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Toronto and Boston conferences

Rob Day: October 31, 2007, 7:45 PM
Enjoyed attending two very strong cleantech conferences over the past few days. The semi-annual Cleantech Venture Forum was, as always, well-attended and a great opportunity to network with peers in the industry. You can see some summaries of the proceedings here, here and here. Prism Solar won the prize for most promising company among the presenters -- later, the company shared with VentureWire that they've raised $6.5mm of their ongoing Series A round (in February we mentioned they'd raised a bit over $2mm to date), with I2BF Venture Capital providing some of the capital. One particularly intriguing session at the Forum was a presentation by member of the "Developer and Platform Evangelism Group" from Microsoft -- for anyone interested in smart building technologies and environmental performance tracking, take careful note that MSFT is now moving into the sector... We also learned that cleantech venture capital took another big jump up in the third quarter in North America, with $1.26B in investments. That was a 36% increase over the third quarter of 2006, and a 50% jump up from Q2 2007. Once again solar and biofuels led the way, apparently. We'll have to revisit these numbers once the details are known -- as always, it's interesting to see how much of the increase is concentrated in a small number of big "venture" deals. Then I had the pleasure of taking part in a venture capital panel at the 3rd Annual Conference on Clean Energy here in Boston. It was a very good showing, demonstrating all the commitment here by the regional government, investment and non-profit communities, toward the development of a strong cleantech cluster. What was quite interesting was the hosting of a parallel Energy Workforce Summit at the same event, illustrating nicely the jobs growth potential that is at the heart of cleantech cluster-building efforts. Gov. Deval Patrick gave a very well-crafted speech on the topic at hand, which was all the more notable for the fact that the Red Sox victory parade was going by right outside the convention center. It worked out very well for everyone who sprinted out the door after the Governor's speech in time to see the "duck boats" drive by with the team members waving and the crowds roaring... Worked out very well for everyone except Peter Girguis of Living Power Systems, who was stuck not only presenting directly after the Governor, but also right at the height of the parade goings-on. So for those of you (like me) who skipped out on Peter's presentation to gawk at Big Papi, do yourself a favor and check out LPS at, they have a very smart technology with a good potential solution to a lot of off-grid power challenges in both developed and developing economies. Deals from the past week:
  • Solar concentrator startup GreenVolts announced a $10mm Series A, led by Greenlight Energy Resources, and including participation by Avista Corporation and other undisclosed investors.
  • Lots of talk about Shai Agassi's Project Better Place startup, which has apparently raised a whopping $200mm in financing from a group of investors including Israel Corp., to develop infrastructure for re-charging and support for electric cars. This will be a fascinating one to watch...
  • Optimal Technologies International, which is developing supply-side and demand-side systems to optimize (note: not "maximize", which would be entirely different...) the consumption of electricity, raised a tranched $25mm financing from Goldman Sachs ($13mm in the first tranche).
  • ImageTree, which has developed land-imagery offerings for monitoring forests (with a variety of potential cleantech-related benefits) has raised a $4.5mm Series B led by Battelle Ventures. PA Early Stage Partners, the West Virginia Jobs Investment Trust Board, the Conservation Fund and Innovation Valley Partners all also participated in the round.
  • VentureWire is also reporting that SensorTran (full disclosure: note that in the past I briefly served as an observer on their board), which has developed fiber optic technology for temperature, pressure and other sensing, is looking to raise a Series B by year-end.  Kent Kalar, the CEO, told VWire that they have received a term sheet, and that they expect this to be their final round of venture financing.
Cleantech investors in the news: Other news and notes: Here's a terrific recap of the recent Solar Decathlon... Speaking of solar, Duke Energy wants to buy a solar developer (and there are lots to choose from)... Econometric dorks like myself might appreciate this interesting event study... The California Clean Tech Open winners have been announced, congrats to all... Yikes... And finally, enjoy.

