The funny thing about percentages

Both Eric Wesoff (of GTM) and the Cleantech Group released their Q1 cleantech venture numbers this week, and they were pretty close to each other in terms of total dollar amounts, with Wesoff tallying $836mm (but suggesting that undisclosed deals will take the number closer to $1B) and the Cleantech Group’s total at $1B.

But it’s always very interesting to see how such numbers are interpreted.  With a column “Optimistic News in Greentech VC,” Wesoff writes that the total—which he pegs at “close to 2007 levels” and compares favorably to Q1 2008 totals, which he had counted at “more than a billion dollars” at the time—is very healthy under the global economic circumstances, and a sign of strength in the sector.

Meanwhile, the Cleantech Group’s press release is very different in tone, talking about a 48% decline from the previous year’s totals. This, of course, led to even more negative headlines in some press coverage.

So wait a minute, how can this be?  Especially since, when I wrote about early Q1 2008 tallies a year ago, I mentioned the Cleantech Group’s totals were at $1.25B, reasonably close to Wesoff’s “more than a billion dollars”...

Basically, it’s another illustration of how good analysts using slightly different methodologies can arrive at very different results.  I checked with Brian Fan of the Cleantech Group, and he clarified that, after the initial Q1 2008 tallies had been released, then two additional and large Q1 deals were later disclosed:  A123, and Nanosolar.  Together, they ended up pushing the Cleantech Group’s Q1 2008 tally up close to $2B.  Which then explains why a $1B Q1 2009 would be a 48% decline, naturally.

I haven’t confirmed with Wesoff, but my guess is that he also captured those two deals in his tallies, but put them into the Q2 2008 category.  It would make sense, too.

So an arbitrary date in last year’s calendar is the difference between the first quarter of this year looking surprisingly healthy, or looking really dire, once you start comparing year-on-year percentages.  But it doesn’t matter, really.  The really important thing to note is simply that the dollars going into cleantech have declined somewhat, but haven’t stopped by any means.

A couple of other interesting notes:  Wesoff counts 14 out of his 59 deals as seed or early stage, which of course means yet another quarter when later-stage investments were the vast majority of deals done (or at least reported), in this case a 3:1 ratio of later-stage to seed/early stage.

Furthermore, it’s also interesting to note that deal sizes appear to be declining across all stages.  It’s tough to prove this point, but when you look at the Cleantech Group’s data point that the average deal size (a figure dominated by follow-ons, probably) has declined from $20mm to $12.3mm since Q3 2008, and also note this article describing how angel rounds across all sectors are still happening but at smaller sizes, it paints a picture of a lot of venture- and angel-backed companies making do with a lot less capital per round.  This may or may not also reflect lower valuations—my guess is that it does, but I don’t have any proof.

And as always, there are differences in deal counts between two different tallies—Wesoff at 59 deals, Cleantech Group at 82.  This can be explained in any number of ways, of course, and one thing to always note is the differences in geographic coverage between the two methodologies.  But interestingly, in terms of # of rounds, the Cleantech Group’s North American tally (which appears to be something like 45 deals or so) is only slightly below their Q1 2008 count.

So piecing it all together, this data appears to roughly confirm what I’d suggested might happen, back in December:  The mega-deals aren’t happening now, and deal sizes are generally down, so the dollars are way down but the number of deals is only slightly down.  Cleantech is still a bright spot within the overall venture picture.

Nice work again by both Wesoff and Fan.  Just always remember to look past the percentages, and especially past the headlines, and dig into the actual numbers.

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Are cleantech VCs finally starting to get active again?

I spent a couple of busy days in Washington, DC this week, meeting with old colleagues and making some new connections.  (And I drove all 1,000 round-trip miles instead of taking the train, how do you like me now, Xconomy!)  One thing that was impressively clear in DC is how front-and-center energy technology is among staffers on the Hill.  A lot of very important things being worked on there right now, and minds seem to be pretty focused.  Great to see.  Unfortunately, it’s also clear that the entire cleantech venture and startup community is gearing up to bombard the Hill and the DOE with funding requests...

Meanwhile, outside of the Beltway, it’s starting to feel like maybe some cleantech VCs are starting to get back in the game.  It’s just anecdotal, but I see my colleagues in the industry getting more serious about doing deals, after a hiatus of a few months.

