CalCEF Angel Fund

from Sustainable Industries - by Amy Westervelt - June 30,2008

Let's make a deal

Despite the flood of headlines announcing $400 million cleantech venture funds and rumblings of the sector’s overvaluation, cleantech investments comprise just 11 percent of total U.S. investment, and worldwide venture capital and private equity investment in the space dropped from $3.7 billion in Q1 2007 to $2.4 billion in Q1 2008, according to New Energy Finance. Read More

from Earth2Tech - by Jennifer Kho - January 20, 2009

Cleantech Crowd Cheers Obama's Inaugural speech

After being ignored in the last two inaugural speeches, the issue of climate change got plenty of attention at U.S. President Barack Obama’s inauguration Tuesday. As an estimated 1.4 million watchers looked on in the mall alone, by far the largest attendance at an inaugural event, Obama said that "the ways in which we use energy strengthen our adversaries and threaten our planet” and that the country cannot “consume the world’s resources without regard to effect."

He promised to "restore science to its rightful place," a move that likely will be seen as an admonition to the Bush administration, which had been accused of interfering with scientific work related to climate change. He pledged to build electric grids, "harness the sun and the winds and the soil to fuel our cars and run our factories" and work with other countries to "roll back the specter of a warming planet."

The cleantech industry applauded the speech for underlining the new president’s commitment to the climate change fight.

"We’re certainly encouraged," said Susan Preston, general partner for the California Clean Energy Fund’s angel fund. "It gives us an understanding of the priority [clean energy]’s been given, and it’s one that it’s never been given before."

With the Obama administration’s focus on climate issues, Preston said she believes green technology will be one of the key factors to revitalizing the economy. She also said she understands that it will take time to craft new legislation to support clean technology and indicated her willingness to have patience, a good sign for an administration that has made hefty promises.

While Preston would, for example, like to see a federal renewable portfolio standard as soon as possible, she said it would likely take some time to put together and doesn’t expect it to happen in the first quarter.

She added that a carbon cap-and-trade program might happen first. "In listening to the conversations in Congress, there’s a lot of difference in opinion, but there’s absolutely no question in my mind that Obama is fully and utterly committed to having a federal renewable portfolio standard and considers it one of his highest priorities," she said.

Gary Mull, V-P of marketing at Akeena Solar, called the event "amazing" and said Obama’s ability to stir the crowd and offer hope to the nation was "very impressive." Aside from Obama’s direct references to the environment and clean technology, Mull said that his call to the nation for service and his reminder that everyone has a duty to work to address the nation’s challenges was relevant to addressing climate change.

Mull also referred to the new presidential limousine — a Cadillac hybrid — as another sign of Obama’s commitment to the cause. The car choice "is a statement of his out-with-the-old, in-with-the-new message,” he said. “He’s leading by example. We’re off to a great start."

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from BusinessGreen - by Danny Bradbury - November 7, 2008

Cleantech titans deliver Obama wish list

BusinessGreen.com asks the great and the good of the US cleantech sector what they are hoping to see from the Obama White House

So, it's all over. Barack Obama is now officially president-elect of the US.

But of course, the real work has only just begun. Having sailed into office on a sea of euphoria, he now has to live up to his expectations. With a ballooning national debt and two ongoing wars, will he really have the resources to pull off the "Apollo project for energy" that he has promised the US public? Can his green jobs revolution really lead the economy out of recession? And can he find the $150bn (£95bn) of investment he has promised for the cleantech sector when the Federal budget is running on fumes?

BusinessGreen.com tracked down several of the leading players in the US cleantech and environmental movement to find out what they want to see from an Obama administration and what they expect to get.

From signing Kyoto to awarding Presidential Medals of Freedom for clean tech heroes, here are their responses:

R. Paul Herman is chief executive and founder of HIP Investor, a San Francisco-based financial firm with a number of green funds and indices

"We need an integrated economic-environmental-social strategy across all three sectors (business, NGOs and government) that tracks results with an overall performance scorecard. By measuring the quantifiable improvements in environmental, social and human effects – and how they drive economic vitality – an Obama administration could better design the tax code, regulatory framework, and cross-sector incentives to stimulate an improved society.

If the government could shift its focus to managing outcomes (such as reduced cost per mile driven for vehicles) instead of picking and choosing products (avoiding ethanol subsidies), then we could unleash the full innovation of entrepreneurs everywhere to solve problems with a wide diversity of breakthrough solutions.

Cleantech is the perfect testing ground for this approach, since increased eco-impacts naturally correlate also with high ROIs for customers and increased profits for clean tech businesses.

His immediate challenges are to restore US credibility and leadership by signing Kyoto and securing immediate Senate approval by 31 January – to send the signal that the US is onboard globally, as Australia did with its new prime minister.

He must stop the backslide by intercepting – and reversing – the Bush and Cheney relaxations of industry regulation and reduced reporting.

He must accelerate eco-efficiency by kickstarting the auction process for a greenhouse gas emissions (GHG) trading system – even if it's baby steps like the European version. We need the bidders' money in the Treasury starting in 2009, and to begin rewarding the early movers (including the US CAP participants).

