Smooth Stone Vows To Nearly Eliminate Server Power Use In Data Centers

August 16, 2010

Secretive chipmaker Smooth Stone came out of stealth today with an announcement of $48 million in funding and a vow to virtually eliminate server power use in data centers.

The sheer size of the Austin company’s first venture round provides a useful validation of its business plan. The funding drew investors Battery Ventures, Highland Capital Partners, Flybridge Capital Partners, Texas Instruments, the Advanced Technology Investment Company and ARM, which had already provided money to the company and has a seat on its board. (Smooth Stone had previously raised $3 million of seed capital.)

The company is among a new wave of start-ups aiming to cut data center power use – specifically server energy consumption.

CEO Barry Evans declined to provide details about its development and delivery of an ARM-based chip. But he said the goal is to deliver a “disruptive” technology that will eliminate “almost all” of the power demands of a data-center server. ARM chips are generally used in low-power devices, such as cell phones and handhelds.

“We want to take power out of the equation” for data center managers, he said in an interview. “The problem is becoming so acute” – along with data-center rack space.

Other companies addressing the market include SeaMicro, which promises one-quarter the power and one-quarter the space of a typical Intel-based Xeon server. The company’s SM1000 server uses 512 Atom chips, another Intel chip made for netbooks and other low-power devices.

A third company apparently making high-efficiency processors for servers is Angilux, which Google bought earlier this month.

Smooth Stone’s business model appears to be focused on chip making, leaving the development of servers to partners and customers. The company isn’t offering much detail on its plans other than to say closing the $48 million round required it to have all the important pieces lined up, from technology to market validation.

Smooth Stone has been engaged with the market for some time, says Evans.

He adds that the money will allow it to complete its chip development and double the size of its development team over two to three months. That could hasten its move into the market.

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Posted by Mark Boslet

Will The U.S. Generate Too Much Energy? Vinod Khosla Thinks So

August 12, 2010

The potential for clean-tech innovation is so great you might be wise to expect the unexpected. What about an energy glut?

This was the prediction of rock star venture capitalist Vinod Khosla during a panel discussion Tuesday. The event at Google’s Silicon Valley campus was held to discuss the implications of California’s Proposition 23, an attempt to rollback the state’s ambitious climate legislation.

But Khosla stole the show with his outlook for the clean-tech innovation and energy use. “In 10 to 15 years, we will be shutting down (power) plants” because of an excess of electricity in this country, Khosla said. There is an “infinite” opportunity for technological innovation.

Such an upbeat outlook is no surprise from a man whose venture firm, Khosla Ventures, is an active clean-tech investor. Khosla said his firm is backing companies that hope to cut energy use in lighting and data center server racks by 80 percent.

He is equally upbeat about prospects for the United States over China – not always the prevailing wisdom these days. “I won’t say China is winning the clean-tech race,” he says. “But they are clearly paying a lot more attention to the race.”

Here are several other observations from the panel:

*Asked if there was an advantage to creating companies in Silicon Valley rather than China, Khosla was emphatic. “No question about it.” The people are here. The markets are here.

*Nuclear power no longer has an advantage over renewables, he added. There hasn’t been a nuclear plant build in recent years that can beat $7,000 a kilowatt. That makes wind and solar (in some parts of the world) competitive, he says.

*Proposition 23 is a threat because it will kill the clean-energy markets California’s A.B. 32 created. Both Khosla and Google Green Energy Czar William Wiehl concur on this point. Proposition 23, which will go to the ballot in November, would suspend A.B. 32 until the state’s unemployment rate drops to 5.5 percent or less for four consecutive quarters. Texas oil companies Valero and Tesoro back the measure. A.B. 32 sets reporting guidelines for polluters, establishes a statewide limit for carbon and guides emissions back to 1990 levels by 2020.

*A.B. 32 has helped create 500,000 clean-tech jobs in California, Wiehl says.

*Google, adds Wiehl, has made strides with energy efficiency. The company builds its own data centers and servers. As a result, data center energy use is one half of what it would be if the company followed industry-standard best practices, he said.

*As to the next “Google.” “There is no doubt in my mind we will see 10 of these” in clean tech, says Khosla. “Today California has the pole position to win that race.”

