Clean Tech IPOs Have Much To Prove, Says Top VC

April 26, 2010

Clean-tech IPOs have yet to prove themselves.

Sure, investor excitement is on the rise with Tesla Motors, Solyndra, Amyris and Ameresco preparing to sell shares to the public. Another potential blockbuster, Silver Spring Networks, is said to have chosen its investment bankers.

It appears the market for clean-tech IPOs is thawing, says Erik Straser, a venture capitalist at Mohr Davidow Ventures

But the track record of recent green IPOs is anything but encouraging. Lithium battery maker A123 Systems went public in September and its shares trade below their introductory price.

Sensata Technologies Holding, a sensor maker from the Netherlands, is hanging onto a gain over its initial price in March, but only a modest one. Biofuel maker Codexis, which debuted its shares last week, is suffering the same fate. And the fortunes of Jinko Solar Holding of China are worse. It canceled its coming out altogether.

“The clean-tech IPOs at this stage are still proving themselves,” says Erik Straser, a partner at the venture firm Mohr Davidow Ventures and leader of its cleantech investment team. Nevertheless, “it appears the markets today are thawing.”

Straser says it is likely there will be more clean-tech IPO filings this year and even a period when less mature companies will go public. That’s because the criteria for what a company needs to interest investors is unsettled.

Several years ago, a high-tech company might need $100 million in annual revenue and profits to attract investors. Clean-tech companies appear to have more latitude. Revenue can be in the neighborhood of $50 million, Straser said in an interview, and business models vary.

Some companies have high production costs and are working them down. Others have businesses that are more future than present. Silicon Valley electric car manufacturer Tesla is an example.

The company sells its Roadster sports car today, but IPO investors will bet on the success of the less expensive Model S sedan, he says. What the Roadster did is show there is a high-end market for high-end electric cars, says Straser, who has invested in green-tech firms such as ZeaChem, Nanosolar and OPX Biotechnologies.

Still, it is hard to predict how clean-tech IPOs will do this year. What is clear is that at some point, investors will become more discriminating and look for more mature companies rather than trendy ones, says Straser. When will this occur? No one knows.

1 Comment | news | Tagged: , , , , , , , , , , , , | Permalink
Posted by Mark Boslet

Clean Tech Start Ups Could Feel The Pain Of Sharply Lower Venture Capital Fundraising

April 12, 2010

Venture capitalists remained cautious in the first quarter of the year with money collected for new and existing funds falling sharply.

Venture capital fund raising was down 31 percent in the first quartet, the worst start to a year since 1993.

The industry raised $3.6 billion, down 31 percent from the first quarter of 2009.  Last year’s first quarter came at the height of the global downturn, so the weakness was particularly profound.

The implications for clean-tech and other start-ups are ominous if the trend continues. With less money in tomorrow’s funds, fewer companies will receive investments and competition for dollars will rise.

Experts fear the industry could be headed toward a multi-year consolidation, with venture firms going out of business and partners looking for jobs elsewhere. Only the strongest firms will survive.

The result is innovation could suffer. VCs provide an important link in the business chain by providing the fuel for scientific breakthroughs to turn into commercial products. Without their money, fewer companies will be created.

The first quarter numbers, calculated by the National Venture Capital Association (press release available on this site) and Thomson Reuters, suggest this year could be on par with 2009. Then 140 funds raised $15 billion, about half of what was raised in 2008.

Last quarter the slowest opening quarter to a year since 1993.

Leave a Comment » | news | Tagged: , , | Permalink
Posted by Mark Boslet

Top 10 Clean Tech VCs Include Draper Fisher And Braemar

April 1, 2010

The first quarter saw a global venture capital industry more willing to do clean-tech deals.

Venture money going into green energy and energy conservation companies rose 83 percent from last year to $1.9 billion. Investing climbed 29 percent from a weak fourth quarter, especially weak in the U.S.

