Been remiss in updating this column recently, it's been a busy time on the investment front.  But I also took time to have a residential home energy audit and "Step 1" retrofit done by Next Step Living, a local Boston-based firm.  If you're in the New England region, I definitely recommend it, especially if you're a gas heat customer.  They sent two smart guys out for 3 hours, brought their air blower door and infrared camera to identify the problem areas, showed me a bunch of things I could do with good economic paybacks, did a fair amount of air-sealing while they were there, and took care of all the rebates, etc., so it really didn't end up costing me that much, more than worthwhile versus the savings.  A good example of how smart approaches to service plays in cleantech might be one of the missing links in growing energy tech markets and jobs -- all the technological innovations are great and all, but someone's got to actually install and implement these solutions in a customer-friendly way.

Anyways, on with the deals and news grab bag:

• Serious Materials has raised a $60M Series C.  Mesirow Financial led the round, which included new investors Enertech Capital, Cheyenne, and Saints Capital. Previous investors including New Enterprise Associates (NEA), Foundation Capital, Rustic Canyon Partners, Navitas Capital, and Staenberg also participated.

• Naturally Advanced Technologies raised a C$1M PIPE. 

• Environmental Technologies Fund led a new $10M financing round into Nujira (efficiently-powered cell tower tech), with existing investors also participating.

• Sungevity raised a $6M Series B led by Greener Capital.

• Solar Power Inc. raised a $12M PIPE.

• Swedish LED startup GLO AB raised a SEK82M Series B, including new investors Hafslund Venture AS and Agder Energi Venture AS, as well as existing investors Provider Venture Partners, Teknoinvest, Nano Future Invest, LU Innovation, and LUAB, along with the founders and employees of GLO.

• Liquidia Technologies raised a $7M round of financing led by Canaan Partners and including Pappas Ventures, NEA, Wakefield Group and Firelake Capital.

• Glacier Bay has taken in an additional $10M in funding led by the Westly Group, and including NEA and Quercus Trust. 

• Speaking of the Westly Group, they closed their second fund at $120M.

• Energy and environmental software vendor Hara has raised a $14M Series B led by JAFCO Ventures alongside Nth Power and existing investor Kleiner Perkins.

• Barclays and NGP Energy Technology Partners have made a "significant" investment into American Wind Capital Company.

Other randomness: 

• Will 2010 finally be the year we see production from the big-named CIGS players?  Looks like both Nanosolar and Miasole have finally got manufacturing facilities up and ready to go...

• Is Silicon Valley finally figuring out how much cleantech innovation is happening outside of Silicon Valley?  Note the subsequently panicky tone of the headline of this article...

• Congrats to Whitney Rockley on joining Emerald -- and congrats to Emerald on snagging her!

• Some thoughts on cleantech from Foundation Capital.

• Okay, VCs, step aside -- Google's gonna figure out that whole heliostat problem for you.

• On the subject of general VC stuff, here's a cogent argument against overly elevating the role of VCs in economic value creation... Some investors ask: "Should LPs keep chasing after the big brand GPs?"... And here's some good advice from a VC for entrepreneurs, on how and when to pitch.

• Definition of a crowded market:  Here's a list (a "sampling", actually) of 11 algal biofuel efforts located in Southern California alone.

• Hmmm... strikes me there must be some sampling bias in these results:  The "Global Cleantech 100" list that came out included 55 US-based companies, and not a single Chinese company. 

• Haven't read it yet, but this new GTM report on grid-scale storage looks potentially interesting (hint, hint, my friends).

• Renaissance Man:  I've been enjoying Excessive Entanglement, a novel by author Nick D'Arbeloff.  Those readers in the Boston area may also recognize Nick as the Executive Director of the New England Clean Energy Council.

Finally, it has basically nothing to do with cleantech, but this press release has to be the clear front-runner for most incomprehensible headline of 2009.  Enjoy!

The headline-grabbing news this week is Khosla Venture's recent fund closings, of their $275M seed fund and $800M "main fund".  It's good to see more seed capital available in the sector -- as we've talked about here before, things have probably shifted too heavily toward late stage deals over the past few quarters, leaving a critical funding gap at the seed stage for cleantech startups.  And it's also good, I think, to see such seed efforts split out into a separate fund from later-stage efforts.  In many of the larger recent cleantech funds, seed and growth stage have been conflated within the same fund, which sets up some internal management challenges and also from an LP's perspective makes it tough to find specialized early stage focus.

