Following on some successful tests of their technology, and a commitment made by Altira Group last year, Enerpulse announced earlier this week that they have taken in a second tranche of funding from Altira, in the amount of $2M.

Enerpulse has an innovative sparkplug design that improves fuel efficiency. For transportation industries, even a small gain in fuel efficiency (Enerpulse claims 2.7% gains) -- particularly in the current market conditions -- can be a big deal for the bottom line... Delivery trucks and other such vehicles use a lot of fuel.

Enerpulse reports they will soon be going out for a Series B round of $3-5M, and they expect to launch their first commercial products late this year or in 2006.

[Note: Edited 6/5 to better reflect the applications that Enerpulse's product can address. Thanks to Derek for calling me on it.]

Think of it as another form of solar energy.

Wired has a good article on the potential for biomass-to-ethanol approaches, which could provide renewable sources of fuel, better energy security, and income for the American farmer. Much of the article focuses in on the debate between corn-based biomass and other sources such as switchgrass.

For cleantech venture investors it is often not clear how VCs can participate in this potential market. Most of the investment opportunities are going to be at the ethanol plant facility-level, or in new biomass-tailored agricultural products developed by big players. However, cleantech investors should be on the lookout for opportunities such as biotech-based developers of new strains of crops that are well-suited; for developers of new technologies for more efficient production of ethanol; and -- depending upon investment model -- for service providers and financial developers who specifically target servicing and/or developing fleets of biomass producers and ethanol plants.

The timing and political factors are highly uncertain, and the investment opportunities for technology-focused venture investors are not obvious. This may be a market generally better suited for project financing investors than VCs. However, at 10:1 energy yield ratios and $25/barrel crude oil equivalent prices, there may be something there, and it is worth tracking.

As discussed here and here ("griping" comment aside), there doesn't appear to be nearly as much of a cleantech cluster here in the bay area as there exists for IT and biotech. We've discussed before why that may be the case, and provided some reasons why the industry may continue to be scattered or why it may start to centralize (in which case the bay area would be a good candidate location).

It's not new, but it's worth mentioning an NRDC/ Environmental Entrepreneurs survey that was released last year, "Creating the California Cleantech Cluster." (note: opens a PDF) The author, Pat Burtis, interviewed a number of cleantech VCs (with an estimated $2.5B of cleantech-targeted funds under management) to get their thoughts on California as a cleantech investment region, and derived a few interesting tidbits, including:

• The VCs interviewed most often cited California as the most attractive region in which to make cleantech investments, twice as often as the next most attractive region (New England) was mentioned
  
• Strong VC support for public policies that position California to be in the forefront of innovative environmental regulations, to promote technology and market development
  

But the telling graph is Figure 2.2 on page 19. As a portion of total US venture investments by industry, in 2003 California received:

• 63% of all semiconductor VC funding
• 59% for computers and peripherals
• 56% for networking and equipment
• 55% for medical devices
• 43% for software and IT
• 38% for biotechnology
• 36% for telecom
• 33% for financial services
• and only 31% of total cleantech US venture investments went to California-based companies.

These are 2003 numbers, but as point of comparison California's overall share of VC funding that year was 43%, and according to the most recent Q1 numbers from Moneytree that remains the same (43.6%) today.

To some extent, the favorable view of California cleantech investing that was expressed by the VCs as described above may only reflect the fact that 11 out of the 21 VCs interviewed were California based. In fact, the fact that only 3 of the 21 were from New England, and yet New England still showed up strong in the rankings of attractive regions for cleantech investment, suggests that region has a strong pull as well. Indeed, New England took in 25% of 2003 North American VC cleantech funding versus 29% for California (note: US #s above versus North American #s here). Which of course leaves almost half of all funding going into entirely other regions altogether.

None of the above argues against the eventual development of a strong cleantech cluster in California, and the report does a good job of describing some ways that might happen over time. However, at least in comparison with other technology industries, cleantech funding does not appear to be centralized in the California region as much as one would expect.

As I said last time: To be effective -- at least at this stage in the industry's rapid, decentralized development -- cleantech investors are going to have to be willing to spend some significant time on airplanes. Because many of the more intriguing investment opportunities are going to be found outside of California and New England.

Claiming a technology for generating hydrogen and fuel gas from biomass (such as corn stalks, etc.), Virent Energy Systems today announced that they have raised $1.5M. The round was led by Venture Investors of Madison, WI, and Advantage Capital Partners also participated. It looks like the company is still in the product development stage.