Some questions to ask in Toronto

Rob Day: October 24, 2007, 9:35 AM
Headed up to Toronto this afternoon, for the hyper-networking experience that is the semi-annual Cleantech Venture Forum. Looking forward to catching up with everyone, since I haven't been able to make it to one of these for quite a while -- should be something like 500-600 participants, I've heard. A big change from a few years back, when just hitting triple-digits was a big deal. Here are some suggested questions to ask while handing out handshakes, execsums and business cards:
  1. Is Heliovolt's $101mm Series B a sign of things to come, or does it mark an inflection point in the solar sector?
  2. Now that first biofuels, and now solar have gone "supernova", what's the next hot sector?
  3. Cleantech may be hot, but it seems like (money-wise) medical tech is even hotter. So why don't you see a lot of articles written about dire predictions of "investment bubbles" in that sector? What's special about cleantech that brings out the skeptics among the punditry class?
  4. Clean technology R&D is everywhere. So why do some regions seem to enjoy a lot more startup creation activity than others? What are the key limiting factors affecting all other potential "cleantech clusters" outside of Northern California?
  5. Who are the favorites to win one of the three recently-announced Federal Energy Lab Entrepreneur-In-Residence spots?
  6. Will Nick Parker show up dressed as the Cleantech Avenger?
Joking aside, looking forward to it. For those who can make it to the energy efficiency panel on Friday morning, it should be a pretty good discussion, hope to see folks there. Other news and notes: Finally, THIS sure seems like an inflection point...

Heliovolt’s $101mm Series B

Rob Day: October 22, 2007, 9:03 AM
Seems like just a couple of weeks ago we were talking about how hot solar is again... News came out this morning (first saw it in CTI) that CIGS thin-film PV startup Heliovolt has raised an $101mm Series B round, which means they've added $24mm to their previous close on the round of $77mm. New investors apparently include Sequel Venture Partners of Colorado, Noventi Ventures, and hedge fund Passport Capital. The capital is intended to help them open "foreign" manufacturing facilities. It's a huge round (Matt Marshall says the biggest solar venture deal ever, but I haven't checked) at any stage, and especially for a Series B. A sign that many investors expect big things out of thin-film and other emergent solar technologies in the near future. Is this another one of the sort-of-VC, pre-revenue mezz rounds, quasi-project-finance, that we've talked about before? The inclusion of hedge fund financing would suggest that might be the case. It certainly turns up the heat in the CIGS sector, at very least...

Deals and other cleantech venture news

Rob Day: October 22, 2007, 5:01 AM
It was a busy week in the world of cleantech investing:
  • Mendel Biotechnology, a biofuels feedstock development startup, has raised an undisclosed amount of funding. ZBI Ventures, Capricorn Investment Group, CFM, and Monsanto took part in the round.  More good background here.
  • Silicon slurry and refining startup SiC Processing AG has raised a EUR 53mm round of financing, led by zouk ventures, and including Merrill Lynch Corporate Principal Investments, CC Private Equity Partners, Masdar Clean Tech Fund, Foursome Investments, existing investors and the Heckmann Family.
  • Jonathan Shieber at VWire reported that Solix Biofuels, an algal biodiesel startup, has raised $1.5mm of a $3.5mm round of financing, according to a regulatory filing.  Bohemian Investments is one of the backers.
  • Shieber also reported that daylighting startup Ciralight has raised $1.5mm in angel financing.
Other news and notes:  Here's an entertaining list of the "top 10 cleantech jobs" -- just don't bet the ol' corn farm on being able to break into that number one job...  Here's a useful ethanol report from Guinness Atkinson (note: link opens pdf)...  Finally, these pictures are really cool.

