Greentech VC Funding Update From Sand Hill Road
Lawfirm Orrick hosted another of its semi-regular greentech events. You’dbe surprised by how many people come out early in the morning for freecoffee and greentech chat in Silicon Valley — 150 people gathered tolisten in to this panel focused on venture funding.
Joe Muscatof Ernst & Young spoke about VC numbers in greentech. According toErnst and Young, greentech represented 8 percent of total venturecapital transactions and 12 percent of venture dollars in 2009. Notably, $60 billion of government money has been allocated to green,but only a third of that has actually been distributed, according toMuscat. He sees considerably more funding coming into the greentechsector in 2010.
A brilliant question was posed to the panel: Do strong venturefunding levels serve as an indication of the health of the industry, orare they just a sign of investor exuberance? Warren Hogarth of SequoiaCapital tried to answer the question by noting that "the jury is stillout" on that one. He added, "Despite the immense amount of moneyinvested, there have been virtually no returns. There has been a lot ofeuphoria, but it’s not correlated to the industry. It’s more about LPsgiving money than an indication of the health of the industry."
Sequoia was an early stage investor in battery firm A123, and morerecently, emeter. Seed investing is an important part of Sequoia’sprogram.
According to Ernst and Young’s Muscat, "We haven’t seenmuch in the way of exits." He added, "There’s so much uncertaintybecause of carbon and climate growth — there’s a challenge forentrepreneurs and investors."
Prakash Ramachandran of Nordic Windpower was on the panel (we covered this firm in detail here). Nordic Windpower’s funding process was quite grueling and started inmid-2009. What ended up convincing the investors was the sheer size ofthe annual wind market and the segment that Nordic Windpower wasfocused upon — distributed wind, which is regarded as an underservedsegment. "And don’t bet the business plan on getting DOE money," headded.
Jim McDermott of energy investment fund U.S.Renewables Group is bullish on wind and recently invested in GeneralCompression, a wind generator start-up that also includes CompressedAir Energy Storage (CAES).
And finishing on exits: Investors are looking for pure play greentech companies, according to the Orrick moderator.
As for the public liquidity market — there is appetite there,according to Hogarth, although he’s very cautious. He stressed that"it won’t do the industry any service if we put companies out that runup in the first 3 months and then collapse soon afterwards." Hogarthadded that companies are filing, and that there is optimism for thosecompanies, but there is also a pervasive sense of caution. "It’searnings that matter."
Speaking of panels at law firms (and inthe spirit of blatant self-promotion) — I’m moderating a panel at theoffices of law firm Pillsbury tomorrow at noon in Palo Alto, CA. It’scalled BackStage Pass—Mr. Smith Goes to the Valley: Washington’s Impacton Cleantech Innovation: How legislation will affect the evolution ofthe cleantech industry.
See you there.
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