM...

Tuesday, March 28, 2006

Catching up on the news

A lot of stories worth tracking from the last week or so...
  • Regarding solar technology, here's an interesting story about the amount of investing China is putting into building their domestic solar industry. Will that be an opportunity or a threat to solar companies elsewhere?
  • Should have mentioned the California Clean Tech Open before. Many readers of this site will already be aware of it, but you can read more about it here and here. Terrific idea. Also, Xerox PARC has put out some more information about their own cleantech efforts. Get those business plans going! ...It's also a great sign for us expansion-stage investors for down the road.
  • The team at the Cleantech Venture Network is teaming up with hedge fund investors Kurzman Investment Partners. It'll be interesting to see what this partnership looks like as it develops... Also, Kjartan has asked me to make sure and mention again what a great job the Cleantech Venture Network team did with last week's Forum, many kudos all around.
  • Here's an interesting article comparing the energy technology market today to the telecom market of a few years back. The author mentions the emergence of distributed generation and energy storage technologies -- I'd also throw in remote monitoring and automated control of energy assets as a key enabling technology. (Thanks to Michael Leyba for pointing us to this article)
  • We haven't mentioned geothermal energy much here, as for the most part (with some definite exceptions) there isn't as much entrepreneurial activity with these technologies as there might be for some others. But the industry is apparently expected to grow quickly, take note.
  • Green laptops? The really interesting thing here is the use of renewable energy certificates (in this case, from hydro) as part of marketing for the products... A sign of an emerging marketing trend?

Energy technology and energy prices

In recent conversations with investors and investees, one question that often comes up is "what is going to happen if and when energy prices drop again?"

It's not just an academic question. So many energy-related technologies derive their economic value out of high baseline energy prices that it could potentially affect market growths and thus the value of clean energy investments.

Now, first of all let's note that this isn't just a question of oil prices (in fact, in many ways natural gas prices are more important in regards to clean energy technologies such as energy efficiency or solar). And let's also note that the consensus is that over the long run the trend is going to be higher energy prices versus recent past periods where energy was a cheap input. But within that trend, there will likely be periods where energy prices fall significantly as well.

Will these periods hinder the adoption of clean energy technologies?

Some that I've spoken with suggest that volatility, instead of decreasing demand for clean energy technology, may actually spur faster adoption. The hypothesis is that consumers of energy will be drawn to making investments that either stabilize their energy prices (such as installing solar), or decrease the impact of price volatility by reducing the importance of energy as a critical input (such as adopting energy efficiency technologies).

That's where this study out of the Netherlands becomes very interesting -- the researchers suggest that this hypothesis doesn't hold true, that instead you need to see consistently high energy prices to really move technology adoption and investments. That the uncertainty of volatility may hinder adoption of new technologies rather than accelerate it.

It's an interesting point for more discussion...

Friday, March 24, 2006

WellDog, OrionSolar, Micro Power Electronics

  • WellDog, which has a number of technological solutions for natural gas extraction and carbon sequestration, announced a $6.5M Series D. The round included new investors Axiom Venture Partners, Kozel Energy and Yellowstone Energy Ventures, as well as existing investors EnerTech and Prospector Energy Capital.
  • Israeli solar startup OrionSolar, which is developing dye cell PV, took in $1M from 21Ventures. This builds upon approximately $800k in earlier funding from 21Ventures and Incentive, an Israeli incubator group. According to the article describing the transaction, OrionSolar is targeting solar cells with costs under $1 per peak watt.

Cleantech Venture Forum recap

Quick side note: A couple of days ago, this site hit its first anniversary. So a big thank you to all you readers out there (and there's a lot of you now), I'm always pleased and honored when I hear from so many of you that this site is useful for your own efforts out there. So why don't we keep this thing rolling...

[3/24 update: Neal Dikeman has also posted a good take on Doerr and Denniston's talk, here. Well worth checking out. rd]

[3/24 update II: Matt Marshall has also put up a column about the Cleantech Venture Forum, here.]

As previously mentioned, my colleague Kjartan kindly offered to write up his thoughts on the Cleantech Venture Forum:


Hi all, this is Kjartan again. Rob is away on the East coast and since I had the pleasure of attending the Cleantech Venture Forum IX right here in San Francisco this week, I agreed to write a few words.