An update on the cleantech venture market in Israel

Rob Day: October 21, 2007, 7:35 PM
Meir Ukeles of Israel Cleantech Ventures has been busy lately, but he still found time to write the following update on how hot things have been over there lately (thanks, Meir!):

On October 30, Israel will host a cleantech conference cosponsored by the Cleantech Venture Network, Ernst & Young, Morrison & Foerster, and my firm Israel Cleantech Ventures, as part of the larger WATEC water technologies week event. Ahead of this event, here are a few thoughts on why Israel is emerging as an important hub of cleantech innovation.

Fueled by acute constraints in natural resources, Israel has spawned a number of successful water technology and alternative energy companies, including recognized names in drip irrigation (Netafim), desalination (IDE), geothermal energy (Ormat), fuel cells (Medis), and solar thermal energy (Solel/Luz). These successes, a wave of immigration from the former Soviet Union, and the inherent strength of Israel’s academic institutions in these areas have led to world class cleantech capabilities and more than 350 active cleantech companies in Israel today. The roots of this growing community of cleantech entrepreneurs can be traced to (1) established or “legacy??? industrial companies active in energy, water, chemicals etc., (2) academic institutions with long histories as research leaders in energy and water sciences, and (3) “crossover??? initiatives or entrepreneurs moving into cleantech from traditional areas of Israeli technology leadership such as power electronics, semiconductors, and even biotech and agritech.

Many of the ‘startups’ that are emerging from the first two constituencies are the fruits of years or decades of research in industry or academia, that now feel the pull of markets actively seeking technological solutions. We are also seeing a growing stream of ‘crossover’ serial entrepreneurs launching their newest companies in the cleantech fields, motivated not by a desire to the planet, but rather by a conviction that these markets offer opportunities that dwarf those of enterprise software or semiconductors. As just a small snapshot of what’s happening in this respect, we’ve seen founders or key members of some of the most recognized names in Israel’s high tech world (Checkpoint, Comverse, Chromatis, Scitex, and many others) now involved in launching cleantech companies.

Israeli cleantech companies must overcome the same challenges faced by counterparts in other countries, including the challenge of penetrating often risk-averse customers in the energy and water markets, managing cash burn rates against long sales and adoption cycles, etc. However, Israeli companies do operate under some unique constraints, starting with their distance from and historical lack of familiarity with many of the key customers and channel partners for their products and technologies. Just as an earlier generation of Israeli entrepreneurs had to learn the hard way how to partner with and sell to Cisco, Nortel, IBM and Microsoft, the cleantech entrepreneur must learn to navigate and fill critical technology gaps for GE, Siemens, Sunpower, Alsthom or ABB.

On the positive side, Israeli companies have a number of factors working in their favor. The global nature of the water and energy opportunity plays to the strengths of Israeli entrepreneurs that seem equally comfortable pursuing business in New Delhi as they are in New York. Israeli companies also benefit from the existence and effectiveness of a number of entities that have emerged as key enablers, including Israel’s national water company, Mekorot, the BIRD (Israel-U.S. Binational R&D) Foundation, and the Ministry of National Infrastructure which is working on development of domestic incentive programs for alternative energy modeled on precedents like the German EEG.

When speaking with investors and other funds outside of Israel, we are frequently asked what we see as the most attractive niches in the Israeli cleantech landscape. There are a number of areas in which we have seen a greater quantity and quality of companies emerge in Israel, including a broad spectrum of water efficiency, quality and treatment technologies, power electronics and energy storage, as well as some aspects of solar energy. However, the simple truth is that Israel’s most important resource is its entrepreneurs – a seemingly inexhaustible supply of talented business people and technologists who excel at looking beyond traditional ways of solving market problems and inefficiencies. That, coupled with the truly colossal demand for technologies to address the world’s insatiable need for clean, accessible energy, water and air, is what is already putting Israel on the map as a global cleantech player.

