The view from the Valley

Spent the entire day driving up and down Sand Hill Road today, catching up with west coast investors I hadn’t seen in quite a while, and it was a pretty informative (and extremely long and tiring) day.

I’d been told by Brian Fan, the Senior Director of Research at the Cleantech Group (he pulls together all their deal tallies), that “the starting point on valuation right now is 50% of the valuation of the last round.”  Provocative stuff.  However, I suspect that says more about the “Valley Valuation” inflation that had been happening in ‘07-‘08 in a couple of high profile sectors, rather than a dramatic valuation reset across the board.  Basically, that may be true in solar, and after all, solar is 40% of the dollars that went into cleantech in 2008, so it’s easy (but probably wrong) to paint the entire sector with that brush.

That having been said, a 61 cents per dollar secondaries discount level is a sobering valuation statistic, even if it has selection bias.

But regardless of valuation, it’s clear everyone expects to see a lot more high-profile startups that are completely resetting.  In other words, doing a restart, raising a small round and considering it a Series A, crushing down the previous ownership (and often, tens of millions of dollars previously invested in the company), repositioning the company toward some kind of “Plan B”.  This will mean some good buying opportunities, but also is going to be a serious hiccup in the market, when even relatively healthy startups can’t raise the money to keep moving forward and have to abandon their plans.

It was also clear that the downturn is affecting different investors in very different ways.  Some were having to take a breather, just pulling back on their cleantech efforts (albeit unofficially, of course).  Others are hungry and active and seeing lots of buying opportunities.

1H09 is starting to feel like quite a crucible period for the cleantech venture community and their investments.

Also notable:  Everyone is now interested in some flavor of energy efficiency/ smart grid.  And no one told me (as I’d occasionally been told before) that they were actively looking for more capital intensive opportunities.

Deal announcements since the last update:

• Ze-Gen raised a $20mm Series B led by Oman-based Omaz Zawawi Establishment and including existing investors Flagship, VantagePoint and the Massachusetts Technology Development Corp.

• Boston Power raised a $55mm Series D led by Foundation Asset Management and including existing investors Oak Investment Partners, Venrock,      GGV Capital and Gabriel Venture Partners.

• WaterHealth International announced the first close of an anticipated $20mm Series D, with insiders Dow Venture Capital and SAIL Venture Partners anchoring the new raise.

• Graphene Energy raised a $500k seed round from Quercus and 21Ventures.  Advanced Hydro also raised a $500k seed round from the same two investors.  This makes 48 for Quercus, according to GTM.

• Fallbrook Technologies did a first close on an anticipated $25.4mm round of financing, with NGEN putting in $10mm and Robeco putting in another $10mm.

• Zeachem raised a $34mm Series B co-led by Globespan Capital Partners and PrairieGold Venture Partners, with follow-on investments by MDV, Firelake and Valero Energy Corp.

• SolFocus has raised $47.5mm of a targeted $60-70mm Series C, led by Apex Venture Partners and including existing investors.

• Funds in the news:  Suddenly I’m feeling insecure about the fact that Bjork could be a better cleantech investor than me...  The Hebrew University of Jerusalem’s Technology Transfer Office has launched a million dollar cleantech fund...  Also, Woody Tasch is raising a Slow Money fund.

• Cleantech investors and others in the news:  Congrats to both Todd Kimmel and Mayfield Fund for Todd’s joining the firm—had lunch with Todd today, he’s quite the cleantech “Boy Wonder” (sorry, Todd, couldn’t resist repeating that gem)...  And another one of my favorite people in cleantech, Paul Dickerson, has left the DOE to lead law firm Haynes and Boone’s new cleantech practice group.

Other news and notes:

Freakonomics on cleantech...  Doerr and Friedman on U.S. cleantech competitiveness...  Meanwhile Obama calls for doubling renewable energy in three years...  And UK conservatives are bidding for regional leadership as well...  Earth2Tech puts up 10 predictions—and Neal tears them down...  Neal also is down on solar...  78 percent spike in land-use applications for solar projects...  More cleantech layoffs—here and here...  Finally, I thought this was amusing, and it gives me the excuse to type ‘Wollongong’.