In the NYT article about the closings, however, I was a bit surprised to see the suggestion that a few million dollars' worth of investment is all it takes for a cleantech startup to prove their technology to the point of being able to secure project financing.  Now note, I'm not going to pick on Vinod for that quote, because I would bet there were nuances to it that didn't pass through the journalist-editor translation.  But it brings up an important point to discuss, nonetheless.

There is in fact a huge capital gap for cleantech startups around early project finance.  In most cleantech startups that will actually be producing anything (as opposed to software-based cleantech startups), building out production or manufacturing capacity is capital-intensive by definition.  To build out a commercial-scale solar fab could require tens or even hundreds of millions of dollars.  Ditto for biofuel plants, for utility-scale solar generation facilities, and for battery manufacturing lines. 

The problem is, project finance is traditionally very risk-averse, and very intolerant of any new technology.  Project finance firms are very good at structuring deals to enable the build-out of large generation or manufacturing projects, as long as they're not taking any technology risk and as long as the construction timeframe and future revenues and costs are very well understood.  That's why project finance will take a much lower expected rate of return than venture capital, because it's correspondingly lower risk.

So what we've seen this decade in cleantech has been the inability of cleantech startups to raise project finance or high levels of leverage for their first or even second commercial-scale facilities.  Even after having "proven" the technology at a pilot plant scale, it's still too early for project financiers to feel they have a good understanding of the construction timeframes and costs for a first of a kind ("FOAK") commercial scale plant.  Also, in many cases the market acceptance is still not locked in, and furthermore the technology will likely not be proven out to nearly the level of confidence that the project financiers would want to see.  So they just don't touch such things.

Thus, for the past few years we've seen venture capitalists stepping in to fund the FOAKs out of necessity.  When you see a $100M+ solar round, for example, there's some working capital and growth equity in there, but the majority of it is going to fill the gap that project finance is unwilling to fund.  It's not really venture capital.  It's quasi- project finance. 

I'm not against this type of activity per se, it can still provide some attractive risk-adjusted returns when it's done creatively.  But it's tough to see how that type of activity can be expected to generate the kinds of absolute returns that VCs are telling their LPs they're targeting, unless there's an opportunity to push a very, very attractive near-term exit afterwords (and there are few such exits right now).  And so when it gets done out of the same venture fund, it's just important to note that it's a bit of a stretch on the definition of "venture capital" as traditionally used.  So be it, rules are made to be broken.

However, what we've seen very clearly over the past 12 months is that such financing will greatly dry up at times.  And a number of high-flying startups have been left high and dry by the pull-back of VCs from FOAK funding.  So it's strange to get the impression from the NYT article that it's fine for VCs to invest in early stage capital-intensive opportunities, because it won't take much capital for the henceforth "proven" technology to bring in project finance to support full-scale commercialization.  FOAKs remain a big gap, one that has already killed a number of promising cleantech startups that had taken in tens of millions of dollars just to get to that point.  What I'm guessing the quote was really intended to say was that non-traditional players like corporate partners, large family offices and government financing can help solve the FOAK challenge, and to an extent that's true.  But it's far from the slam-dunk prospect that comes across in the article.

With $275M to put to work, at around $2M per first-time check, that "seed" Khosla fund must be planning on doing some significant follow-ons (tough to see how they would be able to manage upwards of 100 investments).  And then with the additional $800M in the "main" fund, it's probably a safe bet that KV will have to put some money into FOAKs just like many other VCs have.  Investors may have been advocating for smaller funds focused on capital efficient opportunities.  But there's little evidence such advocacy has really taken hold in Silicon Valley.

Deals from the past week or so:

• WoodPellets.com has raised an $11M Series B, led by Monitor Clipper Partners, and including previous investor .406 Ventures.

• Think Global AS has emerged from bankruptcy and has taken in a capital infusion of around $47M, from investors including several strategics.  Ener1 has put in $18M as part of the financing, in exchange for getting exclusive rights to supply Think with lithium ion batteries, and along with converting $3M in debt is now the biggest shareholder in the company at 31%.

• Utility-scale solar startup Tuusso Energy has raised $2M led by Pivotal Investments, and including Akula Energy Ventures.