So who are these more eager investors? Below is a list of top firms and the deals they did. But first, it is worth noting that 81 percent of money originated from firms in North America. Europe and Israel accounted for 14 percent of dollars, China, 4 percent, and India, 1 percent, according to an analysis by the Cleantech Group and Deloitte.

Here are the top 10 firms, the number of deals they did and some of the companies they supported. All but two (Carbon Trust Investments and Good Energies) are based in the U.S.:

*Draper Fisher Jurvetson, 5, Genomatica, Konarka Technologies, Power Assure, Prudent Energy, Scientific Conservation;
*Braemar Energy Ventures, 3, Ciris Energy, Enerkem, Luminus Devices;
*Carbon Trust Investments, 3 , AeroThermal, Marine Current Turbines, Oxsensis;
*Foundation Capital, 3, Azure Power, CalStar Products, Purfresh;
*Good Energies, 3, Agile Energy, Konarka Technologies, Nexamp;
*Intel Capital, 3, Cymbet Corporation, SpectraWatt;
*Nth Power, 3, CalStar Products, Propel Biofuels, Tempronics;
*Rho Ventures, 3, Ciris Energy, Coulomb Technologies, Enerkem;
*Sequoia Capital, 3, Achates Power, Prudent Energy, and;
*VantagePoint Venture Partners, 3, Adura Technologies, Better Place, Ze-gen.

Leave a Comment » | news | Tagged: , , , , , , , | Permalink
Posted by Mark Boslet

Energy Efficiency To Be Top Clean Tech Venture Capital Investment Theme

March 24, 2010

Move aside solar and electric cars. Energy efficiency will be the top investment theme for venture capitalists this year.

This prediction comes from the Cleantech Group, which said it conducted interviews with venture capitalists, early-stage companies and industry pundits.

Solar to be overtaken as top venture investment category with big opportunities for energy efficiency in commercial buildings

“Our analysis shows that energy efficiency is poised to overtake solar as a top investment category in 2010, and commercial buildings represent a prime target,” according to group President Sheeraz Haji.

The explanation is that venture capitalists are looking for faster paybacks for their clean-tech dollars and places where they can put smaller amounts of money to work. An energy-efficiency company might use computers and software to analyze energy use data instead of build a factory to make solar panels. This means it needed less money to get started.

The biggest opportunity for energy-efficiency innovations is likely to be commercial buildings. Buildings, both commercial and residential, consume about 40 percent of the nation’s energy and 72 percent of its electricity. Commercial buildings make a more immediate target because administrators are eager to save money.

Among the products most like to get funding are those that will use information technology and communications to permit greater visibility into and control over energy use. But low-power Wi-Fi sensors, building automation systems, smart lighting and energy-efficient windows have bright futures.

5 Comments | news | Tagged: , , , , , , | Permalink
Posted by Mark Boslet

Debunking The Clean Tech Investment Myth

February 17, 2010

It seems to be in fashion to call clean tech the largest investment focus of venture capitalists – bigger than the traditional top dogs, software and biotechnology. Unfortunately it is not true.

This myth gets passed around by boosters, journalists and sometimes VCs. Just this week, it was repeated by the merger specialist and blogger Javier Herrero of Spain.

Last year wasn’t such a bad year for clean tech investing, asserts Herrero, with the category becoming the “single largest investment theme in 2Q09 and 3Q09.”

Not exactly on the mark. With financings down 50 percent in dollars for the year, it actually wasn’t such a great 12 months. But of course few businesses can claim it was.

The trouble is clean tech wasn’t even the largest investment category in the second quarter. It did top software and biotech in the third quarter. But for the year, clean-tech investments added up to between $1.9 billion and $2.6 billion while spending on software start-ups was at least $3.1 billion and biotech funding came in at about $3.5 billion.

All is not lost. Here is some better news for clean-tech investing and venture-back start-ups in general. According to an analysis by Fenwick & West, the industry turned a corner about mid-year.

During the first half of the year down rounds (where deals are done at lower valuations) made up 47 percent of transactions. By the second half, up rounds became the norm again, with 44 percent of deals granting companies a greater value.

