Viewing posts tagged "Shallow Thoughts"

“ARPA-E! ARPA-E!”

Okay, so maybe I jokingly tried to start an "ARPA-E" chant at Obama's MIT speech on Friday, simply because I thought it might be the only crowd ever wonky enough to get it.

But acronymical joking aside, it's a potentially valuable DOE program that could end up helping one of the major capital gaps that's emerging in cleantech venture capital:  Seed stage and early stage development of ideas that are promising but will take too long to commercialize than most VCs can handle.

So it's great to see the news release today with $151M of grants to 37 efforts.  Including:

• Sadoway's liquid-metal batteries
• Low-cost LED crystals
• 1366's "mono-equivalent silicon" wafers
• FloDesign's smaller-format wind turbines
• Foro Energy's drilling technology
• And several direct sunlight-to-fuels efforts

On a completely different note, I recently re-read an old 2000 article (I can't find a direct link, but you can access it through this site) from Environmental Finance back in April 2000, where the authors (Byron Swift and Aldyen Donnelly) argued that there's enough inefficient coal-fired generation out there in the U.S. that under a cap-and-trade system there will be a natural limit on CO2 credit prices at around $5-7/ton.  I'm interested in reader reactions, critiques, corrections, etc., please email or use the comments to share with alll...

Swift and Donnelly simply look at the implied financial worth of the generating assets of companies like AEP, Southern Company, and Cinergy (remember, this was from 2000), and then divide that by their CO2 emissions in terms of earnings per ton of CO2.  And therefore, they argue, if you're AEP and you can make more money by shutting down an inefficient plant and selling the avoided emissions, you would do so, and that would be triggered at around the $5-7/ton level.  They also looked at it from another perspective -- market capitalization for each of the companies, estimating how much of that was attributable to the fossil fuel generation fleet, and then dividing by emissions to get a value for perpetual stream of carbon allowances (discounted). Both methods came out with about the same value.

Now, what they don't account for, as far as I can tell, are three crucial additional factors:  1) the shut-down costs associated with mothballing a generation facility to sell off the avoided emissions; b) the incremental cost of replacing that generation capacity with something else with much lower carbon impact, such as gas-fired generation (although they acknowledge this as an open question); and c) short-term volatility as separate from long-term average prices -- it's tougher to shutter a generation plant because of temporarily-high carbon prices, so there could certainly be significant price spikes above the limits Swift and Donnelly indicate. 

But I find it a fascinating analysis, given the policy discussions going on right now (which include possible hard caps on carbon credit prices under a cap-and-trade plan), in that it suggests there may be a lower natural price limit than many expect.  There's definitely precedent from elsewhere in the electricity business for electricity customers to curtail their demand and sell the capacity back to the utility -- see EnerNOC, or in an early example, Kaiser Aluminum (note: pdf). Why couldn't some power plants shut down and re-sell their credits for greater profit?  Whether you love or hate the idea as an electricity consumer, it does open up a new business dimension for anyone in the powergen industry to consider...

Curious to get readers' thoughts.

Okay, so it’s broken.  Now what?

I've been having a lot of conversations with cleantech investors lately, and it's clear there's an emerging "consensus" (as much as you can ever get true alignment in such an industry) that the traditional venture capital model applied to cleantech isn't working -- at least in how it's been applied to date. 

To recap, we have seen billions of dollars this decade put into venture capital and "venture capital" deals in energy tech in particular, but not only have there been relatively few exits, many VC-backed cleantech companies have been way behind in their promises regarding commercialization and adoption.  Cleantech VCs have been more effective at making headlines than at making returns.  And there continue to be clear capital gaps at crucial development stages, including seed stage and "first commercial-scale project" financings.

In talking with a wide range of investors over the past few months, it's clear that there is still lots of optimism that there will be strong returns from venture-type investments in this sector.  After all, these are phenomenally huge markets, and they have phenomenally huge unmet needs.  Significant change is expected, and VCs are supposed to profit from significant change.  Exits have clearly been held back at least in part by the overall macroeconomic situation, which nipped several IPOs in the bud through no fault of the companies or their investors.  And there's clear long-term govermental support putting wind into the sails of the industry.