• Solar converter startup eIQ has unstealthed and announced $10M in financing from NGEN and Robert Bosch Venture Capital.

• CFX Battery Inc. has closed on $5M of a planned $26.9M round.

• PE Hub reported that li-ion battery startup Seeo has raised $8.6M of new financing, including return backer Khosla Ventures.

• Membrane-based separation startup BPT has taken in a $12M Series B, co-led by US Venture Partners and Pitango Venture Capital, and including existing investors Aurum Ventures and Elron Electric Industries.

• ClearEdge Power, which is developing fuel cell systems for residential applications, has raised a $15M round of financing.

Other news and notes:  Another nobel laureate has come out as a pessimist on fuel cells -- at least "present" ones...  Here's a good list of the recipients of the recently-announced ARRA battery and EV awards...  Finally, if you're going to be in Boston on October 27th, check out the cleantech networking session being organized by PE Hub, featuring five insightful panelists (oh, and yours truly as well).

Last week, Katie Fehrenbacher opined that cleantech funding seems poised for another big bump in the near future.  She cited a few big recent deals, and some other factors that are potentially encouraging for investors right now. 

For what it's worth, it still seems like most investors are sitting on the sidelines.  The number of companies seeking funding remains high, but even many well-positioned companies are still having a hard time lining up capital.  And I'm not sure that will change anytime soon.  With a few exceptions, VCs continue to have a hard time raising new funds from LPs, and many are scaling back their investments accordingly.  Until the VCs have more visibility into when the LPs' purse strings will be loosened, many are keeping their remaining powder dry.  I don't see any signs of any near-term shift in LPs' willingness to put money into venture capital, and even once that starts to happen, there will be a pretty big lag time before that starts to flow through to actual venture investments.  Also, the early stage is being relatively neglected, meaning that there won't be a healthy pipeline of growth stage companies when the big investment dollars start looking at them again...

The new Deloitte report on global venture capital (note: link opens pdf) seems to back this up.  It shows how two to four times as many investors are scaling back their investments, as those increasing their level of investment (see pages 5 and 6).  And while almost none are shifting to focus on earlier stage, over a third are shifting toward later stage.  That data isn't cleantech-specific, but gives a good sense of the mood among VCs right now. 

Then again, the Deloitte report also shows 63% of investors saying they're going to be shifting their efforts into cleantech over the next 3 years.  So I guess I'm suggesting that, while cleantech remains a relative bright spot, the overall negative market vibe will continue to weigh it down for a while.

Of course, even in this moribund market there are signs of life, and even Katie rightfully caveats her relatively optimistic perspective by noting that the investment levels won't get back to where they were last year.  And it's the summer duldrums, too.  So let's celebrate the few deals and moves of the past week:

• NanoSteel has apparently taken in $8M of a planned $11M round of financing.

• Amyris Biotechnologies has apparently taken in $24.7M of a planned $62M round of financing.  

• Southwest Windpower has taken in additional financing, of an undisclosed amount.  PCG Clean Energy and Technology Fund participated alongside other existing investors Altira, GE Energy Financial Services, NGP Energy Technology Partners, and Rockport Capital.

• Plextronics has completed a $14M Series B-1 financing, led by Solvay North American Investments.  "Several" existing investors also participated.

• Cleantech investors in the news:  Matthew Nordan, co-founder of Lux Research (and one of the first to call the solar and biofuels subsegment bubble), has joined Venrock.

Other news and notes:  Time to get smart about the proposed "Green Bank"...  Finally, hey Richard, give Tennessee some credit!  ORNL, lots of sustainability efforts in the Chattanooga region, lots of cleantech-related manufacturing efforts: the Volunteer State may be a flyover instead of a destination for many software VCs, but certainly is gearing up for the implementation phase of cleantech.

In case you missed it, Flybridge's Jeff Bussgang wrote a pretty interesting column last week with some thoughts on how entrepreneurs should be thinking about valuation. 

It's a very good piece that makes an important point, that the way to think about valuation is much broader than just the stated pre-money.  I do have some quibbles with it, in the spirit of adding to a good idea...  First off, the principle is right but should be considered even more broadly, since the overall valuation picture is affected by much more than stock option refreshes.  Secondly, while the column argues that the larger option refresh makes the effective economic value roughly equivalent to the entrepreneurs, a larger stock option refresh is by itself a good thing for the entrepreneurs as well -- it avoids further dilution for additional option refreshes later, and also in some cases the bigger option pool might end up being used for additional incentives for the existing management team as well.  Thirdly, the use of the term "promote" is pretty confusing, since it means a totally different thing in other financial investment areas (such as real estate), so another term might be more useful, perhaps "effective premoney"?

