—€¦Then, Find Like-Minded Investors
December 2006 / January 2007
Volume 4 Number 6
The Department of Energy's national laboratories and a network for venture capitalists and high-tech entrepreneurs would seem to have little in common.
After all, the labs attract highly trained scientists and engineers who explore the fundamental mysteries of the universe. The VC profession, on the other hand, appeals to profit-driven business people in search of the next Google—€”an investment that gives high returns in a relatively short timeframe.
Two different worlds, maybe, but in the case of the Cleantech Venture Network®, they potentially can share a common mission: to get market traction for technologies that optimize the use of natural resources while reducing the ecological impact. But for the network, the technologies must be more than "green." To qualify as "cleantech," they must also provide economic benefits such as lower costs or higher profitability. Companies that do good must also do well—€”that is, show the potential for sustainable returns and access to strong markets to attract the capital they will need to grow from startup to a mature business.
Some of the national labs were created about half a century ago to develop nuclear weapons as a means of protecting the nation and they still have duties as keeper of the nation's nuclear stockpile. But their missions have broadened to include efforts to enhance energy resources, solve environmental problems and promote environmental stewardship. But innovations born in the lab don't easily evolve into products that thrive in the marketplace. And that is where the goals of the labs and of the venture network may intersect.
The network was launched four years ago to bring companies that develop clean technologies together with venture capitalists who can fund them. The founders recognized the need to acknowledge the breadth of technologies that could come into play. That meant including software designed to improve the efficiency of the grid, for instance, and advanced materials that made greenhouse emissions harmless. It allowed for energy-related technologies such as ethanol, wind turbines, solar power and fuel cells—€”all of which are becoming attractive alternatives to oil, coal and other traditional carbon-based fuel sources.
These are all technologies that have been worked on, and often advanced, in the national labs. Indeed, most of the 11 segments the network tracks for quarterly and yearly analyses of venture deals, initial public offerings and mergers and acquisitions are familiar territory for national lab staff. The segments are: agriculture and nutrition, air and environmental quality; energy efficiency; energy generation; energy infrastructure; energy storage; manufacturing/industrial; advanced materials; materials recovery and recycling; transportation and logistics; and water purification and management.
Entrepreneurial companies that specialize in cleantech have shown increasing success at capturing venture capital. Data compiled by the network show nine consecutive quarters of growth in cleantech investment. About $2.29 billion has been invested in cleantech companies in North America in the first three quarters of 2006, with Q3 showing a record $933 million. Most of that growth is being driven by the energy segments, which accounted for $837 million in Q3. Cleantech is the third largest investment category in North America, behind only the biotech and medical categories.
European venture investors also have been targeting such companies. A recently completed network report on cleantech investment trends in Europe found that almost $2.42 billion had been invested in cleantech companies in Europe and Israel between 2003 and Q2 2006.
The money is there. To fulfill the missions set out by the DOE, though, lab inventors and their tech transfer offices need to find a way to tap into private resources. The network offers entrepreneurs and tech transfer offices a potential avenue for getting the venture capital that lab spinouts will need to develop their products, succeed in the marketplace and expand to the point where they can go public, merge with another company or be acquired. The network allows companies to submit executive summaries into a secure database for free.
Submitting companies are evaluated to ensure that they fit the definition for cleantech and are then categorized into one of the segments. The network has about 250 venture capital firms as members that then can access the company information anytime on the database. They also receive a weekly e-mail announcing new companies that have been entered in the network.
Company executives also have opportunities to give short presentations before a professional venture capital audience at the three Cleantech Forums—„ held annually in San Francisco, on the East Coat and in Europe. Interested companies must submit an application that will be assessed by in a selection committee of active investors. The roughly 20 companies that are selected then go through a training to prepare them for their presentation. More than $550 million has been raised by companies that have presented at Cleantech forums since 2002. The San Francisco Venture Forum Feb. 19-22 will include a showcase and exhibit area that will allow participating companies to promote their businesses.
Candace Stuart is the director of publications at Cleantech Venture Network.
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About Cleantech Venture Network
The Cleantech Venture Network LLC is a for-profit membership organization that brings senior decision makers from the investment, corporate, government, entrepreneurial and professional services communities together to exchange ideas, explore business opportunities, forge new partnerships and alliances and do deals. The trade group has 1,100 members whose annual dues are $2,500, according to The New York Times. To become a member, please visit www.cleantech.com. The network has tracked and analyzed more than $13.2 billion of North American venture investment in cleantech since 1999 and all European cleantech investments since 2003. It also expanded its database to include all M&As and IPOs in cleantech in North America and Europe during the same time period. Cleantech's chairman is Nicholas Parker.
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