He should create eco-benefits by designing tax incentives for corporates who clean or restore the land, air and water. If clean tech products can pump cleaner water out than it was going in, why can't we start applying these upstream in rivers and downstream in wastewater facilities?

Finally, he should reward the highest-performers in environment, social impact, job creation and economic vitality with Presidential Medals of Freedom. It's appropriate for our cleantech heroes, and speeds the race to the top."

Susan Preston is general partner at the CalCEF Clean Energy Angel fund, an investment fund committed to backing cleantech start ups

"There is a vast need not just for the use of renewable resources, but also for energy efficiency. We are a highly inefficient country, and there is a lot we could do to allow for efficient operation within our buildings. We should be looking at where we could have the greatest impact on lowering the consumption of lighting and HVAC.

We have to ask questions including: How do we make an intelligent grid? How do we use the power that we have so we don't have to build as many power plants? And then how do we convert ourselves from traditional fossil fuel generation to other kinds? We will not get rid of the coal-fired power plants, so how do we capture and sequester that carbon?

Tax incentives are always good to get people to implement the technology, but they are good for commercialisation, and we need more incentives at the front-end. In order to have the right answers we need to be creative. We are specifically focused on the seed funding part of the food chain because of the lack of funding in this area.

A lot of really great ideas aren't getting funded because there are not enough dollars to go around. I think we really could jump-start a lot of the technology. This is an opportunity to hand pick peer-reviewed technology for further development. Each time you allow a technology to be developed, it benefits the entire economy."

Charles Komanoff is co-director of the Carbon Tax Center, a lobby group pushing for a US carbon tax

"An Obama administration should be good for cleantech on many levels. There is a greater likelihood of a carbon price – and a stiff (high) one rather than a soft (low) one.

That is crucial in eliciting large-scale and rapid transformation of the US energy economy from fossil fuels to renewables and efficiency. We will be more likely to see long-term renewal of the PTC [production tax credit] for wind and solar, along with more strategic support of energy conservation and efficiency.

We would like to see a revenue-neutral carbon tax with dividend. Tax is a far more straightforward, reliable, and immediately implementable means of administering a carbon price than cap-and-trade. One hundred per cent return of all tax revenues should go to Americans, and the dividend model is more transparent, equitable and politically salable than tax-shift."

Erik Blachford is chief executive of carbon offset specialist TerraPass

"The more we have leadership on issues relating to renewable energy, carbon abatement, and other clean technologies, the more we’ll see stability in investment and customer commitments.

We would like to see a sincere effort to join any successor to the Kyoto Protocol capping greenhouse gas emissions, starting with a roadmap for legislative efforts to put in place a federal cap-and-trade system to limit carbon emissions in the US.

Climate change outstrips all other challenges, and gives rise to the twin challenges of federal cap-and-trade legislation and a nationwide renewable portfolio standard."

Kassie Siegel is a director at the Center for Biological Diversity, a non-profit committed to promoting wildlife protection

"I would ask President Obama to turn his attention to addressing the climate crisis. Scientists tell us that we have already passed the safe level of carbon dioxide in the atmosphere and we must immediately turn our energy economy around and put our nation and the world on the path to reducing atmospheric carbon dioxide concentrations to 350 part per million or less.

I would ask him not to wait for Congress to act, but instead to immediately begin implementing environmental laws like the Clean Air Act and Endangered Species Act with existing regulatory structures that are well suited to addressing greenhouse emissions and that have a proven track record of success.

The US has some of the strongest domestic environmental laws in the world, and if we simply begin to implement them we can make substantial progress now, before it is too late for the Arctic, for polar bears, and for hundreds of millions of people in this country and around the world as well."

Bill Vogel is chief executive of smart grid specialist Trilliant

"Trilliant believes that the energy utilities should be given incentives to upgrade infrastructure with carbon-friendly smart grid technology. While the depreciation language for new investments is positive, the remaining book value of old investments are still an obstacle.

Since installing these technologies will improve reliability, help the environment, control inflation and reduce dependence on foreign oil, we believe additional tax credits should be considered.

We also believe that the alternative minimum tax laws on options should be revised to not punitively impact employees who wish to exercise options.

Like the environment itself, energy use is a complex system. We already know that energy consumption in one area impacts energy production in another, but the levels of complexity with respect to the regulatory environment, energy production, carbon emissions, poverty levels, and so many other factors are all part of the problem. The biggest challenge is the complexity of the environmental problem and the politically unpopular implications of some decisions."

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from BusinessGreen - by Danny Bradbury - November 6, 2008

Verasun outlook not so sunny as ethanol plant plants shelved

Corn-based ethanol developer forced into Chapter 11 bankruptcy by high crop prices

Giant US ethanol producer Verasun Energy has had to shelve work on an almost-complete biorefinery this week after filing for Chapter 11 bankruptcy last Friday.

The company, which went into protection after high corn prices and credit scarcity choked off its cashflow, made the decision after funding for the plant fell through.

The fate of its 110 million gallon per year ethanol biorefinery in Janesville, Minnesota, is now unclear after the lender failed to finance further construction. Verasun is trying to find additional funding to complete the plant, which was scheduled to begin operating before the end of this year.

