Powerhouse, the Oakland-based cleantech incubator and workspace, has launched a seed-stage venture capital fund.
The new entity, Powerhouse Ventures, raised $5.5 million from industry luminaries and legacy energy companies, which it will invest in increments of between $50,000 and $200,000. The firm will focus on pre-revenue or early-revenue companies that engage with digital technology or business-model innovation in the clean energy space.
The fund constitutes an evolution of Powerhouse's existing incubator program. It will leverage Powerhouse's existing network of startups, investors and energy incumbents in an effort to speed the path from seed round to commercialization.
The fund size may be a drop in the bucket of the overall energy market, but it’s specifically tackling seed-stage cleantech investing, a niche that few investors have specialized in. That constitutes a market gap that Powerhouse Ventures aims to fill, founder Emily Kirsch said in an interview.
There are several accelerators around the country that provide funding and support for a limited time. Some VC firms focus on early-stage clean energy funding, like Chicago's Energy Foundry or Congruent Ventures, the $92 million fund that launched last year to focus on the sustainability space. Most venture firms that still touch cleantech prefer to come in after someone else has shouldered the early-stage risk.
Powerhouse’s leaders believe the network of contacts they’ve assembled as a hub of Bay Area startup activity will help their portfolio companies hone their products and find customers. The organization hosts several events for energy professionals, including parties, hackathons and Watt It Takes, a series of live interviews with cleantech founders produced in collaboration with Greentech Media.
“Not only did we build up this network of clean energy startups, we’ve also built this network of some of the biggest energy companies in the world,” Kirsch said. “We get to play the role of connecting them based on what they say they’re looking for with the startups in Powerhouse’s network.”
That form of connection, at least in theory, will help startups get to market sooner and maybe even exit sooner, too.
The composition of the fund's investors showcases that network-driven approach. Backers include industry insiders like NEXTracker founders Alex Au and Dan Shugar, former NRG Energy CEO David Crane, and former SunPower President and CEO Howard Wenger. Law firm Wilson Sonsini Goodrich & Rosati, Total Energy Ventures and Centrica Innovations have also invested.
“When we’re investing in a startup, if they have room left in the round, we’ll send it to our network of LPs," Kirsch noted. “We become the source of deal flow and validation for them.”
The fund has already made four investments:
- Station A: Provides operational and financial modeling for clean energy products.
- Solstice Energy Solutions: Developed a drop-in hybrid transfer switch that provides energy management for residential and commercial customers.
- SparkMeter: Makes low-cost smart meters for traditionally underserved markets; reports sales of more than 30,000 meters in 22 different countries.
- Leap: Built an automated energy trading platform for distributed energy resources; won a 90-megawatt contract from California's Demand Response Auction Mechanism in 2018.
Many VCs got hammered in the first cleantech investing boom, when hard-tech startups raised hundreds of millions of dollars, built expensive factories and went bankrupt as market conditions shifted. Powerhouse Ventures joins the more recent trend of VCs taking a humbler approach, focusing on digital innovation and smaller-scale investments.
The firm takes a different approach in its management composition as well.
"In an industry where just 8 percent of partners at top venture firms are women, we're proud that Powerhouse Ventures is both founded and led by women," Kirsch wrote in an email to the community Tuesday.