First off, this was the largest gathering in the history of CTVN, with ~500 participants. Huge! It is fair to say that practically “everyone” who is anyone in Cleantech VC (except Rob…) was there. Thankfully for those few who did not make it, for CTVN members, transcripts and podcasts will be made available of all the panels and sessions.

As a quick conference summary before delving into details, the space continues to see a very rapid growth in interest, from new and old General Partner’s and Limited Partner’s alike.

Day 1

Tuesday, day 1, kicked off with the first ever Cleantech Limited Partner Salon, which focused on existing and prospective Cleantech LPs, individuals, families, foundations, and institutions.

As an overall summary of this day, LPs are increasingly looking to put money to work in the space. LPs includes high net worth individuals and families (who tend to be early movers), as well as foundations and institutions. A newish, very welcome development is the formation of Cleantech-specific Fund of Funds. There were two present at the Salon: Piper Jaffray’s and Macquarie Asset Management’s.

Instead of boring you with a play-by-play of the panels, the below is a quick summary of some interesting tidbits:

Mark Heesen, president of NVCA, gave a quick overview of the state of the venture market: In the current fundraise cycle (’04-’06), the organization projects ~$68bn of funds raised. While this might seem like a lot, contrast this to the $202bn raised in the ’99-‘00 fundraise cycle…

He went on to warn investors against the level of regulation in Cleantech. Aside from lifesciences, VCs are not used to this level of regulation. I would dispute this point: a) what about telecom? b) more importantly – he focuses on the energy side of the equation only (a common misunderstanding). While energy continues to make up the bulk of Cleantech investing, I see sectors such as manufacturing (where beyond the cost of energy, the uptick and volatility of natural resources drive demand for more efficient products), advanced materials (new materials properties for i.e. solar apps), transportation related technologies (continued strong demand for hybrids, biofuels, etc), and water & wastewater (which grant it does see regulation, but e.g. is in desperate need of infrastructure upgrading) offering equally interesting investment opportunities, and often at more attractive valuations.

Nick Parker, Chairman of the Cleantech Venture Network, always has interesting things to share, and presented his findings from several studies, including the “Exit Study” (pdf of exec summary) from last year and recently released Cleantech Venture Capital Report (pdf of exec summary). Here follows a quick summary of his presentation:

  • ~120 GP’s raising money at the moment, according to a recent NVCA survey (at least three present at the conference announced plans to close funds in the next two months).
    • 20 of venture managers surveyed plan to make a Cleantech investment in the next 4 years.
  • In the period ’99-’05, 43% of all Cleantech deals done by $, and 36% by count, were in the Energy space.
  • Historically, about 95% of all exits in Cleantech have been via M&A.
  • There is a gap in early stage Cleantech investing (many more multi and later stage funds than early stage)
  • However, CTVN projects ~$8.5bn will be needed through ’09 to fund existing companies. This is not a near term problem, but obviously one that needs to be addressed for the long terms sustainability of the space.

Winston Hickock (CalPERS) moderated the financial institutions panel to explore the financial community’s rational for looking at the space, which can be summed up very briefly: it is an area seeing exciting growth, where real money can be made.

The panel (and probably Winston’s background as the former head of California’s EPA) also triggered the inevitable debate on the energy properties of biofuels, which this blog has previously discussed here and here (and probably other times too)…

Ira Ehrenpreis from Technology Partners moderated the Fund of Funds and Family Office panel. A panel that underscored continued interest from families and increased interest from the institutional community. Importantly, during the panel and per my above comments about the definition of Cleantech, Ira really hammered home that the space is not just energy; it is water, it is advanced materials, it is advanced manufacturing, etc. These are the largest markets in the world, and this is indeed an enduring sector.

Unfortunately, I had to duck out for Jeff Leonard’s panel on corporate investors, but will refer CTVN members to the forthcoming podcasts.

Day 2

Presenting companies.

Not going to go into much detail here except to say that these forums continue to see a steep upward trend in the quality of companies, and very importantly, in the management of these companies: several highly successful serial entrepreneurs proudly presented their Cleantech companies.

In what was definitely the most anticipated session of the day, John Doerr and John Denniston of KPCB shared their view of Cleantech and took questions from the audience. I think all 500 participants and then some were in the room for this.