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Posted by Mark Boslet

Are Venture Capitalists Starving Clean Tech Innovation?

July 22, 2010

Clean-tech investing is a top priority for venture capitalists. But a big chunk of their money is avoiding the tiniest, early-stage start-ups with the most ambitious plans for innovation in favor of more established, later stage businesses.

The result could be a dearth of innovation several years from now, when a new generation of companies might be expected to fuel growth in the industry.

The trend toward later stage investing appears to have been gathering steam in the past year. In 2008, 197 follow-on investment deals were sealed in the United States compared with 93 first-round financings, a 2-to-1 ratio of later stage versus early stage.

In the first quarter of this year, the ratio was closer to 3-to-1, with 85 follow-on rounds completed compared with 31 first fundings.

“There are too few start-ups,” complains long-time industry insider Mark Jensen, managing partner for national venture capital services at Deloitte & Touche.

This shift comes amid a clear sign that clean tech is a growing venture capital priority – both domestically and abroad. A recent study from Deloitte & Touche and the National Venture Capital Association found that 80 percent of general partners plan to increase their clean-tech investing over the next five years. The commitment was far ahead of their number two priority, health care services, which 63 percent said they would fund more actively.

The survey contacted more than 500 venture capitalists in nine countries, including the United States, China, France, the United Kingdom, Brazil, Canada, Israel and India. And it found the intentions were pretty uniform country to country. Clean tech was the top focus for VCS in the United States, China, India, the United Kingdom, Germany, Canada and France.

And yet in countries such as the United States and Europe, money is flowing most readily to later stage businesses where partners hope for a big kill if a high profile Better Place or Amyris goes public.

The fallout is that early-stage entrepreneurs are forced to seek money from angel investors for seed and sometimes first rounds. In some cases, angels have begun playing the role of venture capitalists, but with less cash to deploy.

This was clearly the case in the second quarter. Venture capitalists in the United States set a quarterly record by investing $1.47 billion in clean-tech start-ups, a 107 percent increase from the first quarter.

But the number of companies receiving money remained almost unchanged at 71, compared with 70 in the first quarter.

Large deals dominated. Better Place raised $350 million, BrightSource collected $150 million and Boston Power added $62 million to its bank account.

Experts such as Jensen say they don’t expect the trend to reverse itself any time soon. At least not until VCs start making some money on clean-tech and become more comfortable taking on risk.

Until then, early stage businesses are likely to find money hard to get.

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Posted by Mark Boslet

Clean Tech Investments Hit Quarterly Record

July 16, 2010

Clean-tech investing set a record in the second quarter led by a handful of large deals.

The up tick by venture capitalists suggests investment levels should remain strong through the rest of the year.

But there is caution in the figures released by the National Venture Capital Association, Thomson Reuters and PricewaterhouseCoopers. The number of companies receiving money remained largely unchanged from the first quarter, indicating that the investment surge is confined to a relatively small group of start-ups.

The quarterly MoneyTree survey found venture capitalists invested $1.47 billion in clean-tech start-ups during the three months, a 107 percent increase from the first quarter of 2010. (The increase was an even greater 198 percent from the second quarter of last year, when the recession gripped the economy.)

Seventy-one companies received money in the quarter, compared with 70 in the first quarter.

The MoneyTree numbers are the second set of figures to confirm the quarterly investment trends. Earlier this month, the Cleantech Group found a 65 percent quarterly rise with big deals leading the way. The Cleantech Group measures investments worldwide, which partly explains the differences. The MoneyTree surveys focuses on the U.S.

Among the top deals, electric-car battery-swapping company Better Place raised $350 million, the fourth largest deal in the past 15 years.

Also in the top ten, solar plant developer BrightSource raised $150 million; solar technology developer Stion raised $70 million; lithium-ion battery maker Boston Power raised $62 million; electric-car maker Miles Electric Vehicles raised $57 million and solar system financer SunRun raised $55 million.

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Posted by Mark Boslet

Venture Industry Is In A Trough

July 12, 2010

The venture-capital industry is less a harbinger of things to come for the clean-tech industry than it used to be.

In the early years of this century, private money from venture investors helped defined which companies lived and died, which expanded and which did not.

Markets for solar panels, biofuels and smart meters have grown substantially since then. Market-place demand, economic trends and government spending now wield bigger influences on company prosperity.