The company, which had entered into a $125m (£78m) revolving credit facility with UBS Investment Bank in July, informed the market of its problems as early as September 16 in an 8K filing with the SEC.

It disclosed that it had abandoned its short financial positions, traditionally used to hedge physical purchases of corn, after corn prices rose dramatically from May to July. It followed market predictions that corn prices would continue to rise, entering into a range of "accumulator" contracts that forced it to buy corn at high prices as the market declined.

Susan Preston, general partner at the CalCEF Clean Energy Angel fund, said that Verasun's predicament was not surprising, adding that she has been sceptical of biofuel production that involved foodstocks for some time, instead preferring biofuels based on non-foodstock sources, such as grasses and algae, and cellulosic production.

"You don't have the volatility of futures markets, where there's an independent value for the crop outside the utilisation for biofuel," she said of non-feedstock biofuels, adding that the processes for developing them were looking increasingly viable. "We're starting to go through growth process of one generation [of biofuel production] being replaced by another. It's a natural process in any type of market."

Verasun first traded on the NYSE in June 2006. Its share price halved between October 30, the day before the bankruptcy filing, and the close of trading on November 3. Company representatives refused to comment further on the Chapter 11 filing yesterday.

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CalCEF Angel Fund Press Release - October 30, 2008

CalCEF Angel Fund Conducts Second Close, Completes First Three Clean Energy Investments

Clean Energy Fund Leads Early Stage Investments in Capital Efficient Lighting, Solar, and Biofuels Companies
San Francisco, Calif. – Oct 30, 2008 – CalCEF Clean Energy Angel Fund I, LP (the CalCEF Angel Fund), today announced a second funding close, which will ultimately be invested in early-stage, capital-efficient clean energy companies. CalCEF Angel Fund also recently led investments in its first three portfolio companies: a producer of intelligent lighting solutions; a developer of high efficiency photovoltaic cell manufacturing equipment and a developer of technology in the biofuels industry.

The PCG Clean Energy & Technology Fund (PCG) is one of the newest limited partners in the Fund, which continues to attract capital from leading institutional and individual investors. "PCG’s investment is a strong validation of our focus on seed and early-stage financing, designed to close the critical funding gap in clean energy," said Susan Preston, General Partner of the CalCEF Angel Fund. "There is a growing understanding among investors, policy makers and others that cleantech is primed to be the engine of growth for the next economic cycle. Against the context of global credit crisis and financial uncertainty, we have an eye on the longer-term investment horizon and fostering the next-generation of business leaders for the new green economy."

Added Fund Manager Matt Lecar—"We’re finding significant opportunity for investment in clean energy companies that do not need tens of millions of dollars to overcome the valley of death between concept and commercial success. These smart, capital efficient ventures are focused on delivering enabling technologies within the existing manufacturing and energy industry infrastructure. Spanning solar, biofuels and efficiency, the breadth of our first group of portfolio companies is one indicator of the magnitude of that opportunity."

The CalCEF Angel Fund was formed in April 2008 to help promising clean energy companies throughout the United States bridge the investment gap between seed and traditional venture capital funding. In addition to making preferred stock equity investments of up to $500,000 per round, the CalCEF Angel Fund provides ongoing strategic guidance to its portfolio companies. Recognized experts in energy industry and early-stage business growth, the management team takes an active advisory role on the boards of their portfolio companies.

The CalCEF Angel Fund’s portfolio presently consists of three diverse, high-growth clean energy companies. The CalCEF Angel Fund made two investments in HID Labs, closing out the company’s seed round and leading its subsequent Series A round. HID Labs delivers intelligent high intensity lighting that helps industrial, commercial and governmental customers reduce electricity consumption and improve environmental sustainability. CalCEF Angel Fund was joined by premier investors including American River Ventures, a seed-stage investor in HID Labs, and Greenhouse Capital Partners and Big Sky Ventures, which both participated in the Series A round. CalCEF Angel Fund also led a Series A investment in San Francisco-based Allopartis Biotechnologies, a company in the biofuel industry. X/Seed Capital Management participated as a coinvestor in the round. CalCEF Angel Fund led an additional investment in a start-up focused on adapting semiconductor process equipment for producing higher efficiency advanced solar cells at reduced cost.

About CalCEF Angel Fund: The CalCEF Clean Energy Angel Fund is a first-in-kind fund dedicated to making market-based returns on seed and early-stage clean energy companies. The CalCEF Clean Energy Angel Fund targets companies focusing on renewable energy, energy efficiency, energy storage and other products and services designed to enhance the clean energy sector. For more information, go to www.CalCEFangelfund.com.

Press Contact: Wei-En Tan Antenna Group (for CalCEF Angel Fund)
415-977-1936
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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from Earth2Tech/Gigaom - by Katie Fehrenbacher - October 30, 2008

CalCEF Angel Fund Backs Solar, Biofuels, Lighting

When we spoke to investors at the CalCEF Angel Fund last month, they had been investigating which early stage startups would receive the first investments from the firm’s planned $20 million fund. This morning the investors say they have invested in three firms — efficient-lighting startup HID Labs, biofuels company Allopartis Biotechnologies, and an undisclosed solar investment that is adapting chip manufacturing to make cheap, efficient solar cells.