John and John shared with us what they see as the three big challenges / trends / opportunities for the coming century:

  • Our addiction to oil
  • Urbanization and the challenges this brings, from increased energy needs, to water needs, to health challenges.
  • Climate change

For those who did not already know, KPCB’s most recent fund ($600M) has earmarked $100M for Cleantech (they call it “green technologies”) and $200M for Pandemic preparedness and Biodefence technologies. Now you know why.

The duo covered much ground during the hour long session. To me, the most fascinating part of the presentation was when they shared with us the secret of a successful entrepreneur. There are two types of entrepreneurs: mercenaries and missionaries. Mercenaries are in it strictly for the money, whereas missionaries are in it to change the world.

John and John threw up a laundry list of qualities that characterize the missionary vs. the mercenary. And while they did not use these words, what the finding amounts to is that entrepreneurs who focus on building a long term sustainable business, and not just for their wallet’s sake, are by and large more successful financially than those who are not. I have heard this from other extremely successful VC and PE investors as well

Another trend they reiterated is that the markets are now moving investments in a more sustainable direction, regardless of government policies and other external factors.

Day 3

We started Thursday by honoring Dr. Zhengrong Shi, CEO of Suntech, who also gave a very good speech on the state of the solar market. Rob has done a great job of discussing this topic before and I will summarize Dr. Shi’s comments: The current technology is first generation: low efficiency and expensive. Next generation will be low efficiency, but much less expensive. Third generation (within 30 years) will be high efficiency and low cost – this is the true paradigm shift. If I find a link to his excellent presentation, I will post it here.

I also sat in on an interesting panel discussing current exit opportunities and naturally the AIM came up. For those of you who don’t know, the AIM has provided a mechanism by which early stage companies could access public $, and also obtain shares with which to make acquisitions (not too different from the Toronto Venture Exchange).

A key question was why do North American companies list in Europe and not on an exchange closer to home? The answer appears to be: They can access more funds at a higher valuation, and the regulatory burden is perceived as being lower.

Beyond this, much of the conversation centered around PolyFuel’s (one of the panelists) listing last year. PolyFuel is an early stage (pre-revenue at time of listing) maker of membranes for fuel cells. The panelists seemed to agree that it made sense for PolyFuel to list, yet it did come at a cost. The CEO now needs to be in London at least once a quarter, and the cost of auditing has also gone up substantially, in addition to the cost of actually listing on the exchange (approx $1M). That said, PolyFuel will have accessed in excess of $30M of new capital via the IPO if/when the warrants are executed (currently all above water).

Later, during lunch, Expansion Capital Partners' Mark Donohue (self promotion alert) addressed the forum with a speech titled “Solar Panels Made in Sweatshops”, which really elaborated on the above points made by Doerr and Denniston regarding long term sustainable behavior. In short, by paying attention to the broad sustainability of portfolio companies’ activities (including social and environmental in addition to economic criteria), investors can help maximize and de-risk returns. It seemed to be very well received, and nicely wrapped up the official part of the conference.

Tuesday, March 21, 2006

Comverge raises $5.5M Series C; Neah Power gets reverse-merged

  • Comverge, which offers utility meter equipment and is also developing demand-response services (they'll turn down your air conditioner during peak usage times, in exchange for a rebate from your utility), announced a $5.5M Series C. The financing was provided by new investors Air Products and Chemicals and Partners for Growth, as well as existing investors Nth Power, EnerTech Capital Partners, Rockport Capital Partners, Norsk Hydro Ventures, Ridgewood Capital, Easton Hunt, and Data Systems & Software. The company has now taken in a total of $40.9M in venture financing.
  • In one of the more titillating moves recently, micro fuel cell developer Neah Power has gone public through a reverse merger with Growth Merger... which is a defunct adult entertainment company. The move essentially allows Neah Power to go public through the old Growth Merger shell, a not-uncommon move, and often such shells can have colorful pasts. PE Week Wire suggests that this provides liquidity for Neah's existing investors, but for many such reverse mergers it's not the case, it's instead a vehicle for the company to go to public markets for future fundraising needs (often via private placements); but the company often remains a microcap with low daily trading volume and thus it doesn't provide much extra exit potential for large private investors...