For a while there, even VCs with capital left in their funds were sitting on the sidelines.  The limited partner community just wasn’t making commitments to funds.  So VCs were forced to consider that it might be a long time before they could raise additional capital.  And thus, even if they still had capital left in their existing funds, they needed to hoard their resources and a) make sure they had enough in reserve to fully back their existing investments; and b) make sure that they stretched out their remaining new deals, so doing fewer deals over the course of 2009 than they had originally anticipated.

Of course, many funds are still in this situation, so it’s not like dealflow is coming rushing back.  It’s still a very difficult time for VCs to raise capital from limited partners, and thus it’s still a very difficult time for startups to raise capital from VCs.  But I do see some faint stirrings of life out there.

Naturally, however, that won’t be reflected in recent deal announcements, since there’s a significant lag between VC interest and then deals and then the eventual press releases…  So here are the few announced deals from the past week:

• Lightscape Materials, an LED phosphor spinout from Sarnoff Corp., has raised a $3mm Series A from Wisepower Co. LTD and Foosung HDS Co. LTD.

• Nordic Windpower has raised $3.5mm in convertible notes from new investors I2BF Venture Capital and Pulsar Energy Capital, alongside existing investors Goldman Sachs and Impax Asset Management.

• New Leaf Paper, offering “environmentally responsible papers”, has taken in a $5mm round of financing led by Pacific Community Ventures.

• Cleantech investors in the news:  Redpoint Ventures has added a cleantech CTO, Dr. Nety Krishna…  and Robeco is teaming up with China’s TEDA International to launch a new sustainable private equity fund.

Other news and notes:  REBN continues to grow, with another great REBN-MidAtlantic event in Philly, and a new chapter being launched in North Carolina...  If you’re reading the NYT Mag article on Freeman Dyson today, here’s Hansen’s reply...  A good catch-up on cleantech in the Pacific Northwest…  Here’s a cogent critique of efforts to focus on breakthrough R&D efforts in energytech instead of driving adoption of already-commercialized energy efficiency technologies…  You heard it here last—Al Gore is planning a new book timed to impact the upcoming climate legislation debate in Washington…  Finally, the Conspicuous Consumption Award has to go to this vacuum, which nature must certainly abhor—if you can afford to buy it, I’m guessing you’re not using it yourself.

Getting a job in cleantech

It’s terrific to see the first of the DOE loan guarantees being awarded, to Solyndra it turns out.  Good acceleration by the DOE to get that kind of industry support underway, and the first of a lot more to come.

With a big influx of government support coming into the industry, there will be new project-related jobs as well.  In these economic times, that will be welcome news to many readers, I’m sure.

I’ve already written a few words of guidance in the past, once last year, and once a few years back.

In terms of places to look for the jobs, besides the generic job boards out there, a few green collar job sites have sprung up that are worth checking out:

• Clean Edge’s job board, which has been done in partnership with Hobbs & Towne.

• CleanTechies.com

• Renewable Energy Jobs

• Clean Tech Recruits

• There’s also a new jobs tab on the Renewable Energy Business Network’s LinkedIn discussion board.

There are others out there as well—cleantech recruiters and executive search firms are encouraged to add their sites as comments to this column.

Other news and notes:  My latest Mass High Tech column, on the need to promote industrial demand response as a stimulus priority…  Steven Chu agrees with me that energy efficiency is sexy…  Andrew Friendly of ATV also writes in MHT about the stimulus and cleantech…  A perfect storm for water?...  NEA’s Scott Sandell has provocative thoughts on whether or not cleantech is “dead”...  And finally, at least there’s one new LP putting money into cleantech—ATP.

Cleantech Investing: Four Years Old

Happened to notice that Sunday will be the fourth anniversary of my first Cleantech Investing post.  Going back through the archives really helps bring home what a wild ride it has been over the past 48 months in this sector.  And the fun continues…

Many, many thanks to those of you who have made this site such a fun and interactive experience.  Keep those comments and questions and gripes coming!  I hope I can continue to make this column a useful resource for you (and the few thousand of our closest friends who regularly stop by).  And if you are a web2.0 type, check out the Twitter feed and the Facebook page for readers, so you can network with your fellow C.I. subscribers…

In this era of “capital efficiency” and “energy efficiency is the next big thing” and “smart grid”, it’s fun to look back at some of what I and others have said on this over the past few years.  In particular, this three part series (column one, column two, and column three) on the smart grid kind of made me both smile and cringe when I stumbled upon it today.

And of course, there are deals to report:

• PE Hub yesterday reported two solar financings that sound like they’re of the convertible notes + warrants variety:  Optisolar raised $30mm, and Heliovolt has raised $17.5mm of a planned $32mm round.