The fund says it has also raised additional funding towards its $20 million goal, inching toward $10 million — up from $7 million in September. It has also added limited partners, including PCG Clean Energy & Technology Fund (PCG).

Founded in April 2008, the CalCEF Angel Fund took some of the money from an original nonprofit CalCEF fund, which was established in 2004 with $30 million from a PG&E bankruptcy case. But that fund was mainly being invested in later stage companies. This new CalCEF Angel Fund is very much for-profit and is looking to invest some $300,000 to $500,000 into 15 or so deals, and move technology from the lab to the early stages of commercialization.

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from Greentech Media - by Jeff St. John - October 30, 2008

Clean Energy Angel Fund Makes First Investments

The CalCEF fund backs HID Labs, Allopartis Biotechnologies and an unnamed solar-technology company. It also raises its second funding round, bringing its total capital so far to $9.3 million.

The California Clean Energy Fund announced Thursday that its angel fund had invested in three companies and was nearly halfway to its overall fund-raising goal.

The Clean Energy Angel Fund closed a second round of funding, bringing it to a total of $9.3 million.

The fund also reported it had recently led investments in three companies – HID Laboratories Inc., Allopartis Biotechnologies and an unnamed solar-technology company.

Menlo Park Calif.-based HID, which is developing systems that can control and dim commercial lights to save energy, received two investments from the fund, which closed HID's seed round and led its Series A round.

The company has said it can cut up to 40 percent of the power consumption from some high-intensity discharge lights, bright lights that use capsules of gas instead of filaments and are often used in stadiums. (HID CEO Antonio Espinosa will speak at Greentech Innovations: End-to-End Electricity on Nov. 17 in New York.)

American River Ventures participated in the seed round, and Greenhouse Capital Partners and Big Sky Ventures participated in the Series A round.

San Francisco-based Allopartis is developing enzymes for use in cellulosic-biofuel production, co-founder Robert Blazej told the San Francisco Business Times in January. The Clean Energy Angel Fund led a Series A investment in the company. X/Seed Capital Management also invested in the round.

The mystery solar company is adapting semiconductor-manufacturing technology to make solar cells that it claims can convert more sunlight into electricity at a lower cost, according to the fund.

Fund managers told Greentech Media the company expects its technology will boost the efficiency of solar cells by 1 to 2 percentage points. The angel fund placed between $250,000 and $500,000 in each of its investments, they said, but did not disclose how much the companies raised in each of their rounds.

The California Clean Energy Fund, also known as CalCEF, was created in 2004 as part of Pacific Gas and Electric's bankruptcy settlement and has invested in startups including Tesla Motors, Imperium Renewables, Fat Spaniel Technologies, CoalTek, Synapsense and others (for more information, see CalCEF Invests in 10 Startups).

But its Clean Energy Angel Fund, launched in April, is aimed at earlier-stage companies looking for $500,000 to $5 million to get off the ground, Susan Preston, general partner for the fund, told Greentech Media in April (see Q&A: California's New Angel).

At that time, Preston said the increasingly large amounts of money venture-capital funds were raising for greentech investments were creating a funding gap for early stage companies. Larger funds were likely to seek out larger, later-stage deals, possibly leaving companies with good ideas but lower capital needs out in the cold, she said (see Filling Greentech's 'Early Stage Gap').

Since the fund's launch, the ongoing global financial crisis may have changed that equation. Venture capitalists have said the crisis could put a crimp in their fund-raising efforts (see VCs Predict Greentech Investment Slowdown and Funding Roundup: How Poor Do Investors Feel?).

Still, Preston, who was previously an entrepreneur in residence with the Ewing Marion Kauffman Foundation, said in a news release Thursday that the Clean Energy Angel Fund has "an eye on the longer-term investment horizon" amid the economic turmoil.

The fund hopes to raise up to $20 million to fund early stage green-technology companies. It raised $6.8 million in its first round in February and $2.5 million more recently, it reported Thursday.

Venture capitalists speaking at the Renewable Energy Finance Forum in Seattle on Tuesday said that angel investors could play an important role in filling funding needs that may arise because of the financial crisis, though they said it may force angel investors to be more cautious with their money as well.

"I'd say we have a love-hate relationship with angels" given that they can compete with venture-capital firms, said Raj Atluru, a managing director at Draper Fisher Jurvetson. But given that venture-capital firms only do about one angel-sized deal per year, angels are still needed to give good companies a chance to grow, he added.

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from AltAssets - by Fiona Bond - October 30, 2008

CalCEF Clean Energy Angel Fund I holds $9m second closing

Early stage-focused CalCEF Clean Energy Angel Fund I has held a second closing on $9.32m. The fund has a target of $20m. It held a first closing in February of this year on $6.825m. Investors into the fund include the PCG Clean Energy & Technology Fund.

To date, the CalCEF Angel Fund has led investments in three companies. The fund has made two investments in intelligent lighting business HID Labs, closing out the company's seed round and leading its subsequent Series A round. Participating investors included American River Ventures, Greenhouse Capital Partners and Big Sky Ventures.

The CalCEF Angel Fund previously led a Series A investment in San Francisco-based biofuel company Allopartis Biotechnologies, and also led an additional investment in an unnamed solar technology start-up.

