It’s no secret that venture-capital funds for greentech are growing strong. Just look at Foundation Capital, which this week announced it had raised $750 million, with $250 million set aside for cleantech (see Funding Roundup: Greentech Sees $988M in Q1).

Last month, CMEA Ventures said it had closed a $400 million fund, an undisclosed part of which would be invested in energy, and iNovia Capital said it raised a $104 million fund and would stake about a quarter of it on greentech (see Funding Roundup: Will Green Investments Bring Ireland More Luck?).

But are all the big bucks actually creating a funding gap?

Susan Preston, general partner for the California Clean Energy Fund’s new Clean Energy Angel Fund, says yes.

As VCs are closing larger funds, they end up looking for larger, later-stage deals to spend all the money on, she said. Average venture-capital deal sizes are around $8 million, she said, while angel investments average between $300,000 and $400,000. And that difference has created a gap between the investments by angels and venture capitalists – a gap where good ideas fall through.

Preston’s not the only one who has noticed this trend. Greentech Media’s Cleantech Investing blogger Rob Day, who also is a principal at @Ventures, has written about some industry insiders’ perceptions that greentech VCs might be moving toward later-stage investments, where they potentially might see quicker returns, but arguably add less value (see Cleantech Investing posts here, here and here).

The California Clean Energy Fund, known as CalCEF, hopes to help narrow that perceived gap with its new angel fund. CalCEF, a $30 million fund that was created in 2004 as part of Pacific Gas and Electric’s bankruptcy settlement, launched the fund Wednesday (see Filling the ’Early-Stage Gap’).

CalCEF hasn’t said how much the angel fund has raised so far, but Preston said it plans to raise a maximum of $20 million. (For more information on CalCEF, also see Cleaning Up, CalCEF Invests in 10 Startups, UC Gets $1M for Efficiency and CalCEF to Fund New Center).

Preston, who will lead the angel program, previously was an entrepreneur-in-residence with the Ewing Marion Kauffman Foundation, where she focused on angel-investment issues. Preston continues to work at the foundation as a consultant and also is a consultant to the Angel Capital Education Foundation.

Greentech Media caught up with her this week to find out more about how she hopes to help fill the early stage funding gap.

Q: How do you plan to spend the money?
A:
We want to be able to deliver a diverse portfolio for our investors and it’s important that we contribute … our leadership and our resources. We’re looking atsolar energy efficiency (including green building), transportation, cooling systems … and lighting. We are evaluating investments in a number of areas. And there are three or four companies we’re already looking at in all sorts of areas.

Q: Will activities such as the new angel fund, as well as business-plan competitions such as the Clean Tech Open, be enough to fill the gap for seed funding?
A:
The gap is fairly significant; it has been for a long time. Like almost any industry, we’re seeing the gap widen as we’re seeing VCs closing larger funds and so they’re looking for larger, later-stage deals to invest in. Venture funds are larger and larger so they’re deploying larger sums in each one -- on an average basis, around $8 million per deal. Young companies don’t need $8 million and, for the founders, it’s a pretty huge dilution. We do see a large gap, between half a million and $5 million, where it’s harder to raise money. We don’t want to see that gap expand, but it has. It used to be the top of the gap was $2 million to $3 million, but now it’s closer to $5 million. We need more angels and angel organizations.

Q: If this gap is happening across the board, why do you think it’s particularly important to grow angel investment in cleantech?
A:
I guess it’s important for any industry, but we have a particular outlook that resolving issues such as our dependence on fossil fuels, greenhouse-gas emissions [and the economic impacts of global warming is especially] important. Power production is the largest industry in the world. And it’s all the more important to understand how to fund companies because many of us agree these problems will be solved by technologies. … [Also,] technologies are at an earlier stage in this industry. When you look at large corporations with large R&D budgets looking to invest outside of their own realms, they are investing millions and half billions … because they don’t have the answers either. There is no silver bullet right now, which is part of what makes it exciting. There are a lot of opportunities for many companies to succeed.

Q: Are those corporations investing in early stage companies?
A:
Not so much. Larger corporations with good-sized R&D budgets [find it] fairly difficult to make early stage investments. They are partnering with universities and looking at research [that might lead to] acquisitions. It’s at a much more mature level. Many also are investing in funds of funds [so they’re able to invest in a] diverse manner.

Q: Kleiner Perkins partner John Doerr has said that government spending on early stage research and development in greentech is extremely low at about $1 billion. Does this lack of early lab research, combined with the larger leap from angel to VC-stage investment, make it more difficult to invest in -- and get a return at -- this angel stage?
A:
There’s a woeful lack of funding and support for a lot of early-stage R&D. … [The angel stage] is a higher-risk time period to invest. We’d like to think we have the capability to identify those opportunities where there’s a high opportunity for growth and [we can add value]. But it does make it more difficult when a company hasn’t had any funding to develop [its technology] and bring it even to beta stage. … Yes, if we had more grant dollars, maybe companies would have an easier time to get to a prototype. On the other hand, I’m not interested in companies that have lived for eight to 10 years on grants.