So the news Monday morning that venture industry fundraising has swooned will have less impact on clean-tech companies than it would have four years ago. But it is still not good.

The National Venture Capital Association and Thomson Reuters announced that the amount of money going into new venture funds fell 49 percent in the second quarter to $1.9 billion. The quarterly total is the lowest since 2003.

Clearly the industry succumbed to the financial turmoil stirred up by the debt crisis in Europe and the corresponding fears of a slower United States economy. NVCA President Mark Heesen says the fund raising trough is likely to continue through the year.

The challenge for venture firms is they raise their money from big pension funds, endowments and financial houses that are sensitive to changes in the broad investment environment. Add that to fears of a continued slow IPO market, from which venture funds make money – and the mixture is catatonic.

A few successes in the IPO market could change this. If Tesla Motors holds onto a gain, or Amyris gets a warm reception, big money could loosen up.

But on the present course, there will be less money for clean-tech companies and more willingness to invest in smaller rounds.

Is this a sign of a long-term change in venture capital? Probably not. Is it a sign of short term slowing of investments. Yes.

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Posted by Mark Boslet

Solar Tops Venture Investing But Watch Out Below

July 1, 2010

Overall, the second quarter appears a stable investment period for venture capital and clean tech.

A breakdown of second quarter clean-tech investment categories shows the prominence of solar

Venture capital firms poured $2.02 billion into 140 companies despite a relatively tumultuous three months in the public markets. This global total nearly matches the $2.04 of the first quarter and is up 43 percent from last year (an almost pointless comparison given the depths of the global downturn last year).

What’s really interesting in Thursday report from the Cleantech Group and Deloitte is the amount of money VC continued to put into solar start-ups, despite the prevailing wisdom that these cash-intensive investments so popular several years ago had seen their day. Without that money – $811 million – venture investing looks depressed and should signal a warning for the rest of the year.

Solar drew the largest chunk of the money, and big deals were the fashion of the day. Solyndra took in $175 million; BrightSource claimed $150 million; and Amonix, a developer of a concentrating photovoltaic technology, won $129.4 million from Kleiner Perkins Caufield & Byers and others.

The conclusion one might draw is that VCs continue to think solar will be a big money maker and a substantial piece of the world’s energy future. But there are a variety of factors at play, some not so sanguine. Solyndra took its money after withdrawing an IPO that was unlikely to be welcomed on Wall Street. There may have been no alternative except for venture investors to walk away from money already spent.

BrightSource, too, had special needs. It is trying to secure its first solar thermal plant in the Southwest desert and faces an end-of-year tax credit deadline and a September 2011 construction deadline for its $1.37 billion in federal loan guarantees. It needs to have a lot happen between now and then, including taking in private money to match the public funds.

The second largest category, biofuels, roped $301 million. But this total also needs to be examined closely. Of the amount, Amyris captured almost $109 million. The company is shortly headed to the public markets for an IPO, so is a special investment case. Virent Energy Systems, a Wisconsin biofuel maker, attracted an additional $46 million from Shell and Cargill (not typical venture sources), and Kior of Texas took in $40.

The remaining categories of smart grid and energy efficiency posted investments of $256 million and $147 million, respectively.

In other words, while the quarter appeared stable, several large deals with special needs were responsible for a big slice of the total. Without them, a stable seeming clean-tech venture capital environment might be down in the dumps.

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Posted by Mark Boslet

Better Place Moves Ahead In China; GE Prepares Charging Station Rollout

June 16, 2010

Clean-tech venture capital is hard to come by, and the smart grid still moves at a glacial pace.

But General Electric is making good on its thrust into charging stations, and Better Place is revving up its efforts in China.

These were the key takeaways from Tuesday evening’s Cleantech Enterpreneurs: Think Global, Think EU event in Palo Alto.

Better Place has had more success in China over the past 90 days than anywhere else in the world, say Communications Vice President Joe Paluska

The session’s overall message was clear: electric cars are hot, but capital-intensive projects are not. And corporations steadily show interest in green technologies even if they not quite sure when the payback will come.

Here is what was said:

*General Electric said it will unveil a suite of electric car charging station products in several weeks. The company has a modular approach to product design, letting customers buy just what they need. The package will include both hardware and software, and a complete set-up will sell for about $2,500.