Susan Preston, general partner, CalCEF Angel Fund, said, 'There is a growing understanding among investors, policy-makers and others that cleantech is primed to be the engine of growth for the next economic cycle. Against the context of the global credit crisis and financial uncertainty, we have an eye on the longer-term investment horizon and fostering the next-generation of business leaders for the new green economy.'

The CalCEF Angel Fund was formed in April 2008. The fund targets investments of up to $500,000 per round, targeting renewable energy, energy efficiency, energy storage and other products and services designed to enhance the clean energy sector.

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from Dow Jones Venturewire/Wall Street Journal - by Yuliya Chernova - October 30, 2008

CalCEF Halfway To $20M Fund Close; Invests In 3 Clean-Tech Cos

CalCEF Clean Energy Angel Fund I LP held a second closing on the fund, getting to just under $10 million, with a goal of reaching $20 million, according to General Partner Susan Preston and Fund Manager Matt Lecar.

The seed-stage fund also made its first investments, which were each less than $500,000, in clean-technology companies: efficient lighting company HID Laboratories Inc., enzyme developer for biofuels processing Allopartis Biotechnologies, and an equipment developer for making solar cells, whose name wasn't revealed. These investments were part of larger rounds for each company.

New limited partner PCG Clean Energy Technology Fund and individual and angel limited partners participated in the funding. Preston said in an interview with Clean Technology Insight that she hopes to close the fund-raising for the San Francisco fund in the next few months. California Clean Energy Fund, a nonprofit fund that was formed as a result of a PG bankruptcy in 2004, is a founding limited partner of CalCEF Clean Energy fund, which is a for-profit entity.

In the past few weeks the fund saw a noticeable influx of proposals sent its way, Preston and Lecar said. They surmised that it's possible that company founders are unable to support their business plans with their own cash and are seeking third-party capital earlier in view of the broad economic credit crunch. "Or it could be sheer coincidence," said Preston.

"We're investing very early in the lifecycle, pre-product and pre-revenue. We are countercyclical," Lecar said, adding that the company's portfolio companies are not as affected by broad market forces as some later-stage plays as they are still in development. At the same time he noted that just like other investors, CalCEF is looking at a narrowed exit window, so it focuses on "how we preserve cash in our companies and preserve our opportunity to sustain them longer," Lecar said.

The goal of the fund, launched earlier this year, is to provide seed-stage investments to clean technology companies that do not need large amounts of capital to reach profitability. "In general we're looking at companies that will get to profitability for less than $20 million. That is a constraint that keeps us away from a lot of interesting opportunities in clean energy," Lecar said. He also noted that it allows the fund to keep away from substantial dilution and to differentiate itself from other companies. He said the fund avoids "long-term science projects," or companies whose research and development stage takes several years.

The firm took part in a bridge round that was converted to a Series A round for HID Labs, said Preston. The company hopes to raise $6 million in total in the Series A, she said. Current Series A investors include CalCEF, Greenhouse Capital Partners and Big Sky Ventures. American River Ventures backed the company at the seed level.

HID Labs developed high-intensity discharge lights that are commonly put up in big-box stores. The company's technology, which is now going into field trials with potential customers, replaces the current lights with ones that can dim, use 40% less electricity, and can switch on quickly allowing motion-detection switches, for example, according to Preston. The company will use contract manufacturers to go to scale production. It will sell the lights through energy service companies that do energy-efficiency upgrades for large stores.

CalCEF also backed Allopartis Biotechnologies in a round that totaled $750,000, including an investment from X/Seed Capital Management. "Allopartis is developing a "process by which it will significantly increase the performance of enzymes that are specific to the actual feedstock" like jatropha or switchgrass, said Preston. Lecar added that "the fundamentals in the oil market are such that we'll see prices moving up." At the same time, he said, it makes much more sense to invest in a company like Allopartis as opposed to an ethanol refiner. Allopartis is currently validating its technology, after which it plans to go out for further finance, said Preston.

The fund also backed a solar company, which it declined to name, which is adopting semiconductor equipment to processing crystalline solar cells. "As wafers get thinner, you need greater precision of some instrumentation," said Lecar. He added that solar previously didn't need to use deposition tools that can deposit at nanometer thickness, but that the industry is moving in that direction. The company is testing its concept using existing technology and will then move on to develop solar-geared equipment. The total seed round for the company was less than $1 million, Lecar said.

CalCEF reserves about half of its capital to make one follow-on investment. "In each of these deals there's an [anticipated] near-term milestone that dramatically increases valuation," said Lecar.

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from Energy Priorities Magazine - by Denis Du Bois - October 15, 2008

Solar Power Intl 2008 Observations

The Solar Power International conference sold out. Again. And once again the line-up of speakers was first class. They included California Governor Arnold Schwarzenegger and General Wesley Clark. Celebrities aside, this conference -- the industry's largest -- gave us an annual glimpse into the business of solar. Denis Du Bois talks about the show with CalCEF Clean Energy Angel Fund Manager Matt Lecar. (podcast)

Listen to the Podcast (8-minute mp3)

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Music by Chris Keister

Solar Power International 2008 is a business-to-business conference about solar, co-produced by SEPA and SEIA (it started as Solar Power in 2004). This year's estimated attendance is close to 17,000 from 92 countries, with over 425 exhibitors and 65 conference sessions. As in recent years the program included top industry speakers and celebrities.