All of which is great, but in talking with these investors they also acknowledge that no one's yet proven out a successful investment model for the sector.  And so, in true hive fashion (everyone thinks they've arrived at the thought independently, but we all are influenced by each other's thinking), I keep hearing that the model is "broken" and solutions need to be found.

Okay.  But what solutions?

Some say that the problem isn't with either cleantech or with the traditional venture capital model, but instead that they don't overlap as often as VCs would like to think.  So, they say, applying IT investment models to IT approaches in cleantech (automated building energy management, carbon accounting SaaS offerings, etc.) is the way to go, not putting hundreds of millions of dollars into capital-intensive renewable energy generation.  Limiting the scope of cleantech venture investing, in other words, to just a subset of the overall energy, water and materials market.  I've argued for this approach at times myself.  However, it does beg the question:  Then how DO we expect to see these renewable energy technologies get to market?  Are the investors putting money into those sectors wrong?  Perhaps VCs are unintentionally, as some have said, simply taking pension fund money and investing in these capital-intensive technologies for society's benefit, but without good overall likelihood of venture-type returns?  Or perhaps not, the exits just haven't happened yet but they will? But that's not an answer to the question, that's just a diagnosis and another set of questions.

Some say that the key is, given long gestation periods, being late-stage investors and coming in after significant technology and commercialization risk is taken out of the company.  Which is a very smart approach except: a) Everyone else is having the same idea, driving up prices for late-stage investments; b) Being only late-stage in capital-intensive development efforts starts to look more and more like some kind of project finance, not venture capital; c) We're seeing ample evidence that there's still plenty of execution, scale-up, and market risk even at these later stages; and d) If everyone's investing late-stage, who provides the funding to bring the companies to that stage of development?

Some, albeit fewer, argue that the way to play cleantech is instead to go quite early and really swing for the fences.  Acknowleding the long gestation period of truly breakthrough ideas in the sector, the idea is to adopt a longer investment horizon, but to raise the bar in terms of the returns potential an investment might have:  So to paraphrase, don't go for the traditional 10x in 5 years, go for 20x in 10 years.  But it's unclear how LPs will react to such an approach, and if you think accountability is low on investments done with 5 year horizons... Furthermore, what about the other 99% of good cleantech innovations that don't qualify as having such dramatic potential?  Not everything can be "the next Google", after all.

Some investors are implicitly pursuing a momentum approach -- backing high-profile startups in high-profile sectors, putting a lot of effort into P.R. activities to further raise the profile of the startup, using that to bring in corporate partnerships and government support, and thus creating seemingly unstoppable momentum toward an exit.  It's almost (note: I'm clearly using hyperbole here) as if the underlying startup's technology and economics don't really matter.  One big challenge for this approach is the ephemeral nature of P.R. and momentum-building, it's easy for journalists, pundits, etc. to get very skeptical very quickly and turn against a company that has been over-hyped.  And more damaging, in the pursuit of visible evidence of rapid progress, these investors often encourage the companies to take on a high cash-burn model.  Which, when (not if) things go a bit sideways at some point, can be deadly.

I'm also seeing some efforts to create more overt "hybrid" approaches, combining (or at least setting up in parallel) VC, project finance, and middle-market buyout strategies.  But these are as yet mostly ill-defined, and it's unclear at the end of the day what's different from what's already de facto being done today by big VC funds, aside from the additional clarity of returns and risk expectation.

And of course a lot of other intriguing new ideas as well, there is some innovative thinking being developed out there, sometimes in places you wouldn't expect.

But despite all the ideas, so far, few proven answers.

Stay tuned...

A123: A deeper look

Many cleantech investors were cheered by the successful IPO of A123 this past week. 