But it brings up another point about valuation as well, one that I've seen happen in cleantech perhaps more often than in other sectors.  Since many (note: by no means ALL) cleantech investments can be capital-intensive, the capital needs even in earlier rounds can be higher than for other sectors.  Even a few years ago a $20m deal wasn't unusual for solar Series A rounds, for example.  And so in cleantech moreso than in some other sectors, for instance, we see valuation pressure forced by round sizes.

This is one of the backwards facts of venture capital -- valuation is often heavily influenced by round size.  It comes about because of a confluence of factors.  One, the management team is naturally sensitive to giving up too much ownership to investors, with a particular sticking point around 50% ownership in early rounds.  Two, in some areas like solar panel manufacturing and other capital intensive areas, the capital needs for necessary equipment can be large, and thus the round size could be double digits even for a Series A.  Three, in a sector with such huge potential upside as cleantech, and as the funds targeting cleantech (either as specialists or because big generalists have gotten in) have gotten bigger and bigger, some VCs have been willing to pay a higher valuation if it means being able to put more money at work in an exciting opportunity. 

So what this then naturally leads to are some deals with overly high valuations.  Not as a rule to be applied across the entire sector (as some journalists have seemed to want to do), but certainly in some high-profile examples. 

Which is a great thing for those entrepreneurs, right?  After all, they get more capital up front, without giving up more than 50% of the company, so it's a clear "win" for the founders, right?  No, in my opinion.  From the entrepreneur's perspective, a higher valuation is generally a good thing, certainly.  But when you start seeing real nosebleed valuations, it very much affects the ability of the management team to get real upside from that. 

Here's why:  I sat down a few years back with an entrepreneur who had just taken in a Series A round with a very high valuation (tens of millions of dollars).  He was quite pleased.  But after congratulating him, I was compelled to warn him that now he was marching across no-man's land with a bayonet at his back.  No stumbles allowed.  For a company that was still a few years from initial revenue to carry a valuation like that at the Series A stage really demonstrated that the expectation of their investors was that this was going to have to be a "big win" investment.  If the revenue was a while off, therefore the exit was a while off, and thus to get the high IRRs that VCs expect would take an exit valuation (likely an IPO) of a billion dollars or more, within the VC's investment timeframe. 

That's possible, sure, but pretty improbable.  It would require everything going really well, pretty much a faultless execution according to plan.  And as anyone who's been involved in an early stage venture can tell you, things never go according to plan.  In which case who was going to get the axe?  The management team, of course. 

Here's the other problem:  If you look at the (relatively short) list of cleantech "success stories" out there, what most of them have in common is that at some point in their history they hit a major hiccup or two.  When that happens to a startup, more capital is going to be required to see the company through an unanticipated delay and/or tough times.  But that's tough when the valuation from the last round of financing is high.  It would require a significant "down round" to entice new capital.  When that's even possible, it often ends up washing out much of the founding team's ownership along the way, because of some of the structural advantages of the institutional investors which allow them to protect some of their ownership.  Since even the successes often stumbled like this, it seems likely that to put a big valuation on an early stage company increases the chances that a slight operational disruption could require a pretty disruptive round of financing down the road. 

High valuations mean less dilution but higher risk for the entrepreneurs.

So while I quibble with a few details in Jeff's column, I would want to endorse his overall message to entrepreneurs, and take it a bit further:  Worry about the pre-money valuation of a round, sure.  But don't think it's the single most important factor to consider in selecting an investor.  In fact, it will often fall short to other more important factors.  For as much as it's a real economic issue, it's also a window into what kind of investor the entrepreneur will be partnering with, and an overly high valuation isn't a good sign in that regard.  As first priority, select investors who will be good business partners.  THEN worry about valuation.

Here are recently-announced deals (I'm sure they were all done at very mutually-reasonable valuations):

• French fuel cell company Pragma Industries has raised a EUR412,000 round of financing from Finaqui, Oseo Capital and other sources.

• Greentech Media, the owners of the column you are reading right now, have raised $825k of a planned $1.25M Series B extension.