The company announced in February a partnership with Ohio-based Juice and promised the first joint offerings would be available by the end of June under the Plug Smart name. Watch out Coulomb Technologies, the giant has arrived.

Smart grid deployment around the world is slower than expected, says GE government relations specialist Kevin Decker

*Better Place expects to kick off a battery swapping pilot project in China, perhaps later this year. The company anticipates China will step up its commitment to electric cars in the same time frame adding new cities to the more than dozen already committed to promoting electric cars.

“We’ve had more success in China in the past 90 days than we’ve had in 2½ years” elsewhere, said Joe Paluska, vice president of communications.

In April, the company took a first step into the Chinese market by partnering with the automaker Chery Automobile to develop electric-car prototypes with switchable batteries. The company said at the time it hoped to secure a pilot project.

*Despite the excitement over electric cars, the deployment of the smart grid around the world is slower than expected given the billions of dollars being spent, said Kevin Decker, U.S. engagement leader in GE’s government-relations arm.

“The smart grid is going to be big,” he said. “It’s not big yet.”

*Venture capitalists continue to be cautious with cash and start-ups find it hard to get funding in Silicon Valley, said Chief Operating Officer and founder of Calisolar, Kamel Ounadjela.

“I would not be able to raise money today with the same story,” said Ounadjela. The company raised more than $170 million since it was formed in 2006.

*However, corporations are investing. Sheeraz Haji, president of research firm Cleantech Group, said investments were up 180 percent from the fourth to the first quarters, with several billion dollars committed. Companies such as Boeing and Raytheon are participating.

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Posted by Mark Boslet

Washington’s Big Money For Clean Tech

June 10, 2010

Microsoft Chairman Bill Gates and General Electric CEO Jeff Immelt hope to convince the federal government to triple clean tech investments.

Bill Gates and Jeff Immelt, CEO of GE, want the federal government to triple clean-tech investments

The pair of corporate titans said Thursday they want $16 billion to go each year to research, develop and deploy technologies including wind energy, solar and nuclear fission. Their newly created American Energy Innovation Council includes fellow heavyweights John Doerr, a venture capitalist, and Bank of America Chairman Chad Holliday, among others.

On the surface, this flood of money makes obvious sense. But in a sense it is nothing new. Contained in proposed federal legislation waiting Congressional approval is clean-tech spending that will increase to $50 billion a year by 2020 says Mark Trexler, director of climate strategies and markets at risk management firm DNV.

About $13 billion comes from tax credits and other fiscal measures. The rest is the result of ratepayer increases for electricity and other energy.

The spending should lead to massive investments for wind, solar and carbon capture, Trexler said at the Cleantech Institute conference at the University of California, Berkeley.

The trouble is the legislation has a slim chance of passing and the stalemate over bills, such as Waxman-Markey, could last another five to six years, says Trexler. If Democrats lose seats this fall and again in 2012, “it doesn’t make sense that the numbers look any better,” he says.

According to Maximilian Auffhammer, also at the Cleantech conference, the Waxman-Markey has another big benefit for clean tech that is not well known

Among the bill’s important policy mechanisms are “the most stringent building codes we have ever seen,” says Auffhammer, an associate professor at the University of California, Berkeley.

The bill would bring into existence the first nationwide system of building codes and tighten them every year through 2030. They will spark considerable demand for green building technologies, he says.

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Will Unprofitable Zipcar Be Another Webvan?

June 1, 2010

Zipcar’s IPO is likely to be an interesting test for clean-tech investing.

The company doesn’t make lithium batteries or solar cells. But it capitalizes on the same green product trends slowly taking shape in the United States and around the world.

Zipcar made a name for itself by convincing people to drive less and rely on car sharing networks when they do. And while it has racked up impressive sales, it is spilling red ink like an underwater oil well and forecasts more losses this year and possibly in the next several to come. So will it be a clean-tech Webvan or eventually a money gusher?

Zipcar had revenue of $131.2 million in 2009, but losses of $4.6 million. More red ink is on the way.

Wall Street may find out later this year as Zipcar said Tuesday it will sell about $75 million of stock to the public.

