Rob Day 07 14 09, 7:24 AM

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The hidden dealflow:  Secondaries

While we discuss the numbers being tracked around new venture capital dollars into cleantech, in the background there's a totally different type of deal that goes on, and especially right now. 

In a "Secondary" transaction, a new investor buys the existing equity of a current investor in a startup.  It can be done in conjunction with a new funding, but often doesn't bring any new capital into the company at all.  It can be a specific acquisition of a company's equity from an existing investor to a new investor, or it also can happen more indirectly as an entire venture portfolio gets sold from a VC firm to a new institutional investor. Typically the seller of the equity or portfolio is facing a liquidity crunch and needs to sell off some of their holdings, even if at a discount, in order to raise some cash.  But it also can happen at the tail end of a VC's fund, in order to give their LPs some near-term finality and close out a fund even if some of the investments haven't exited.

And we'll never know just how much of this is happening in cleantech venture capital.  Because it doesn't get talked about very much, for obvious reasons.

But from all reports, it's happening quite a bit right now, especially as VCs continue to have trouble raising new funds.  There are some hints of the secondaries taking place, in such news as Daimler has already sold off 40% of the stake they recently bought in Tesla Motors.  But we're not hearing about the vast majority of secondary transactions that are taking place.  Nor will we.

Just something to keep in mind as we discuss the talked-about deals:

• SolFocus has added yet more to their Series C, with the final close at $77.6mm.  

• Water membrane developer inge watertechnologies has raised EUR5mm in venture financing, from new investor BayTech Venture Capital and existing investors Taprogge Watertech, Emerald Cleantech Fund I, Sustainable Performance Group, Siemens Venture Capital, StoneFund and Entrepreneurs Fund.

• Turbine Air Systems has raised at least $15mm of a targeted $50mm round of financing, with Element Partners participating.

• Algae biofuels continue to get a lot of buzz, and now Solix Biofuels has announced a $16.8mm Series A.  Shanghai Alliance Investment Ltd. (SAIL, but not to be confused with SAIL Venture Partners, another cleantech venture investor) led the round.

• Speaking of Sail Venture Partners, I missed reporting last month that they invested in Xtreme Power, as part of a $5mm round that the CEO of Xtreme describes as "not that big of an event for us".

• Pyron Solar has been acquired / rescued by Ellis Energy Investments.

• Finite Carbon has raised a Series A including $2mm from TL Ventures.

Other news and notes:  WHEB Ventures has held a 3rd closing on their second clean tech venture fund... Overall, however, fundraising by VC firms is way down, which is bad news for many startups since that means fewer checkwriters...  Finally, can a VC-backed startup cause earthquakes???