Big-name speakers here in San Diego included one-time presidential candidate General Wesley Clark and Senator Maria Cantwell. No-shows included Duke Energy CEO Jim Rogers and NASDAQ CEO Bob Greifeld, who sent substitutes. There was one speaker only the organizers knew about in advance -- California Governor Arnold Schwarzenegger spoke to an auditorium packed with thrilled attendees. The large audiences put many programs behind schedule, and visibly shook some of the presenters.

"A number of heads have turned, both in the Valley and in the solar industry generally, around some of the rounds that have been raised on the thin-film side." -- Matt Lecar, Fund Manager, CalCEF Clean Energy Angel Fund.

The celebrities and crowds are one aspect of Solar Power International. The other aspect is the business of solar, into which we get this annual glimpse. For a unique perspective on this, I asked someone who's been around the energy industry for many years, and who has several million dollars to invest in clean energy companies. I caught up with CalCEF Clean Energy Angel Fund Manager Matt Lecar at the airport for this interview.

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from Energy Priorities Magazine - by Denis Du Bois - September 29, 2008

New Leadership at CalCEF Angel Fund Means New Opportunities for Cleantech Startups

The CalCEF Clean Energy Angel Fund's announcement earlier this month -- that Matthew Lecar will henceforth manage the fund -- is good news for the cleantech industry. Lecar combines Sand Hill investment savvy with energy industry expertise. That means entrepreneurs will meet an investor who understands the value of transformational clean energy innovations, and sees through those that aren't really.

On September 10, 2008, Matt Lecar took the reins at the CalCEF Clean Energy Angel Fund 1, LP. Lecar's particular blend of experiences make him well suited for the rather challenging job of financial planning and development for the fund's portfolio of early-stage, clean-energy companies.

As the traditional VC community clambers up the cleantech learning curve, they're discovering the challenges of the multi-trillion-dollar energy industry, with its unfamiliar dimensions of policy, reliability, scalability and public relations. Cleantech entrepreneurs in search of money are teaching VCs that energy bears little resemblance to software and dot-coms.

Matt Lecar stands in sharp contrast to energy newcomer VCs: It's the entrepreneurs who might learn a thing or two. With 18 years in the energy industry, including stints at two of the world's largest utilities (PG&E and EdF), Lecar left the respected VC firm Trinity Ventures to join the fund. (Trinity's only cleantech investment, Soliant Energy, a rooftop CSP play, predates Lecar's time at the firm.) Silicon Valley is a long way from the Harvard Kennedy School of Government, where as a graduate student Lecar focused on energy and environmental policy.

"Coming to the investment world from the energy industry, I apply a different filter," says Lecar. "I understand where the technologies fit, the requirements they have to meet, and just how difficult utilities can be to deal with."

That kind of experience is invaluable when the business plan depends on influencing incentives, developing public programs, or dealing with utilities as sales channel partners. Many founding entrepreneurs lack that experience and, if their innovation is less than obvious, they've been returning from Sand Hill Road empty handed.

That doesn't mean just any cleantech company will find easy dollars at Lecar's door. Not only is he dedicated to clean energy -- no clean water or air deals, thank you -- Lecar sees through the green veneer of technologies that are merely positioned as cleantech.

"Our portfolio companies must have a significant impact on reducing the energy and carbon footprint of an activity," Lecar says, noting that some ideas could technically improve energy efficiency, but are likely to fail because efficiency isn't in line with the business objectives of the target market.

"If you give data center managers the ability to increase server density within their energy and thermal constraints, they'll take advantage of that ability to generate more revenue, not to reduce their energy consumption," he explains. Translation: A hybrid car with amazing acceleration but no better gas mileage is not an energy efficient vehicle.

The fund was established to bridge the gap in the investment cycle between seed and venture capital funding. Seed rounds average a few hundred thousand dollars, while most venture capital funds don't consider investments under one or two million. Angel investment accounts for almost as much money invested annually as all venture capital funds combined, but into more than ten times as many companies.

Unlike individual angel investors putting in their own money, the CalCEF Angel Fund is a limited liability partnership. Its members join forces to provide critical capital to support the commercialization of new, potentially transformational clean energy technologies.

The not-for-profit California Clean Energy Fund (CalCEF) put up the founding seed investment to establish the for-profit Angel Fund. CalCEF's relationships and network originate much of the newer fund's deal flow.

CalCEF's board includes some key energy policymakers in the state, and two of those board members sit on the Angel Fund's investment committee.

"CalCEF's board members have their hands on policy direction in the state," says Lecar. "They're interested in actively helping build our investments and help our companies."

Lecar doesn't discount the value of those relationships when it comes to navigating a sea of complex policies and utility regulations.

"When our entrepreneurs need a meeting with a Commissioner or legislator, we can arrange it."