• China's Nobao Renewable Energy Holdings has raised a $25M round of financing from Tsing Capital.

• General Fusion has raised $9M from a syndicate of VCs, with an additional $13M from SDTC.

• Advanced Electron Beams has raised a $14.2M Series C led by Flybridge Ventures with participation from existing investors.

• PV installer Borrego Solar has taken in a $30M round of financing from Taiwanese cable manufacturer Walsin Lihwa.

• Intel Capital has put $10M into 5 cleantech companies: GridNet, Powervation, Convey Computer, iControl, and CPower.

• Novomer has raised a $14M Series B from Flagship and OVP.

• Data center power management vendor Power Assure has raised $2.5M from DFJ and angels.

• Cleantech investors in the news:  James Kim has moved from CMEA to Khosla... the same Khosla Ventures that has closed on their seed stage cleantech / IT fund at $250M...  And NGP Energy Technology Partners has closed on their second fund at $348M.

Other news and notes:  PE/VC fundraising terms are unsurprisingly shifting to become friendlier to LPs...  What I found most fascinating from this survey is that almost 50% of VCs surveyed expect to do 2 or fewer (note: the article had it wrong) deals over the next 12 months...  India's renewable energy industry took in $527M in PE/VC investments over the past four years...  Cleantech remains a relative bright spot in the otherwise moribund venture capital market...  And finally, aaaachooo!!!

Perhaps the single biggest difference between cleantech and other venture sectors is the "what if" factor.  As in, what if something comes out of left field and blindsides an entire investment thesis.

Last week Earth2Tech profiled 13 different lithium ion startups, most of them venture-backed, all vying to make a big dent in the market for the batteries that are presumed to end up powering future cars and other vehicles.  Each has a different technological solution that they think will give them an advantage on cost or performance or both versus other lithium ion batteries.

But what if EEStor is for real?  If you haven't read it yet, read the highly entertaining transcript (Tyler swears it's real) supposedly of EEStor's CEO giving an interview on what the company is up to.  I'm personally a bit skeptical of the company's prospects, for a number of reasons, and the UL certification effort that bloggers are going ga-ga over really doesn't validate anything.  But if you believe Weir, the company's products will soon obviate all other energy storage options, including lithium ion.

I'm not trying to either slam or boost EEStor (so direct your flames elsewhere, people), it's just a really vivid example of the "what if" principle I'm describing.  What if EEStor's products are for real and as ready as promised?  What would that mean to lithium ion investment theses?  Or other energy storage investment theses?  After all, there are a million different ways to store or regenerate electricity.  Even if EEStor's technology isn't all it's promised to be, what if there's some other breakthrough waiting in the wings?  VCs have backed any number of battery chemistries, after all.

In areas like biotech this "what if" factor appears to be a bit less of an issue, because there's more openness about what people are working on, and the research tends to take place in more well-known places.  There aren't a lot of biotech entrepreneurs working on a new drug discovery platform in their garage.  But there are lots of garage inventors in energy tech, and even with the more well-known research institutions they can either be very close-lipped (like corporate R&D shops), or the substitutionality described above might mean that the "killer app" comes from an entirely different discipline, so simply knowing everything going on in the world of chemical engineering (for example) might not be enough to mitigate the "what if" factor.  Or it might not even be a new technology; as in solar, where an expected flood of really cheap "Gen 1" panels out of China might obviate a whole lot of "Gen 2" efforts...   All of which makes it just about impossible for investors to know everything that's going on that could blindside their investment theses.

This is also driven by the fact that most clean technologies are, in the end, involved in the production of a really basic commodity like kwh, drinking water, energy storage, etc.  There are so many different ways to accomplish the intended goal, that a mono-disciplinary approach will leave out many otherwise unanticipated competitive threats.

The only solution as an investor is to be deeply, deeply networked across a very wide range of markets and disciplines and geographies.  And to be really disciplined about valuations and capital efficiency (so that even ancillary markets can yield good outcomes), due diligence, and most importantly the need for strong execution. 

Good management teams need do their best to know everything that can be known about potential competitive threats (and don't just trash the competition), and understand that it's not always the best technology that wins...

Here are deals from the past week or so -- we're starting to see the return of some bigger deals:

• Carbon-zinc battery developer Blue Spark has raised $1.5mm of a planned $5mm Series B, from insiders.

