Green Tech Will Reinvent The Infrastructure Of The World, Says Vinod Khosla

It is hard to predict when green energy technologies such as solar, wind and biofuel will be cheaper than oil and coal.

Khosla Ventures will make more money from the Amyris Biotechnologies IPO than it has invested so far, says VC Vinod Khosla

But when they are, watch out. “We will fundamentally reinvent the infrastructure of the world,” says top clean-tech venture capitalist Vinod Khosla. “This is about changing assumptions.”

Khosla, who was interviewed at the GreenNet conference in San Francisco, said that once the cost of green energy is competitive with fossil fuels, Wall Street financiers will pour money into projects, eager for big returns. The reinvention of the infrastructure will take place over 10 to 15 years, he said.

Khosla defended the investment portfolio he’s accumulated since turning his attention to green tech about five years ago. He admitted he hasn’t yet made money with clean-tech start-ups.

But he vowed, just like the Wall Street moneymen, he would eventually rake in big bucks – green from green, you might say. “I’m pretty confident we will,” he said.  Already the book value of the portfolio – an estimate of its market value – is higher than the amount of money his firm, Khosla Ventures, invested.

Earlier this month, Amyris Biotechnologies, one of his biofuels firms, filed to go public. It should be a success, Khosla said. “We will make more money with this than we invested so far.”

He’s equally confident about his other companies. Half will bring positive returns to Khosla Ventures, he predicted, a high hit rate for a venture fund.

So what technologies does Khosla see as ripe for investment? LED lighting is attractive with breakthroughs possible, he said. Clean coal is another area he is investigating.

Disruptive Innovation Coming To Clean Tech, Says Steve Jurvetson

Steve Jurvetson’s Draper Fisher Jurvetson is the world’s largest clean-tech venture investor, with positions in 42 start-ups.

It is a portfolio this high-octane visionary would like to add to. The energy generation and fuels industries are “traditional businesses that haven’t been radically disrupted yet,” Jurvetson says, with an emphasis on “yet.”

Venture Capitalist Steve Jurvetson said he is excited by investment opportuniites in recycling and reuse as well as water purification

Jurvetson makes a point of looking for disruptive change from technological innovation. He was an initial investor the e-mail powerhouse Hotmail, eventually bought by Microsoft, and put money in the information-technology firms Interwoven and Kana.

His clean-tech holdings include equally exciting companies eager to break down walls in entrenched industries, including electric carmaker Tesla Motors and biofuels developer Synthetic Genomics.

Jurvetson is quick to point out he sees plenty of opportunity in clean-tech, despite the sagging economy. During an address at the Nordic Green II conference, he also had this to say:

*Many clean-tech start-ups are growing faster than information technology start-ups. Aggregate revenue from DFJ’s portfolio of companies was $450 million in 2008. It will be $1.4 billion this year.

*The most exciting investment opportunities in clean tech are recycling and reuse, and water purification. DFJ has not invested yet in geothermal energy. Jurvetson emphasizes “yet.”

*Electric scooters and bicycles are “very interesting,” he added. Sales volumes should be greater than all other electric vehicles combined. Presently they outsell electric cars in China.

*Jurvetson laments that he would love to make an investment in nuclear energy. “We keep meeting with these guys. There hasn’t been an obvious nuclear investment where we can help.”

*Included in the DFJ portfolio are: BrightSource Energy (booked $10 billion in revenue in two years) and EnerNOC (built a sustainable business model with $3.5 million and “this business is still in the early days of its potential”).

*Also on the list are: ScientificConservation (cuts commercial energy spending by 25 percent annually) and Genomatica (can build 4 billion microbes in a day.)

Expect to see more.

Clean Tech Venture Investing Entering Fourth Stage, Says VC

The venture industry placed its first clean-tech bets on solar start-ups about five years ago. Then came the biofuels companies turning corn, edible feedstocks, and eventually grasses and wood to gasoline and diesel replacements.

The fourth wave could focus on energy storage and new-era lighting, says venture capitalist Erik Straser.

Smart-grid and smart-meter start-ups made up the third wave of investing by a venture capital industry increasingly excited by the monstrous alternative energy and green technology markets.

Now a fourth wave is approaching with a focus that appears to be on energy storage, new-era lighting and with smart-grid money being doled out a slower pace.

“I think people are looking for the candidates for the fourth wave,” says Erik Straser, a partner at the VC firm Mohr Davidow Ventures and the head of its clean-tech investment team. “I think people would like to believe it is energy storage.”

There is little question energy storage – along with lighting – are huge opportunities. Imagine the sales of lithium ion and other advanced batteries when a million or so electric cars are manufactured annually, a production target that could be reach in five to 10 years. Companies also are beginning to develop storage batteries and devices for the home. Residents might employ them to store solar energy for use at night.

But the granddaddy of the opportunities is likely electric-grid storage, says Straser. Expect venture firms to take chances on new technologies, he says – such as new materials and systems but not necessarily lithium or nickel hydride.

In the lighting space, LEDs are likely to command the most attention. The motivation will be to find business plans from start-ups that provide new ways of making light emitting diodes or which lower the costs of turning the LED chips into bulbs.