Monday, March 20, 2006

News you can use

In advance of this week's Cleantech Venture Forum in San Francisco, here are some news stories to talk about in the networking sessions, if you're able to attend...
  • Building on last week's discussion of the hydrogen economy comes this useful update on the current state of micro fuel cell commercialization -- a tech some have looked to for earlier market adoption than hydrogen-fueled PEMs, focusing on battery replacement instead of stationary or vehicular power. "But profitability in the segment appears to be elusive, as the technology remains in the R&D stage for now."
  • Tyler Hamilton reports on the white-hot solar market, by focusing on a Canadian company that will be at the Forum... "Solarbuzz LLC, a San Francisco-based research firm focused on the solar industry, reported last week that the generating capacity of solar PV installations around the world grew by a stunning 39 per cent in 2005, with more than $1 billion (U.S.) invested in new plants to manufacture solar cells. The industry also raised nearly $2 billion on the capital markets last year, and was one of the hottest areas of venture capital investment."
Unfortunately, due to scheduling conflicts I won't be able to attend the event myself, but attending readers should look for my Expansion Capital Partners colleague Kjartan Jansen, who will be there and has kindly offered to share his thoughts on this site during the week... Look for his posts over the next couple of days.

Wednesday, March 15, 2006

VCs and the hydrogen economy: An update

With the National Hydrogen Association conference in full swing this week, complete with lots of talk of "hydrogen highways" and emissions-free cars and fuel cells, it seems like a good time to check in on the hydrogen tech market from the venture investors' standpoint.

The short answer appears to be that hydrogen-economy investments are limping along. Note that this is not to be confused with any general statement about fuel cells fueled by anything other than direct hydrogen, but instead I'm referring only to the generation, storage, and use of hydrogen as a fuel, unreformed out of methane, etc. We'll deal with SOFCs another day...

By my count (and it's likely an incomplete look, but probably indicative), there have been only two hydrogen economy venture investments announced so far this quarter (ClearEdge and Safe Hydrogen), with the quarter almost over. In first quarter 2005, there were six or so. Not real compelling data points, two isolated quarters' worth of data, true. But amid all of the hype in the public realm now about the hydrogen economy, it's intriguing to see relatively low activity among investors.

This lack of activity comes while there are important technological and market developments being announced all of the time, such as recent mentions of:
  • 33 states have announced plans for some kind of support for hydrogen economy infrastructure, and in California fueling stations are already being built.
So why aren't investors funding a huge portfolio of hydrogen economy startups, as is happening in solar right now? There are several possible answers to this question:

1. The first possible answer is to refute the question -- certainly some investors are actively looking at and investing in hydrogen economy startups. The numbers may not be huge, but it's still happening.

Nevertheless, the numbers are low. And some hydrogen/ fuel cell focused venture firms have talked about how they are looking to now move beyond the niche into other, broader areas. So while it's an overgeneralization to say that investor interest in the hydrogen economy has fallen off entirely, it's certainly waned a bit.

Someone's going to take issue with that statement, that things are "limping along" in terms of venture investments in this market, which is fine, it's all relative and somewhat subjective -- but again, compare it with the activity in solar right now. Even if you re-phrase the question as "why is solar getting so much more investor interest than hydrogen tech," it's still largely the same issue.

2. Another answer I've heard mentioned is that the entrepreneurial activity has passed beyond the startup stage, to publicly-traded companies and the likes of GE.

A few early startups in the market took advantage of friendly investment environments to go public at huge valuations early in their lifespan, taking them out of the venture investment stage before they were fully commercialized. Meanwhile, larger players with bigger names have gotten into the act, and have been consolidating the industry a bit and pushing their own internal innovation efforts, making it tougher for new startups to compete. Unfortunately for this argument... The market I'm talking about is the solar market, which continues to be white-hot for VCs. So it's hard to put a lot of weight behind this argument.

In reality, if companies like GE and Air Products are taking leadership roles in the development of a hydrogen economy, it should serve to both legitimize the market opportunity and improve exit potential (via trade sale) for investors.

3. Another potential answer is that the potential for IPO exits is low.

Certainly, publicly-traded hydrogen economy stocks have fallen dramatically from their peaks. But even at the lower prices, individual investors are still driving pretty attractive multiples (from the company's perspective). Take Ballard Power -- sure, it's down to $6 or so from a high in 2000 of over $100/share. But it's still trading at more than 12x ttm revenues. And public market appetite for new hydrogen-economy issuances remains high, as the IPO of Hoku Scientific shows -- while down from its post-offering peak, it's still trading above where it debuted, and at around 15x ttm revenues.

With these and other examples, and all of the media and political hype, it's hard to argue that a hydrogen economy startup that was doing well wouldn't get a good reception as an IPO.