The ratio for the clean-tech industry was slightly better than the average, despite that “some of the down rounds in the clean-tech industry were down by a large percentage.”  Fenwick & West did not detail what it meant by largest percentage.

Certainly 2009 was no stand-out year for clean tech. This year is likely to be much better.

1 Comment | news | Tagged: , , , | Permalink
Posted by Mark Boslet

Venture Capital Clean Tech Love Affair Is Maturing

February 8, 2010

U.S. venture firms are taking a more circumspect view of clean-tech investing. Less flash, more focus on profits.

That could lead to more start-ups trying to build businesses with less money.

According to a recent survey, substantial sums of money continue to flow into the industry. Ernst & Young reported Monday that $2.6 billion went into clean-tech start-ups last year, a noticeably more optimistic assessment than last month’s MoneyTree survey, which posted a figure of $1.9 billion. The higher sum suggests VCs were significantly more active last year than may have been thought.

The E&Y work also uncovered a second detail that didn’t show up in the MoneyTree study – which was conducted by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.  While investment dollars fell 45 percent in the fourth quarter, the number of deals were up – 21 percent to 62. More deals, smaller sums of money per company, more room for profits.

The MoneyTree work found that the number of deals in the quarter fell to 47 and that overall dollars declined 58 percent.

It is hard to know which of the surveys is more accurate. But the prospect of venture capitalists funding more companies at lower dollar values is interesting to contemplate. It suggests funds are seeing clean-tech investing more like they see information-technology investing: put a little money in, expect a lot back.  This prospect may encourage more VCs to take part.

Of course the shift to small deals is due in substantial part to the maturing of solar start-ups. In recent years, these companies needed large sums of money for manufacturing plants, and VCs were eager to provide them. That cycle is winding down. New solar ventures still get money, but in small allotments to explore new technologies.

At the same time, venture interest in clean tech has shifted to energy efficiency. It is here that small investment sums can start companies eager to develop, for example, software for energy management.

In the fourth quarter, energy efficiency received more money than any other category of clean-tech investing: $253 million. That total was inflated by the $105 million investment in smart meter maker Silver Spring Network. By even without Silver Spring, 21 deals were done, about a third of the total.

As venture capitalists look toward 2010, expect to see more funds using the game plan of the past. Dole out money slowly. Spread it around. Find ways to make each dollar go further.

3 Comments | news | Tagged: , , , , , | Permalink
Posted by Mark Boslet

Not All Clean Tech Start-ups Need $200 Million; The Other Side Of Venture Investing

November 25, 2009

Clean tech investing is often thought of as big money, big scale, speculative returns. But not all green start-ups require venture capitalists to write large checks.

The misconception is that every clean-energy project requires the hundreds of millions of dollars that have gone to Solyndra or Bloom Energy to construct manufacturing plants or take on complex technical problems.

Clean tech investor John Doerr says he crawls through university labs looking for early stage start-ups

Kleiner Perkins Caufield & Byers partner John Doerr says he has two templates for clean-tech investments. The big-scale businesses do get the big money, he says. But others firms wrestle with scientific breakthroughs and products that are still as many as 10 years out – and don’t require as much cash.

“We crawl through labs trying to find them,” says Doerr.

Other start-ups more closely resemble the young software companies of 10 years ago, which might have been working on enterprise products and needed just a couple million dollars.

These companies might be developing energy conservation software or products to spark new grid efficiencies. They require money “the same way the software companies were funded back in the 1990s,” says Scott Wornow, a partner at the law firm of Baker Botts.

One such company is Reality Mobile, whose software helps field workers and office staff communicate more effectively. The better communications helps avoids unnecessary repair trips.

Another is Consolidated Green Services, with offerings as varied as waste collection and carbon tracking.

It is not a capital-intensive business, says Wornow, and in that way is like many other green startups.

1 Comment | news | Tagged: , , , | Permalink
Posted by Mark Boslet

Next Entries »
Follow

Get every new post delivered to your Inbox.

Join 32 other followers