Some observers suggest the reception could be good despite the losses. Zipcar has built a brand and its cars are increasingly visible in the Bay Area, says Silicon Valley consultant Louis Gray. More importantly, losses at the company have been cut by more than half in the past year while revenue growth is about 30 percent a year.

Some companies “choose growth and seize opportunity” instead of hold down costs to generate profits, Gray says.

But professional investors are cautious. The company doesn’t have a new technology that differentiates it from its rivals – which are low-margin rental companies, such as Avis or Hertz, said one who asked to remain anonymous. It needs to show it can make money from invested capital – perhaps by selecting a typical market, such as San Francisco, and demonstrating  it can turn a profit. Then the task would be to translate that success into a formula it can apply to other markets.

“You don’t want to be another Webvan” and sacrifice profits for unrestrained growth, he said. The online grocer went bankrupt during the 2001 dot-com crash when it found it couldn’t turn a profit.

The venture capital-backed company claims its opportunities for expansion are stunning. Zipcar already operates what it claims is the world’s largest car sharing network, with operations in 13 metropolitan areas and on 150 university campuses in the U.S., Canada and the United Kingdom. It rents cars to a self-service clientele of 400,000 members, who pick them up in reserved parking spots and pay by the hour, or day.

Zipcar claims in a filing with the Securities and Exchange Commission it has identified 100 metropolitan areas across the globe ripe for expansion. “Given our estimate that ten million driving age residents, business commuters and university community residents live or work within a short walk of a Zipcar, we believe the adoption in our current cities represents only a small fraction of the existing market opportunity,” the filing states.

According to a Frost & Sullivan estimate contained in the document, the car-sharing market could amount to $3.3 billion by 2016.

However, building a profitable business is anything by assured. Revenue was $131.2 million in 2009 before the April acquisition of U.K.’s Streetcar. (Streetcar had revenue of $23.1 million.) Yet the company lost $4.6 million, an improvement from $14.5 million in 2008.

“We expect to incur net losses in 2010 (and) we do not know if our business operations will become profitable or if we will continue to incur net losses in 2011 and beyond. We expect to incur significant future expenses as we develop and expand our business,” according to the SEC filing.

The losses come on top of an accumulated deficit of $56.4 million, with $26.9 million in long-term debt. (Zipcar hopes to pay down this debt with the money from the IPO.)

Still, the company has no trouble calculating a positive value for its stock. That value was $3.49 in July 31, 2009 and $4.37 at the end of December.

With improving financial markets and lower risks in the company’s business the value rose to $5.27 by March 2010, Zipcar says in its filing. It will be interesting to see how accurate the estimate is as losses continue to pile up and investor faith is tested.

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Posted by Mark Boslet

Green Plastics, Water Tech And Management Software Are Hot Among Clean Tech Investors

May 14, 2010

Clean-tech investors appear to be shifting their focus from energy efficiency to water technologies, green plastics and software tools to manage the horde of data expected to flow across the smart grid.

Water is the next carbon, says H-P's Judy Glazer

With the economy on the mend, money again has been seeping into green start-ups. But a shift in focus appears to reflect the limits of a still capital-constrained environment.

VCs appear to be betting on companies that can do more with less. The exception is where technologies have the chance to turn a market on its ear – such as plastics made from carbon and materials other than oil.

This is certainly the case for Gerd Goette, managing partner at Siemens Venture Capital, an organization with 40 different funds and investments in 150 companies.

Goette says he is interested in software and services that connect power generators and customers – systems that turn bills into real-time communications and put supply and demand face to face. Some interesting business models might bypass utilities entirely, he said.

One particular need is for software tools to manage the flood of electric cars expected to enter European, U.S. and Chinese markets in coming years. When millions of cars draw power, the demands on the electric grid will multiply.

Software infrastructure also is a focus for Andrew Williamson, a director at Physic Ventures in San Francisco. Corporations need clean-tech tools for metrics and measurement, he says.

Other areas where he is starting to invest are green plastics and water technologies that could offer big returns by muscling bottled water out off the shelves of retail stores.

“Water is going to be the next carbon,” agrees Judy Glazer, director of global, social and environmental responsibility at Hewlett-Packard. That seems to be the consensus of the environmental community, she notes.

Goette says he is intrigued as well with sensing technology that might monitor plants, equipment and the like.

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