4. The answer perhaps most heard is that VCs think the hydrogen economy is going to take a long time to arrive, if it's going to develop at all.

This argument has a lot of merit -- VCs I speak to tend to talk about the infrastructure and market adoption hurdles facing the emergence of a "hydrogen economy." They talk about how the likely market adoption period is longer than their funds' investment periods. They talk about how they don't want to invest in markets that are heavily dependent upon government subsidies. All of which are probably true for hydrogen tech. Even the most aggressive program in the U.S., California's, talks about 50-100 fueling stations statewide by 2010. Compare that to the 11,000 retail gas stations in California. The solar industry is growing 30%+ a year off of a nice base, whereas hydrogen and fuel cells remain mostly at a beta stage, as a generalization.

Nevertheless, take a look at this fascinating survey of "alternative energy industry" members and experts. Note that the survey concludes that these experts feel it will take until 2014 for solar power to achieve competitive prices (which I assume to mean unsubsidized). Mass-produced hydrogen-powered cars only take a couple more years after that, in the minds of those surveyed. So according to these industry experts, in many ways solar is just as far away from unsubsidized economic competitiveness as the hydrogen economy. Plus, there are niches (such as industrial hydrogen) where hydrogen tech innovators can find early beachheads in the market. And sure, solar is getting a lot of near-term subsidies that are driving the market right now -- but so are hydrogen techs. So it's still a bit of a funny contrast.

One analyst report recently stated, "Investors in solar companies are rewarding these firms for their ability to commercialize products, increase production capacity and exhibit a path to profitability. Failure to exhibit these same characteristics is the main reason that most other U.S. alternative energy companies continue to trade at multiples below their solar peers." Probably true. There's a lot of venture investor interest in solar technologies that seem to be a long way away from profitability today, and relatively less interest in similarly early-staged hydrogen tech companies. But investors have an easier time seeing the path to commercialization of those early solar technologies.

5. Finally, another answer people point to is that most venture investors (aside from seed/ early stage VCs, in some cases) really need to see markets today, and that a) hydrogen and fuel cell markets remain relatively small; and b) what's often called a "herd mentality" for VCs reflects the fact that seeing other investors' activity in a given technology area helps to legitimize that sector.

This answer, along with the "it's beyond my investment horizon" answer from above, probably explains a lot. CleanEdge recently concluded that global wind and solar markets are over $11B each, while fuel cell markets total around $1B today, "primarily for research contracts and demonstration and test units." And it's much easier to invest in the technology that other firms are investing in, that's already a 10x bigger market, than a market that's smaller and less covered by your colleagues. Nevertheless, in other venture sectors there are early stage/ seed investors willing to bet on market creation when there's enough positive signs that it will take place (think Web 2.0). Either most VCs don't see those signs in hydrogen tech right now, or they're not acting on them as they do with other markets.

That having been said, there are definitely seed and early stage investors in cleantech who are looking into these technologies and taking stakes in various possible market development scenarios. Remember, this is all a discussion about relative activity levels...

In the end, the answer is a bit of all of the above. Many venture investors remain somewhat uncertain about the market and science risk in hydrogen tech, their colleagues aren't legitimizing the opportunity for them, and the near-term market is relatively small versus other clean energy investment areas. There are exceptions to all of the preceding statement, but it remains a broadly applicable generalization.

So the next question is... will the media, government and political attention, as well as the continual announcements of technological innovations, start to attract more venture investor attention anytime soon?

Monday, March 13, 2006

Stirling Danmark raises approx. $2M; SJF closes on $15M

  • Stirling Danmark, a Danish manufacturer of biomass-fueled Stirling engines for power generation with zero CO2 impact, has raised approximately $2M in seed financing. Funders include EGJ Development Ltd., SEED Capital and Vaekstfonden. The company will be looking to hire a CEO, and hopes to achieve revenues of 20m euro within five years.
  • SJF Ventures, which focuses on cleantech and workforce innovation investments, has closed on $15M in commitments to their second fund. Investors in the fund include Calvert Social Investment Fund, Deutsche Bank, MBNA, Wachovia, Merrill Lynch, HSBC, State Street, KeyBank, and The F. B. Heron and Mary Reynolds Babcock Foundations.