More on the cleantech management challenge

Rob Day: October 18, 2007, 1:25 PM
A few days back we talked about the different challenges of managing any startup through the different stages of development. And ended by noting that one of the encouraging signs for the cleantech sector is the development of a deeper pool of entrepreneurial talent (although it still needs to be much deeper -- please, jump in the pool, the water's warm and getting warmer). It was great, then, to validate this point this past week, by having the opportunity to speak at HBS, alongside Dhiraj Malkani of RockPort, to students who were interested in getting into the sector. It was a fun discussion, and I know Dhiraj and I both certainly appreciated the invitation to come meet some smart young businesspeople with many insightful questions. Another demonstration of how current and future managers are looking for ways to get involved in these industries. (Unfortunately, we were asked to follow directly after a plenary by Vinod Khosla, which is a pretty tough act to follow, and so after the standing-room-only crowd sat -- spilling out into the aisles and out of the classroom -- spell-bound for an hour, and then ran up en masse to shake Vinod's hand and have their pictures taken with him, it was pretty amusing to watch around 3/4 of the crowd get up and head right out the door before the next panel... But I digress.) Based on the questions that were asked, some of the students must have recently read Bill Aulet's thought-provoking column in Xconomy on the multi-dimensional challenges facing managers in cleantech enterprises in particular. Bill's point is that making a cleantech business a success will require many different skillsets -- knowledge of disparate technologies, understanding different markets, being able to work with a variety of large customers, plus the general entrepreneurial challenges we discussed earlier. Bill concludes that managerial talent capable of handling all these many challenges will be tough to find, and thus that managerial talent will remain a limiting growth factor for the sector. Contrast Bill's column with this other column that's been making the venture capital rounds lately, discussing the long-term shifts in IT and Web 2.0 investing. In the column (among some other interesting points worth digesting), the author makes the point that the barrier to entry for IT and web entrepreneurs is coming down quickly. "When starting a startup was expensive, you had to get the permission of investors to do it. Now the only threshold is courage." The author discusses the reduced technical needs to develop a new offering in that space, and how easy it is to "release a minimal version one quickly, then let the needs of the users determine what to do next." Not being an investor in that space, from an ignorant outsider's perspective it seems like an intriguing take on the future of that market. (Although it does raise important but unanswered questions about how any such startup could create defensibility against similar low-budget, low-barrier-to-entry competition -- and the implications for investors) But it's the contrast between the two messages that I wanted to highlight, and it really helps illustrate the point Bill is making. As Dhiraj and I told the HBS students, launching a successful industrial energy efficiency technology startup might require knowledge of software, hardware, machine-to-machine communications, industrial manufacturing equipment, manufacturing facility management, electric utilities and their billing patterns, energy usage analysis, proper structuring of business partnerships with larger firms, etc., etc., etc. And can you imagine throwing a "minimal version one" out there for such customers, in anything so mission-critical? Or throwing a "minimal version one" biofuel out into the market, untested? Bill's diagnosis of the challenge is spot-on, in recognizing that there is a multi-dimensional and deep knowledge requirement for successful entrepreneurship in cleantech. Where I would quibble with Bill is in his conclusion, that few managers will have the multi-dimensional skills to be able to rise to the challenge. Instead, what we're seeing is that it takes a village to build a world-class cleantech enterprise. It takes a strong management team, but not where any one manager has the complete skillset themselves -- one where the complete team has most of the necessary skillsets. And it requires a good syndicate of value-added investors who each bring their own areas of expertise to the Board room, as well as their networks of contacts for helping to round out the management team and business partnerships, to address any remaining gaps. Purposefully matched co-investors, for example, where one is bringing market expertise, another is bringing technical expertise, another is bringing regional presence, and all bring to bear their collective experiences with the general challenges of entrepreneurial growth. This, then, means management is much less of a limiting factor than Bill's column would suggest. The influx of strong entrepreneurial talent lacking specific domain expertise isn't a "sorely lacking" dynamic, but instead a really healthy thing for the sector, as long as this proven entrepreneurial talent is matched well with domain expertise from the rest of the Board and management team. But it also means that pulling together such a collaborative effort will require a lot of hard work and more inclusiveness. This helps explain why we're seeing more syndication in early-stage cleantech venture investing than is often seen in other sectors. It also provides a good model for thinking about building successful startup management teams in cleantech. And finally, it should be encouraging for any proven entrepreneurs who are eager to find ways to get involved in this sector.