• Thin film developer Sencera has taken in a $15.6mm investment from Quercus Trust.

• VentureWire reported that Silver Spring Networks has added $15mm to its Series D.  The additional capital apparently came in at a 20% premium on their first close back in October.

Other news and notes:  Here’s one take on the SBIR reauthorization debate…  CFR has a good overview of the clean coal debate...  Google’s Dan Reicher says energy efficiency could be the next big thing...  And finally, I’ll extend the same generous offer to Fisker that I made (unsuccessfully) to Tesla—simply give me one of your cars for a two-week test drive, and I promise a GLOWING review on this website!

A T.R.I. for carbon emissions?

Perhaps I’m just a hopeless policy wonk, but I was very excited to see the news that the EPA has proposed that major sources of carbon emissions should have to report what and how much they put out their smokestacks.

Information is an undervalued but critically important regulatory tool.  If information gathering and reporting programs are well-designed, they can drive powerful market forces at minimal costs, with maximum flexibility.

When policy pundits talk about regulating a pollutant like carbon emissions, what you hear most of the time are arguments for either “market-based” regulations (like cap-and-trade or carbon tax) or “command-and-control” regulations (like “best available control technology”, where everyone is required to achieve the same performance with the same technology).  But few talk about “information-based” regulations.

Yet back in the 1980s, Congress’ implementation of the Toxics Release Inventory as part of a “right to know” law turned out to be a very important illustration of the potential usefulness of information as a regulatory tool.  The thinking was simple:  Require companies that were putting toxic pollutants into the environment (even if at legally-allowed levels) to report it into a simple database that the public could get access to.  If you want to see what the data looks like, check out Planet Hazard, a great web-based interface.

The impacts were significant and immediate—companies started reducing their emissions of toxics (with total reported emissions dropping 48% from 1988 to 2000).  In some cases companies were embarrassed by local news reports identifying the biggest polluters in certain regions.  And in other cases I’ve seen, some CEOs had never been forced to acknowledge the amount of toxics being emitted out of their factories, and they recognized that pollution is very often a form of wasteful cost, so TRI spurred waste-reduction efforts that improved profitability.

I emphasize that last point because it shows that not only was making the data available a relatively low-cost way to get significantly reduced emissions, the information also became a useful business tool for businesses that were looking to lower their costs and environmental impact.

TRI has come under attack for putting reporting burdens on companies, costs which have been measured in the hundreds of millions of dollars by some accounts.  But of course, that misses the point entirely—this is information these companies should be gathering anyway, if they’re run by profit-maximizing businesspeople.  And it’s certainly a less-costly alternative to BACT standards or other more active regulations that could be placed on emitters of toxic waste, in any attempt to achieve the same reductions.  So it was a great win to see Obama already signing legislation strengthening TRI reporting requirements.

So now we have the EPA proposing greenhouse gas emitters be put into a somewhat similar system.  And I think it’s a terrific idea.

Again, this is information that major GHG emitters should already be tracking.  Because carbon out the smokestack represents some form of waste, potentially avoidable.  Companies like eQuilibrium have already been signing up corporate customers who want to use their carbon emissions tallies to help them identify places where they are wasting energy.  There are efficient ways to gather this information now, it shouldn’t be a huge administrative burden.

But as the example of TRI showed, such information gathering and reporting can have a major impact on corporate performance.  Information is a powerful regulatory tool, and it’s great to see it start to be deployed in the fight against climate change.

A TRI equivalent for carbon emissions could be a lot more important than most people realize.

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Catching up on a month of cleantech dealflow

Even in this economy, cleantech deals keep happening.  We’re way behind on mentioning them here, so here’s a catch-up of sorts:

• Microbial fuel cell startup Emefcy raised a Series A round of financing.

• ChapDrive AS, a Norwegian wind turbine transmission startup, has raised an EUR 6mm round of financing.  Existing investors NorthZone Ventures, Hafslund Venture and Energy Capital Management, and new investors StatoilHydro and Innovation Norway provided the funding.

• Lithium ion battery developer Nexeon raised a GBP 10mm round of financing led by Invesco, and including return investors PUK Ventures and Imperial.

• Wind project developer Invenergy took in a $30mm convertible note from Leaf Clean Energy.

• Oasys Water took in a $10mm Series A, co-led by Flagship and ATV, and including DFJ.  The company was formed with seed investment from GreatPoint Ventures.