Friday, March 10, 2006

Stories from the week

In case you missed them, below are some interesting stories from the past week or so:
  • Tyler Hamilton has tracked down some interesting info about the Kleiner ultracap startup EEStor, which has been "stealth" for a while. His Clean Break column here also links to his full Toronto Star article on the topic. Ultracaps have a lot of potential to take on batteries in certain applications where rapid charging and discharging is valuable (the highest profile example being electric vehicles). Cost, however, remains an issue around which further innovation is being sought (and, of course, funded).
  • The next technology you've never heard of that will save the world: Modified high-density plasma toroidal collisions. Start stocking up on heavy water today! “Heat is a particularly interesting discussion since our discovery will reduce waste heat from cars by about 70%... thereby reducing global warming.” The good news is that they're developing a version for your home that will not emit radiation, which is a nice feature. Best of all, and certainly totally coincidentally for the timing of this article, the developers of this breakthrough approach are raising $10m in funding.
  • Here's a useful report on the upcoming wave of IPOs (particularly solar IPOs) expected to be coming out of China. 42% of all Chinese companies are planning stock issues? OK, then, we're going to need a lot of new tickers... Regardless, there is a lot of emerging demand in China for clean technologies, in many cases driven by very favorable government policies, so it's not surprising to see a lot of entrepreneurial activity in the field that would attract a lot of outside/ public market investment, and this article does a very good job of exploring that trend.
  • Want to win $25M? The folks behind the X Prize are now developing a new effort to inspire market introduction of mass-produced hyper-efficient cars, hopefully providing inspiration and incentive for entrepreneurs and VCs/angels. Start your engines!
  • Finally (self-promotion alert), here's some follow-up media coverage of this week's cleantech VC data from the Cleantech Venture Network. It'll be interesting to see if the momentum continues in the first quarter data when that comes out, or if there will be a near-term normalization.

ISE, Concentrix, EnvironmentIQ, Ometric

  • ISE, a manufacturer of hybrid drivetrains for buses and heavy trucks, announced a $25M Series B. NGP Energy Technology Partners, Rockport, and Third Avenue Management participated in the round. The round brings total financing to $31.7M to date.
  • EnvironmentIQ, f/k/a Camaxys, took in $15M in funding from Fidelity Ventures and Cazenove Private Equity. The company's enterprise software assists corporate Environment Health and Safety ("EH&S") efforts. Apparently this funding represents a bit of a restart for the company, which has gone through a wide variety of financings in the past.
  • Ometric, an optical spectroscopy startup that is looking forward to launching its first products soon, took in an undisclosed amount of financing from Sequoia Capital and The Trelys Funds. We've talked about the cleantech applications of optical sensors before. Ometric appears to be initially targeting pharmaceutical quality assurance applications, but one of the appealing features of emerging optical sensor technologies in general is that they tend to lend themselves to a broad range of applications, including environmental monitoring. For an example, take Expansion Capital portfolio company Tiger Optics (self-promotion alert), which has developed a different proprietary spectroscopy solution aimed initially at the semiconductor/ high purity gases markets, but which is developing (and in several cases, successfully selling) applications for automotive emissions testing, atmospheric pollutant monitoring, pharma, medical diagnostics, continuous process manufacturing, etc. When these optical sensing technologies represent true proprietary breakthroughs, they can serve as "platform technologies", enjoying both TCO and performance advantages, with strong growth potential across a broad range of cleantech applications.

Wednesday, March 08, 2006

Cleantech investments skyrocket in 4Q05

Following up on yesterday's cleantech market growth news comes impressive data from the Cleantech Venture Network today, showing that a half a billion dollars were invested into cleantech startups by VCs in the fourth quarter last year. Matt Marshall's already got the scoop (as well as a link to the press release), and he contrasts these totals with total semiconductor venture investments in the same period.

These results show a huge uptick in VC activity in cleantech sectors, a 60% increase on fourth quarter numbers from 2004, and an 18% increase on 3Q05 figures. The numbers show that cleantech grew to 10% of all venture investments in the quarter. Sure, one can go back and forth on the specific figures (and the Cleantech Venture Network does a terrific job with an inherently impossible task), but the directional answer is clear -- these results simply put some numbers down to back up the clear trend toward more and more VC investments in clean technologies.

Here's the AP newswire story.