I noted a very interesting column on PE Hub (sub req'd), by Lawrence Aragon, one of the finer private equity journalists out there.

(We need to caveat all this by acknowledging that it's unlikely much of the VCs' returns have been realized yet, there's typically a lock-up period.  So here's hoping the market valuation holds up.  Still, Lawrence's approach of using current valuations is still quite useful for our illustrative purposes...)

Lawrence takes a look at estimated investment totals and returns for major VCs in the company, and concludes that these investors didn't produce "a huge return", because the major holders only got like 4x or 5x.  But let's look at that a little deeper.  One thing that really struck me about Lawrence's column is that his assumption seems to be that these were all venture investments, and that therefore if you don't get a 10x you didn't get a "high voltage charge" for "venture investors". 

I would argue that much of the pre-IPO capital that was put into A123 wasn't "venture capital", at least in the sense Lawrence seems to mean it.  Let me illustrate what I mean:  If you have the chance to make 2x on an investment over 1 year, would you do it?  Sure, 100% IRRs are pretty sweet.  2x over 2 years, 3x over 3 years are all pretty attractive returns as well, on an IRR basis.  So when Lawrence points to 4x type returns to "venture investors", he seems to be assuming that these were long-term holders, but many weren't.  The Series D was in 2007, for example, and was at an approximate pre-money of $300M. Right now, that return looks pretty good on an IRR basis, even after an extra year's delay past the originally intended IPO date.  North Bridge, for example, was looking at a much higher multiple on their investment before they had to pump in an extra $10M as part of a May 2009 Series F, and while that very late round yielded a much smaller multiple, it was over just a few months, and probably looks great right now on an IRR basis.

So I don't think Lawrence crystalized the point he was trying to make.  However, I think the A123 experience illustrates a couple of important principles at work in cleantech investing today:

1.  I continue to have a hard time thinking about pre-IPO equity investments at pre-money valuations in the hundreds of millions as being "venture capital".  At very least, we need a new sub-category to describe this type of investing.  We have early stage investing, the Series As and Series Bs that are what most outsiders think of when they think of "venture capital" (if at all), typically aiming (read: "hoping") for a 10x return over 5-7 years.  Then you have "growth stage" venture capital, which is later-stage VC investing, aiming for a 5x in 3-5 years.  But as I noted back in that August 2008 post, much of the Series E (June '08, ~$100M raise, approx. $1B pre-money) appears to have been provided by first-time investors.  These investors weren't brought into the raise as "venture capitalists," I guarantee you.  Instead, it's probably best to think about that type of investment as a "mezz equity round".  In other words, the expectations were probably for a 2x in 1-2 years.  That's not necessarily better or worse investing than "venture capital" as Lawrence is referring to.  But it's certainly different.  It means a simple analysis of returns based on multiples is useless if all these types of investors are bundled together.

2.  Growth and even "equity mezz" financing isn't as low-risk as it's made out to be.  It's worth noting that those Series E investors are the ones who didn't make out so well.  Right now it's looking good as A123 trades almost 50% above its IPO price, so if that holds up through their holding periods they may still make out with a 1.5x return.  But the initial offering price appears to have been at just about the same post-money (around $1.1B) valuation of the Series E.  So a zero return at that price. And since my write-up last August after the Series E, apparently investors needed to pony up an additional $99M Series F round according to the updated S-1... and that was at a significant down round valuation (something like $9.20/sh vs. the Series E's $16/sh).

A lot of non-VC investors such as family offices and hedge funds have been brought into these kinds of mezz equity rounds in the past.  The pitch to those investors is, "hey, this company is going to IPO, and you're going to double your money over a year or so -- you can't lose!"  What we've learned about these kinds of rounds in thin-film solar, and now with A123, is that even at that late stage there's still plenty of risk of an exit not happening in the timeframe anticipated, or at a lower than hoped for valuation, or perhaps not at all. 