“Cleantech CEO Attrition Tied to Market Struggles”… Huh?

Rob Day: October 14, 2007, 4:52 PM
Really didn't understand the Clean Technology Investor article cited in the title of this post. Unfortunately, I can't provide the full text of the article, since it's on CTI's paid service, but the gist of the article (from this past Monday) was: 1. "Running a clean technology company holds out the prospect of leading technological change in an industry, but also the possibility of product delays and a struggle to gain market acceptance." 2. "That may explain the rapid turnover of CEOs among clean technology companies, along with the limited pool of talent in a nascent industry, which heightens the chances of a mismatch between company and leader." 3. "Merrit Baker, president and chief operating officer of Kopos & Baker, which operates Pennsylvania recruitment firm 21st Century Staffing, estimates that a new clean-tech CEO will leave 25% to 30% of the time over a 24-month period. On the other hand, Martin LaGod, co-founder and managing director of clean-tech investment firm Firelake Capital Management LLC, said he hasn't observed much difference between the career longevities of clean-tech CEOs and those in other industries. No one appears to track actual figures." So... there's an implied message of high turnover among cleantech startup CEOs, but no one really tracks the numbers to know for sure, nor does anyone compare such turnover versus other venture-backed sectors. It would be a challenge for anyone to argue that cleantech CEOs are being driven out of their startups any faster than startup CEOs turn over in other sectors. The simple fact is that it takes very different skillsets to be an effective CEO at the various stages of an early company: The innovation stage, the product and organizational development stage, the early commercialization stage, and the late commercialization (possibly including going public) stage. Most startup CEOs I speak with readily acknowledge this fact, and the implication that it's going to be rare for any CEO to have the complete skillset to be the right fit across all these stages. That means changes at the top, although often the CEOs that step aside maintain a strong role with the company in a non-CEO position. Or they go off and start up something else new, and become "serial entrepreneurs". It's the nature of the beast for startups, and it's true across all sectors, not just cleantech. And given how hot the sector is right now, it's also tough to argue that long time to market is making cleantech CEOs in particular impatient to leave their startups. What is a more important point to note here, however (one that we've mentioned before), is that the rapid growth of the cleantech sector is in fact being enabled by the emergence of a strong class of entrepreneurial management talent in the space. Even just a few years ago, cleantech was a small sector with a shallow pool of entrepreneurial talent, as evidenced by a real lack of serial cleantech entrepreneurs. As the sector grows, more proven entrepreneurs are coming in and carving out their new "next big thing" in this space. And as the startups mature and early CEOs step aside with successes under their belts, we are starting to see an encouraging cadre of serial cleantech entrepreneurs ready to continue the sectoral momentum. The CTI article was confusing, but the real management trends we're seeing in cleantech are actually very encouraging. Deals from the past week:
  • Rhode Island-based TPI Composites closed a $22mm Series A, led by NGP Energy Technology Partners, and including Angeleno Group and Landmark Growth Capital Partners. TPI makes large-scale composite structures for the wind energy, transportation and military vehicle markets.
  • VentureWire reported that carbon offset provider NativeEnergy has raised an undisclosed amount of Series A financing, from FreshTracks Capital and Village Ventures.
Other news and notes: Gore's Nobel just makes it that much clearer that current policy trends are providing a tailwind for cleantech (see write-ups here and here) -- other big illustrations of this from the past week include California's green law push and Obama's government-sponsored cleantech VC proposal... Here's an update on the Sacramento cleantech VC scene... And finally: Oh well, it was a fun idea, aside from all the radiation poisoning.