Tuesday, March 07, 2006

Clean energy on the rise -- $40B in 2005

Clean Edge put out their annual report on clean energy markets, and even to those expecting to see strong growth, the results were surprisingly good. According to their study,

"Global wind and solar markets reached $11.8 billion and $11.2 billion in 2005 -- up 47% and 55%, respectively, from a year earlier. The market for biofuels hit $15.7 billion globally in 2005, up more than 15% from the previous year."

Fuel cell markets remained relatively small, at $1.2B (as they describe it, "primarily for research contracts and demonstration and test units"), and their 10-year expectations for the market have retrenched somewhat (this year's 2015 forecast is the same as last year's 2014 forecast).

Overall, Clean Edge expects the market to increase 4x from $40B in 2005 to $167B over the next ten years -- a 15+% annual growth rate. Last year's survey suggested a 10-year CAGR of around 20% in these markets, but over the last year they've grown 33%, so things are moving faster than even Clean Edge had perhaps expected. (Interestingly, it appears they expect the growth of the wind power market to slow down considerably in the out years, but perhaps I'm reading too much into the 2004 vs. 2005 numbers)

Also, released in conjunction with the market report, Nth Power and Clean Edge released their annual survey of clean energy investing by the venture community. Unsurprisingly, that was also up -- to $917M, which they report is up 28% (although last year's announcement said 2004 totals were $520M). They peg the clean energy portion of the overall venture capital market at 4.2%, up from 3.3% last year by their calculations. The number of deals they identified went down from 81 to 84, but it looks like they may have boosted their 2004 deal numbers retroactively with more deal inclusion, so perhaps that will happen again this time.

Interestingly, the mean deal size went up from $8.4M to $10.9M, while the median deal size only increased a little bit from $6M to $6.5M. Which suggests a few bigger deals really drove the increase in total investment this year. But it's tough to tell with the shifts in 2004 numbers (the differing calculations of clean energy investment figures by various groups is something we discussed last year as well). It's all a bit confusing, but the basic storyline is the same -- more VCs are investing in clean energy.

Of course, solar was the highlighted investment sector. We'll have to start making more of an effort to talk about the other cleantech sectors beyond energy and solar in particular, even if that's all anyone writes about right now...

Kudos to Clean Edge and Nth Power for good, helpful reports.

Sunday, March 05, 2006

The Carlyle Group embraces green energy

More evidence of the trend of generalist investors getting into cleantech investing: Founder and Managing Director David Rubenstein told attendees at a private equity conference in Germany that the firm intends "to be much more active in the wind, power, solar energy, biomass and geothermal areas." The article describing his speech also mentions that Carlyle will be raising a private equity fund to specifically focus on renewable energy infrastructure. Rubenstein's statements probably relate primarily to the firm's later stage investment activities, but there's reason to believe this approach will extend into the firm's early-stage investments as well.

In any case, as later stage financial investors get more active in cleantech, it improves the possibilities for M&A exits and for project financing for venture investors' portfolio companies. The cleantech "ecosystem" continues to fill out nicely...

Wednesday, March 01, 2006

Various news items

Busy week, so excuse the laundry list of news items of interest:
  • Seattle Biofuels' Martin Tobias and others have formed the Northwest Energy Angel Group to fund regional clean energy startups. Two articles cover the group here and here. Will this signal the beginning of a trend of other regional cleantech-focused angel groups? The role of angel investors in cleantech is a topic we've touched on before.
  • Finally, a couple of interesting columns on solar. First, a good catchup on the industry by pundit Peter Fusaro. Secondly, a report that the looming silicon shortage is driving M&A in the industry. Fast-moving trends are rapidly changing the shape of the industry.

Renewable Ventures and MicroGreen Polymers

  • Renewable Ventures, which is going to be providing financing to offset the upfront costs of installing solar systems, has announced that they (and their institutional investors) have $100M of funds to put into such financings. See this Red Herring story for more information on the company's efforts; the company appears to be an emerging competitor to SunEdison, which earlier raised $60M for third-party solar financing, as well as GE Commercial Finance, which is also providing financing options. Renewable Ventures claims to have financed 1MW of solar developments through 2005.
  • MicroGreen Polymers, which has developed thermoformed plastics with added durability and heat insulation, has raised $2.4M in their first significant raise of capital. Two unnamed private financing groups led the raise, which also included WRF Capital and local angel investors. As this article describes, one of the most promising early applications for the plastic would be eliminating the need to "double-cup" when you get your morning caffeine fix...
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