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from BusinessWire - September 10, 2008

CalCEF Angel Fund Gains Energy Industry Veteran as Fund Manager

Matt Lecar Lends Market Expertise to Capital-Efficient Cleantech Investment Portfolio

SAN FRANCISCO--CalCEF Clean Energy Angel Fund 1, LP (the CalCEF Angel Fund), announced today that Mr. Matthew Lecar has joined as fund manager. A industry thought leader with a proven 18-year track record in venture capital, new product development, international business development, and management consulting in the energy industry, Lecar served previously at Pacific Gas & Electric Company (PG&E) and Electricite de France (EDF) Group, two of the world’s largest electricity providers. In his new position as Fund Manager at CalCEF Angel Fund, Lecar will direct strategic financial planning and development for the company’s diverse portfolio of early-stage, capital-efficient clean energy companies.

“Matt brings a unique combination of financial management expertise, technical insight and a practical understanding of the energy industry that is rare in the rapidly-expanding cleantech universe,” said Susan Preston, CalCEF Angel Fund general partner and internationally recognized expert in angel financing. “His experience has already proven him well-suited to spot promising early-stage investment opportunities and position our portfolio companies for strategic growth as they bring product to market.”

Established to bridge the gap in the investment cycle between seed and traditional venture capital funding, the CalCEF Angel Fund provides critical capital to support the commercialization of new, potentially transformational clean energy technologies.

“The mission of the CalCEF Angel Fund aligns perfectly with my own investment philosophy that there are significant opportunities to be found in incremental innovation when you’re looking at a market that’s as large and well-established as the energy industry,” said Lecar. “There are plenty of billion-dollar niches in a trillion dollar market, and we aim to identify and nurture those innovations that stand to deliver real market value with relative speed and capital efficiency.”

Immediately prior to joining CalCEF, Lecar worked as a venture consultant at Trinity Ventures, refining cleantech strategy for one of the most respected names on Sand Hill Road. At PG&E Lecar led new product development from 1998 to 2001. During his five-year tenure at EDF, Lecar helped launch and grow Silicon Valley-based Easenergy, where he was responsible for business development. While at Easenergy he also played major roles in supporting EDF’s investments in Clipper Windpower (AIM IPO 2005) Enerwise (acquired by Comverge in 2007) and Serveron (acquired by BPL Global in 2007). Lecar holds a Master of Public Policy degree from the Harvard Kennedy School, where he focused on energy and environmental policy, and a Bachelor’s Degree with High Honors in Physics and Political Science from UC Berkeley.

About the CalCEF Clean Energy Angel Fund

The CalCEF Clean Energy Angel Fund is a first-in-kind fund dedicated to making market-based returns on seed-and early-stage clean energy companies. The CalCEF Clean Energy Angel Fund targets companies focusing on renewable energy, energy efficiency, energy storage and other products and services designed to enhance the clean energy sector.

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from earth2tech - by Katie Fehrenbacher - September 10, 2008

Cleantech’s New Angel Matt Lecar

The CalCEF Angel fund is officially announcing that it has brought on a new fund manager: Matt Lecar, an 18-year veteran of venture capital and energy investing. Lecar, who previously held positions at utility PG&E, EDF Group and consulted for Trinity Ventures, actually joined the CalCEF Angel fund in March, but has already helped the fund work on its first deal into an undisclosed “lighting controls company.”

The CalCEF Angel fund was formed with some of the money of the original non-profit CalCEF fund, which was established in 2004 with $30 million from a PG&E bankruptcy case. That original fund was mainly investing in later stage companies, and was being managed by 3 traditional venture capital firms. General Partner Susan Preston explained to Sustainable Industries that the CalCEF Angel fund was created because the original fund wasn’t “targeting the area the utilities commission was interested in, which was moving technology from the lab to the early stages of commercialization.”

But the CalCEF Angel Fund, which is managed Preston and now Matt Lecar, is very much a for-profit fund, which has so far raised $7 million of a planned $20 million total fund. The fund plans to invest in very early stage companies with $300,000 to $500,000 per deal, and the ability to add on low-digit millions, and some total 15-odd deals.

Lecar joined the fund because he says he wanted to invest in early stage companies because “we need fundamentally new technology,” not just an acceleration of the current technology that we already have (that was also the topic of the Economist’s Energy Debate). Lecar says that he is looking at deals that are not too capital intensive (like large renewable energy plants that need to be built out), but that are developing intellectual property from biofuels to energy efficiency.

Lecar says the seed stage is a little different from the more traditional venture investing, partly because there’s more mentoring and prep work involved. But that’s the way he likes it and he contends: if we can take a young pitcher and teach him to throw a curve ball, that works for me.

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from San Francisco Business Times - by Lindsay Riddell - August 26, 2008

Fund aims to plug cleantech money gap

Venture capitalists have pumped hundreds of millions of dollars into cleantech companies in the last few years, yet a small cleantech fund aims to address what it sees as a “funding gap.”

“Something we’re trying to do in our little way is fill that funding gap that’s still out there between the very early stage family-and-friends round and venture capital,” said Sue Preston, who manages the fund.

Preston runs the CalCEF Clean Energy Angel Fund set up by the California Clean Energy Fund, formed with $30 million from the Pacific Gas & Electric Co. bankruptcy settlement. The San Francisco-based angel fund closed a $7 million first round of funding in February and is seeking to close a second round in coming weeks that will bring the fund tab near $20 million.