• Triton Format AG, a Germany-based water tech play, raised an EUR 10mm round of financing led by zouk ventures, and including Meidlinger Partners.

• VentureWire reported that Bloom Energy is raising a $150mm Series F round of financing, with an asked-for valuation of $1.45B.

• Italian fuel cell manufacturer Electro Power has raised a GBP 4.7mm round of financing led by a private investor and existing investor 360° Capital Partners.

• Intel Capital invested an undisclosed amount into Pulse Technologies FZ-LLC, a UAE-based developer of home and hotel room automation software and systems.

• Green building startup Soladigm took in $10.6 in debt and convertible notes from Khosla Ventures and Sigma, reported VentureWire.

• China-based Astronergy raised $50mm from two Chinese private equity investors.

• Smart window manufacturer SAGE Electrochromics raised a $20mm insider Series C (note: link opens pdf) led by Good Energies, and including Applied Ventures, NV Bekaert SA and Bekaert Corporation.

• Advantage Capital Partners has invested $5.85mm in Environmental Operations Inc.

• Access Venture Partners has invested an undisclosed amount of capital into LED developer TerraLux.

• VentureWire reported that Fisker Automotive has added $3mm to their $65mm Series C.  Meanwhile that money has gone right out the door as they also reported Fisker invested as part of a $4mm round into Advanced Lithium Power, Inc.

• India’s Acme Group has invested $30mm into eSolar in exchange for a 5% ownership stake and exclusive rights to deploy the technology in India.

• VWire reported that Smith Electric Vehicles took in $10mm in undisclosed financing earlier this year, as part of the company’s formation.

• Green data center startup SynapSense added $7mm to their 2007 Series B round, with the funds provided by Robert Bosch.

• Craton Equity Partners invested an undisclosed amount of capital in GridPoint.  And also committed $10mm to Principle Energy Limited, a sub-saharan Africa biofuels project developer.

• Shell has reinvested in Codexis—VentureBeat reports the amount was roughly the same as their previous $30mm 2007 investment.

• NorSun raised a $72.3mm round of venture financing and a $94mm bank loan.  Good Energies led the equity round, and were joined by Scatec AS and Norsk Hydro ASA.

• Think, the electric vehicle company, went bankrupt, reports VentureWire, and now its U.S. operation has been restructured to be a 100% subsidiary of Think AS, the Norwegian parent.  As part of the restructuring, Kleiner Perkins now has a direct stake in Think AS and RockPort has increased their stake in the parent as well.  The company is reportedly seeking a $40mm new equity infusion.

Cleantech investors and other luminaries in the news:

• Last month, VentureWire reported that CalPERS is considering a $200mm commitment to Khosla’s new $1B targeted expansion-stage fund.  The article also pointed out a few other firms out there raising $1B+ sized later stage funds, including Riverstone Holdings, Clean Energy Partners, and C Change Investments.

• VWire also reported that Macquarie is in the process of raising a $400mm cleantech fund-of-funds.

• Element Ventures announced the final close of their new cleantech fund at $486mm.

• Index Ventures closed on a $438.8mm new fund, with cleantech as one stated area of interest.

• Here’s a good thought piece from Paul Dickerson, the previous COO of the DOE’s Energy Efficiency and Renewable Energy program.  And here’s a good example of what Paul is referring to.

• Khosla Ventures has added Pierre Lamond, formerly of Sequoia…  And Braemar has added Scott DePasquale, formerly of GE…  Also, my @Ventures colleague Matt Horton has taken on an interim role as CEO at Propel Fuels [mandatory self-promotion alert, naturally].

Other news and notes:  Here in Boston, what sounds like a terrific group has been launched—New England Women in Energy and the Environment (NEWIEE)...  Meanwhile, on the policy front, without getting into the pros and cons of it, it’s worth pointing out the cleantech implications of an emerging debate on patent reform, as illustrated by this column [3/16 update: changed link]...  Also, here’s another good article looking at the implications from the mention of cap and trade in Obama’s budget…  China’s cleantech sector took in $1.3B in venture capital and private equity last year, 120% up from 2007, according to one survey...  Xconomy’s been running through a list of cleantech companies in selected regions, such as this list of Oregon players...  Martin LaMonica searches for the Google of cleantech...  Clean Edge released their latest annual clean energy market report, and while 2008 was a record year, they suggest 2009 won’t be so rosy…  In Britain, the BVCA has set up an energy, environment and technology group...  Finally, “Show of hands,” everyone!