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Venture Capital Firms Begin to Focus on Alternative Energy Start- Ups

Posted on: Saturday, 6 August 2005, 03:01 CDT

Top venture capital firms in the San Francisco, California region are reported to show serious interest in the alternative energy sector, hoping to capitalize on the growing worldwide demand for energy - driven in part by high oil prices, climate change and dwindling natural resources. "This is an area where we've been seeing a lot of quiet investing going on," says Mark Heesen, president of the National Venture Capital Association in The New York Times. (6/22/05). "When you're talking about energy, when you're talking about water, you're talking about the largest markets in the world," adds Ira Ehrenpreis of Technology Partners in Palo Alto, California. These days in Silicon Valley, more venture capitalists are allocating dollars to this sector because they think it will deliver attractive returns. "It's not because we want to do great things for the environment or great things for the world," explains Ehrenpreis, who also cochairs the Cleantech Venture Network.

"We've seen a real change in terms and interest level and an understanding of this area," notes Andrew Beebe, president of Energy Innovations. The field is "starting to get big and grow rapidly," observes Sunil Paul (founder of Brightmail), who has used his personal fortune to help finance three alternative energy companies. (He was an early investor in Nanosolar, an energy firm, along with the founders of Google.)

The attention now given by some of Silicon Valley's highest- profile investors is great news for Nancy Floyd, a founding partner of Nth Power, a San Francisco-based venture firm that specializes in clean-tech investments. "Energy had always had a very small core audience among venture capitalists," she points out in the Times. "It's only the last six months to a year we're seeing some of the generalist firms form teams around this and write checks in this area."

According to the Times' account, clean-tech represented a 1.2 percent share of the total dollar amount of venture capital invested in 2000. In 2004, the $520 million that venture capitalists invested accounted for a 2.6 percent share of the overall venture pie.

The federal government and states are taking far different paths when it comes to supporting renewable energy development. While the national role continues to favor corporate fossil power and scaled back investments in renewable technologies, states are reported to be "playing an increasingly important role," declares Ron Pernick, cofounder of the consulting group Clean Edge. As noted in BioCycle, nearly 20 states have set goals for the percentage of our energy sources that must come from renewables. Pernick also notes that some states, including California and Connecticut, are allocating funds to be invested in promising alternative energy companies.

Copyright J.G. Press Inc. Jul 2005

Source: BioCycle

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