Viewing posts tagged "Venture Capital"

VC in Greentech Back With a Vengeance

They're back.

After a weak first quarter that had everyone grinding their teeth and a modestly improved second quarter, venture capital investment in green technologies roared back with $1.9 billion invested in 112 deals in the third quarter of 2009. That's up from $836 million in 59 deals in the first quarter of 2009 and $1.2 billion in 85 deals in the solid second quarter.

Solar power was once again the leading investment segment at more than $575 million in 29 deals followed closely by biofuels, biomass, and gasification deals at $512 million in 17 deals. As forecast by GTM Research – investment in Smart Grid, Energy Storage and Automotive is gaining momentum.

Q3 VC Investment in Greentech

Driven by the optimism of a recovering economy, plentiful government funding for renewable energy and a recent successful Greentech IPO in battery maker A123 – venture firms have returned to investing in all stages across all greentech sectors. 


Notable and sizeable deals included:

• Solyndra’s $198 million VC investment from Argonaut Private Equity, et al. for its Fremont, Calif.-based thin-film solar firm
• Synthetic Genomic’s $300 million multi-year commitment from Exxon for the development of algae-based biofuels
• eMeter’s $32 million investment from Sequoia Capital and Foundation Capital for smart grid management software
• Tesla Motor’s $82.5 million round from Fjord Capital and Daimler Motors for Tesla’s groundbreaking electric vehicle
• Serious Materials’ $60 million round from Mesirow Capital et al. for green building materials

Some of the most active VC investors in greentech this quarter included NEA, CMEA, Khosla Ventures, Kleiner Perkins and Foundation Capital.  


In addition to the sheer magnitude of investment (this quarter’s $1.9 billion is close to reaching the investment levels of pre-recession 2008) there is a marked trend of a return to early stage deals with more than 35 Series A and seed rounds this quarter.


 Also remarkable was the increasingly global nature of greentech investment this quarter. More than 35 deals came from outside the United States with plentiful deals from the U.K. and France.

Steve Vassallo, Venture Partner at Foundation Capital, sums it up: "It's nice to see that we've hit an inflection point across all segments of cleantech.  With the economic recovery well on its way, combined with imminent carbon legislation and the acceleration of energy efficiency and renewable portfolio standards, I expect we're going to see a surge of cleantech IPOs.  Several of our cleantech portfolio companies – from SunRun to SilverSpring – are about to close their biggest quarters on record.  No doubt, there's good reason to be optimistic."

Details on every deal in the third quarter can be found in the Greentech Innovations Report.

Hot Algae Nights: Venture Investment In Biofuels

VC investment tends to come in stages.

In the biofuels realm, 2006/2007 was the corn and food-based ethanol stage. That has not worked out too well for VC investors or corn-farmers who dabbled in ethanol factories.  It has been a boon for bankruptcy lawyers, though.

The years 2007/2008 were the cellulosic biofuels phase. That's somewhat in remission with occasional VC outbreaks.

And 2008/2009 has been the era of algae biofuels.

Venture Capital Investment in Algae Biofuels

Considering the immense technical risks and daunting capital costs of building an algae biofuels company, it doesn’t seem like a reasonable venture capital play. And most if not all of the VCs I’ve spoken with categorize these investments as the longer-term, long-shot bets in their portfolio. But given the size of the liquid fuels market, measured in trillions of dollars, not the customary billions of dollars, it makes some sense to take the low-percentage shot.

These startups run the gamut of algae technologies – open pond, closed pond, photobioreactors, aphotic, naturally occurring algae and genetically modified.

And these firms are going to continue to need capital.  According to Jennifer Fonstad of VC investor, Draper Fisher Jurvetson, “The current strategy of many of these companies has been to turn to the government stimulus plan – this is the risk capital we can rely on today.” Ms. Fonstad was an investor in the now defunct GreenFuel.

Michael Kanellos covers recent algae activity with LiveFuels here.  Jeff St. John gives an algae rundown here.  I covered Synthetic Genomics' funding here.  And GTM Research has a brief algae summary report here.

I'm not a phycologist, but after hundreds of conversations with experts and a few years of research – my take on vehicle-scale fuel from algae is that it can be done but it's going to take a lot more time, money, land, water and resources than currently anticipated.

“VCs cannot come in here and just harvest ripened fruit – this is not shovel ready technology,” according to Dr. John Benemann on Venture Capital in algae.