• eMeter has raised $32mm in new financing from Sequoia and existing investor Foundation Capital.

• Quercus and 21Ventures have put a second round into Advanced Telemetry.

• FRX Polymers, a developer of more environmentally-appropriate flame retardant additives, has raised a $6mm Series A co-led by Israel Cleantech Ventures and Capricorn Venture Partners.

• Fuel cell developer Intelligent Energy has raised a $30mm round of financing from unnamed existing and new investors.

• Suniva has raised a $75mm Series C from new investors Warburg Pincus and Apex Venture Partners, and including existing investors NEA, HIG, and Advanced Equities.

• Smart home startup iControl has raised a $23mm Series C, with participation from new investors ADT Security Services, Cisco, Comcast Interactive Capital and GE Security, alongside existing investors Charles River Ventures, Intel Capital and the Kleiner Perkins Caufield & Byers (KPCB) iFund.

• Flagship has presumably made an investment in recently-unstealthed Joule Biotechnologies.

• Produced water treatment company Ecosphere Technologies has taken in a $10mm PIPE from Bledsoe Capital Management -- and there's another retired QB in on the action, too!

• NEAH Power has raised a $500k PIPE.

• SunRun raised a $18mm second round of financing, led by Accel Partners and including existing investor Foundation Capital.

• Solicore has raised $12.2mm of a $13.3mm Series D, led by Rogers Corp., and including existing investors Draper Fisher Jurvetson, Rho Ventures, Braemar Energy Ventures, OPG Ventures, and Firelake Capital.

• Cleantech investors in the news:  Khosla's reportedly soon to announce closure of $1B in new funds...  DFJ is also raising...  And here's some info on 21Ventures' investment approach.

Other news and notes:  CleanLaunch, a new cleantech incubator in Colorado...  Interesting take on a secondaries market for privately-held cleantech shares...  This sounds like a relatively soft landing...  Finally, who do you believe, the Nobel laureate or the politicians?

It continues to feel like things are picking up a little bit in the cleantech venture world, but if so, just a little bit.  I continue to see lots of cleantech startups that are having a surprisingly hard time raising capital, given decent internal progress and good market prospects.  What deals are happening appear to be pretty small ones, some smallish Series A rounds, some smallish follow-ons, some extensions of previous rounds: deals done simply to pad out cash reserves or add a strategically valuable investor.  Not a lot of "inflection point" deals, ones where the capital is intended to dramatically accelerate a company's internal development and growth.  Entrepreneurs would do well to continue to focus on lean growth plans and capital efficient operating models when approaching investors over the near term.

With that in mind, here are deals and other items of interest from the past week or so:

• Solar panel inverter startup GreenRay has raised a $2M Series A from Quercus Trust and 21Ventures.

• In another example of a cleantech startup looking outside of the traditional VC financing path, MSW gasification startup Enerkem has taken in an asset-backed financing facility from ATEL Ventures.

• In China, Nature Elements Capital is looking to raise a $350mm fund to target investments in regional clean energy projects.

• Apparently, at least two Asian-based solar IPOs are planned for Q4.  Apparently.  We'll see...

Other news and notes: 

Here's a great follow-up on the NECEC's inaugural class of Clean Energy Fellows... 

Here's a good perspective from Joel Makower, who always is worth listening to -- but I do disagree with his concept of energy becoming cheap and plentiful anytime soon.  While we are bringing cost curves down on new energy sources, the scale disparity versus incumbent energy techs, and the continuing challenges, mean that even as alternative energy sources start to get close in some cases to incumbent energy benchmarks, we're still a long way from achieving "grid parity" with these new resources.  And crossing that threshold is a long way from energy being virtually free.  Basically, information is a virtual good and energy is a physical good, and as such requires a lot of capital expenditures to produce even when the "fuel" (photons, sugars, etc.) is free, so it'll always be costly.  If anything, I would expect energy prices to go up over the coming decades, not go down.  But others are encouraged to disagree.  What I do agree with is that diversifying our sources and virtual sources (ie: automated efficiency and demand response) of energy may well launch a period of amazing entrepreneurial and innovative efforts even outside of the energy industry, just like the internet has helped usher in a period of "creative destruction" across many different markets... 

Finally, I'd love to chat with any entrepreneurs working on biochar-related businesses -- just drop me an email if you are one.

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???