There's this theory out there that being a very late investor into cleantech is the way to go because the risk has been taken out of the equation.  Do the later investors into thin-film solar companies still feel that the risk of a timely and high-valuation exit was low?  Do the Series E investors in A123 feel like the risk was low in retrospect, after a year of holding their breath amid high cash burn and a down round and no exit window in sight? It worked out for A123.  But so far, for most of the large late-round investors in cleantech, the exits still haven't appeared. We all know early stage cleantech venture capital is risky.  But when I see it said/written/implied that we somehow can conclude with confidence that early stage cleantech VC doesn't make sense because it's "too risky, too long" whereas growth stage is the "smart way to do cleantech", I just shake my head.  And when anyone tells me I "can't lose" on a later-stage investment, I run away as fast as I can, because there's no such thing.

So basically, I look at the A123 IPO and am cheered.  I see it as being a sign of more good exits to come, in a sector that really needs them.  And I believe it shows us something about the shape of cleantech venture investing right now.

It’s going to get worse before it gets better

I'm at the Cleantech Forum in Boston this week.  As always, a great networking event, they've really honed the model here at the 23rd edition of the series.  For those of you into such things, you can follow various tweets on the conference, including far too many from yours truly, with the #cleantechforum hashtag...

It's notable, however, how few west coast investors are attending this event.  Now, bay area VCs are always pretty loathe to travel outside of the 650 area code, but still, it's clear that even fewer made this trip than would have this time last year.  Why?  Perhaps some travel budgets are smaller, especially for the smaller shops, but really this is instead an indicator that most VCs are just really inactive on new deals and fundraising right now.  If an investor is actively seeking deals and/or LPs, they'll use a conference as an excuse to travel somewhere for networking purposes.  Which means that conference attendance by VCs is a bit of a leading indicator.

It's an important indicator, because cleantech venture capital doesn't seem to have been too badly hit yet.  Not to say things are easy for cleantech entrepreneurs right now, by any stretch.  But still, according to the Cleantech Group's numbers described at the conference today, in Q3 cleantech became the #1 venture capital category, above IT and biotech, etc. (details to follow on that once I get them).  And while there have been some companies that have gone under over the past 12 months or so, most continue to chug along one way or another.

But for the most part, most VC-backed cleantech startups remain net negative on cashflow.  Which means they're going to need either a rapid market pick-up translating into very near-term revenues, or else they're going to need to raise more capital.

My strong sense, watching the reported deals from the past few months, is that a significant portion of those deals that are taking place (and thus are captured in those Cleantech Group numbers) are insider-only rounds.  I wouldn't at all be surprised to see about half of the deals being such.  This means that most of the rounds taking place are not being priced by the market, it's instead just existing investors putting more money into their portfolio investments, likely at flat valuations or unpriced bridge financings.  Anecdotally, I can tell you that most investors are still refusing to take down valuations on their own portfolios, and yet only looking at follow-on deals that are at down valuations. 

These insider rounds, including many more that probably haven't been announced, are what have been allowing cash-burning cleantech startups to survive, in other words. 

And they can't continue indefinitely.  VCs don't have unlimited funds, and many at this point are starting to feel out of dry powder.  They'll only have so much patience and so much capital they can devote to any one portfolio company.  And with VC fundraising on hold, we shouldn't expect to see VCs be refreshed with capital anytime soon.

I'm not trying to sound too doom-and-gloom, we're not talking about some kind of mass extinction event.  Certainly, government support is going to help some companies survive.  And for those companies and investors willing to take a down valuation, there are still some investors out there willing to step in and carry the torch. Even a slight recovery of the credit markets could also help some startups raise non-dilutive growth financing.

But my point is that, while we haven't seen a massive wave of cleantech startups crashing yet, the factors underlying that are drying up.  And so I expect to see many more unfortunate stories over the next 12 months, even if the economy appears to be slowing getting better.  And if the economy twitches back downward... batten down the hatches.

Proving clean technology works

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).

High valuations aren’t always good for entrepreneurs

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!!!