The quest is “how to drive to the next price points,” says Straser, And to make the bundle of money that has so far eluded the clean-tech venture business.

Straser has in the past invested in biofuel companies, such as Catilin, solar start-up Nanosolar and coal gasification company Laurus Energy, among others.

Clean Tech IPOs Have Much To Prove, Says Top VC

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.

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

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.

Top 10 Clean Tech VCs Include Draper Fisher And Braemar

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.

Clean Tech Investing Bounces Back With Electric Cars Deals Leading The Way

Venture capitalists returned enthusiastically to clean-tech investing in the first quarter, increasing their spending. But they shun solar companies for electric cars and backed away from the smart grid. To hedge their bets, they spread their money more broadly than in the past, putting smaller sums in more companies.

Clean-tech venture investing rose in the first quarter after a soft fourth quarter. Source: Cleantech Group and Deloitte

Clean-tech start-ups globally received $1.9 billion during the three months, an 83 percent boost from the first quarter of 2009, when the depths of the recession brought investing to a stand still. Investments rebounded 29 percent from a soft fourth quarter, which perhaps is a more telling sign of the renewed vigor in the sector.

The number of deals in the quarter – 180 – set a record, edging out the 165 of the fourth quarter, according to a investment survey released by the Cleantech Group and accounting firm Deloitte.

In North America, VCs turned in their largest quarterly investment total in a year and a half. Venture firms in the region accounted for 81 percent of total dollars.

Perhaps the most disappointing news from the quarter was that venture investors continue to feed their portfolios, pouring most of their money into existing companies instead of new start-ups.

The transportation sector, including electric cars, was the quarter’s largest category. The electric car battery-swapping venture, Better Place, took in $350 million and electric carmaker Fisker raised $140 million. Battery maker Coda Automotive added $30 million to its bank account.

The greatest number of deals took place among energy-efficiency start-ups, including LED lighting companies.

Overseas, venture investing in Europe and Israel was down compared with the fourth quarter.

Energy Efficiency To Be Top Clean Tech Venture Capital Investment Theme

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.

Ontario Jump Starts Venture Capital Industry In Push For Clean Tech Silicon Valley

Ontario is eager to be a major player in clean tech.

With top research universities, entrepreneurial talent, a diverse population and a commitment to renewable energy, many of the ingredients are in place. Just last month, the Canadian province attracted Samsung, which will build plants to make wind turbines and solar modules.

Ontario has the opportunity to build a clean-tech cluster like Silicon Valley, says Deputy Minister George Ross. "One of the things we've been lacking is capital."

“We do believe there is an opportunity to build a cluster like Silicon Valley,” says George Ross, deputy minister at the ministry of research and innovation. “One of the things we’ve been lacking is capital.”

To remedy that, the province set out to build a clean-tech venture capital industry. That meant attracting C$205 million for a fund of fund to serve as a source of money for venture firms. Of the total, C$90 million came from the government.

It also meant setting aside C$29 million in government funds for seed-stage investments in young companies, and a C$250 million government fund to co-invest alongside VCs.

In late February, XPV Capital, the first new venture firm, closed its inaugural fund. Ross says he anticipates four more funds will close within a year. The target size for a fund is about C$100 million.

Start-ups also are getting money. So far, C$9.8 million has been invested in 20 companies, according to the ministry.

“The whole goal is to move money quickly into those companies,” says Ross. “We’re more or less a silent partner.”

Coupled with a commitment to renewable energy and efforts to create a climate for companies to prosper, “it’s a comprehensive strategy,” he adds.

Let’s see if it has the size and scale to work.

California Is First To Offer Big Incentives To Clean Tech Manufacturers

Immigrant entrepreneurs may be getting all the attention, but California is ponying up for domestic clean-tech manufacturers.

Is California the golden state again? Sens Kerry and Lugar draw accolades for innovative bill in Congress

The state on Thursday became the first to offer large-scale incentives to green-tech companies eager to set up shop in the U.S.

Both moves show how policy makers are shifting their focus to innovative companies and start-up founders to combat what many believe could be a long period of slow employment growth in the U.S.

For their part, Senators John Kerry (D-Mass) and Richard Lugar (R-Ind) introduced a clever bill in Congress that will make it easier for foreign entrepreneurs to obtain visas. If these innovators can raise $100,000 from angel investors or $250,000 from venture capitalists – and create at least five jobs in two years – they deserve special treatment, the bills states.

This long-sought effort to open America’s doors to creative foreigners drew support from more than 100 VCs.

The second barrel of policy initiative was fired at the start of the Cleantech Forum in San Francisco. The California Energy Commission said it set aside $90 million to support manufacturers. The decision reflects a new urgency in the state, which has lost 32 percent of its manufacturing base since the dot.com crash 2001. With it went 600,000 jobs.

Commission Chairman Karen Douglas said $30.6 million will be available in the form of low-interest loans for manufacturers focused on renewable energy or energy efficiency.

An additional $59.5 million of support will go to companies developing transportation technologies, such as electric cars, and renewable fuels.

With both announcements, it appears the time has come for the state and the country to open their sails and welcome the next generation of business leaders. The timing couldn’t be better considering the paltry $15 billion job package Congress approved Wednesday.

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