The phrase for the day is “cleantech convergence.” We believe what we said in a Buyouts article over a year ago still holds true – companies providing energy efficiency and resource management solutions are attracting more venture capital and private equity as frustrated “cleantech” incumbents flee the maturated wind and solar sectors. See “Inside the Deal: Select Cleantech Companies Look Rip for Investment,” Buyouts, January 30, 2013. Of course, we all see “clean tech” differently, but most of us don’t mistakenly associate it with Solyndra and Fisker, or even renewables. The mainstream clean tech media is now announcing a “repositioning” of cleantech. See “Silicon Valley Shifting to Power Grid After Solar Sours,” (www.bloomberg.com). But perhaps it’s an evolution not merely of an investment sector but, rather, how we see cleantech investment opportunities throughout the economy.
VC investment across industries bounced back to record levels in 2012, with only a slight step back in the first quarter of 2013. Most general VC quarterly reports (e.g., PricewaterhouseCoopers’ MoneyTree and the NVCA) have emphasized the “retrenchment” in clean technology and life science investments, while noting the dominance of software, media and other capital efficient business models. But clean tech is like health care – rapidly converging with the entire economy notwithstanding the challenge in striking public-private partnerships. Health care and cleantech include both capital intensive (producers, developers and providers) and capital light, quicker-to-exit (IT and cost-reduction technologies) business models. Generalizing about such huge pieces of our economy is as misguided as predicting the next 4 quarters based solely on the last. While, according to media sources that adopt a narrow view of the cleantech (although while admitting its overlap with most other sectors), “clean tech” investment plummeted in the first quarter, the percentage of all VC investments in clean tech going to energy efficiency, storage and smart grid technologies has more than doubled since 2008.
Even more focused clean tech news sources see the shift from an alternative energy and fuels focus to energy-related advancements as a mere light at the end of the tunnel. See “Some light in clean tech investing, despite the gloom,” GreenBiz (www.greenbiz.com). We see much more than a shift or repositioning – energy efficiency (from buildings to transportation to the grid), resource management (from water to raw materials to logistics) and sustainability (from food to agriculture to cities) solutions are converging with all sectors of our economy, including even other VC darlings like big data, health care and biotech.
Clean Deals – Efficiency and Storage Still Dominate:
Alphabet Energy (US) – thermoelectric waste-heat technology – raised $16 million in its Series B round backed by strategic investor Encana and existing backers, TPG, Claremont Creek and CalCEF. Its CEO believes that “[w]aste-heat recovery is the largest untapped potential for energy efficiency.” See Greentech Media (www.greentechmedia.com). GMZ Energy, MTPV, Phonoic Devices and Silicium have all recently raised VC in the same space.
Ecolibrium (India) – electricity usage monitoring and control platform – raised $1.6 million from Infuse Ventures (Indian fund focused on efficiency, waste and water) and IFC.
Next Step Living (US) – residential energy efficiency solutions – just raised $18.2 million from VantagePoint, Black Coral Capital and the Massachusetts Green Energy Fund.
LightSale Energy (US) – energy storage devices – Khosla Ventures just invested.
Ambri (formerly Liquid Metal Battery) (US) – power grid battery producer – got $15 million from Bill Gates, Khosla and French oil company Total SA.
EMeter (US) – originally backed by Foundation Capital (which also invested in Sentient Energy and Silver Spring Networks), got acquired by Siemens.
Fund Focus – SJF’s Vision Produces Top-Quartile Results
Like Black Coral Capital and others, perhaps one of the best examples of the broad (and correct) view of clean tech as an investment thesis is SJF Ventures. SJF is not in the Valley or Boston (North Carolina). As the number of VC funds declines, SJF just closed on its third fund ($90 million), and their second fund is in the top quartile of all US VC funds of its vintage year. SJF describes itself more in terms of sustainability than clean tech, having already invested in waste recycler CleanScapes, e-waste recycler ERecycling Corp, and data center efficiency software provider FieldviewSolutions. SJF sees clean tech differently and much more broadly, focusing on real businesses that provide immediate value to customers with low cap ex requirements and faster growth trajectories – think asset recovery, reuse and efficiency.
SJF, Black Coral, The Westly Group and other smaller funds are joining cleantech pioneers Khosla, Baemar and Kleiner, but without first testing their metal in the Valley of Death of renewables. Earlier-stage bets on good management execution and large potential markets – sounds like the old days. Thank you SJF for confirming our belief in both cleantech convergence and the power of being a leader versus a follower.