Compared to the multi-hundred-million-dollar dedicated cleantech funds rampant throughout the venture universe, $20 million might seem like pocket change. But Preston insists it fills a need.

Its first investment — a $4 million infusion the fund split with other firms — went to HID Laboratories Inc., a Menlo Park-based lighting company whose technologies target those energy-sucking block lights in commercial and industrial buildings like Costco.

HID’s CFO Tim McNally said as the company solicited funding, he felt there was a lot of interest in the company, but few investors who had deep knowledge in the lighting industry and were willing to put their money in first.

“We do think CalCEF Clean Energy Angel Fund has an important position both as a way to bridge this (funding) gap but also as credibility in the energy space that allows other, less-familiar investors to get more comfortable,” said McNally.

By the end of 2008, cleantech investment will likely be double the amount of 2007 and reach seven times what it was in 2003. Cleantech is a broad sector that includes renewable energy technology, alternative fuels, building materials, battery storage, energy efficiency and other technologies that aim to reduce or improve the effects of global warming. And despite its breadth, there’s still a lack of industry-experienced individual investors compared with other hot industries, said John Rockwell, a venture capitalist at cleantech-focused Element Partners in Menlo Park.

“If you look at who backs Internet and telecom and semiconductor and life science companies, it’s entrepreneurs who made a lot of money in that space in the past,” Rockwell said.

By comparison, there aren’t many of those kinds of experienced executives-turned-investors who have made millions in cleantech and now can turn it around and put it into a cleantech startup, he said. That’s why Preston’s fund may fill a need.

Jim Watson of San Francisco-based CMEA Ventures said there’s a lot of wait-and-see going on in cleantech.

“Right now, there are lots of VCs that are followers,” he said. “They want others to prove there’s a technology there and put the first money there and prove that it works. Then you’ll have 50 people who want to put money in.”

While larger funds are somewhat limited to larger deals, Preston’s fund is also limited.

“We’re not going to do a thin film (solar) company that requires $200 million (in venture investment),” she said.

Her fund is looking at energy-efficiency technologies, like tracking systems to control solar technologies, green building materials and small wind power technologies.

Mark Heesen, executive director of the National Venture Capital Association, said the funding gap shows that some investors are showing restraints in the face of a flood of entrepreneurs vying to solve big environmental problems.

“The reality is, I’d be concerned if there wasn’t a gap,” he said. “If there isn’t a gap, that means everything out there is being funded. That scares me.“

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from Sustainable Industries - by Amy Westervelt - June 30,2008

Let's make a deal

Despite the flood of headlines announcing $400 million cleantech venture funds and rumblings of the sector’s overvaluation, cleantech investments comprise just 11 percent of total U.S. investment, and worldwide venture capital and private equity investment in the space dropped from $3.7 billion in Q1 2007 to $2.4 billion in Q1 2008, according to New Energy Finance. All hype and speculation aside, cleantech is still considered a risky investment by many investors’ standards, including venture capitalists.

“VC funding traditionally works really well for technology companies with high margins, but cleantech businesses, for the most part, bring in longer-term returns, typically with lower margins,” says Barry Cinnamon, CEO of Los Gatos–based solar installer Akeena Solar (Nasdaq: AKNS). Cinnamon also points out that cleantech companies often continue to need expansion capital, which is not consistent with today’s venture capital investment patterns.

Many of today’s cleantech companies tend to be heavily reliant on factors beyond investors’ control, ranging from fuel prices to tax credits and federal incentives, which makes them inherently risky. Unlike the dotcoms to which cleantech companies are often compared, cleantech companies also rely on the viability of a particular technology and the company’s ability to build products at scale and cost. In many cases, neither technology nor commercial viability can be proven right out of the gate.

Venture funds that invest in cleantech tend to stick to more established sectors, such as solar and biofuels, or energy-efficiency plays that resemble the more familiar software deals of yore. Venture investments in cleantech are also migrating toward later-stage deals, according to a recently released Ernst & Young report, which noted that later-stage deals made up 43 percent of financing rounds in the first quarter of 2008. Echoing a sentiment heard frequently in recent months, Richard MacKeller, managing director at Chrysalix, a Vancouver, B.C.–based venture fund focused on early-stage energy plays, says there is simply too much money chasing too few deals in the cleantech market.

The result is a dire need for funding at the extremes—early stage research and development and late stage project financing—as well as for the large number of cleantech companies that don’t fit neatly into the existing venture capital mold, which demands high, short-term returns. Fortunately, a host of new financial models is emerging to finance underserved segments of the cleantech market.

In the beginning
Federal funding for early-stage research has been steadily cut over the last few years, and startups have turned to private capital to fill the gap. But venture firms’ “early stage” funds have swollen to numbers that push them away from true early-stage investments, which require smaller but vital amounts of capital, says Jon Bonnano, chair of the Keiretsu Forum’s Clean Tech Committee and president of renewable energy startup Principle Power.

“The No. 1 nameplate venture firms have hundreds of millions to invest, so doing a $1 million investment isn’t interesting to them,” Bonnano says. “It takes so much to conduct due diligence on these investments that you need bigger blocks. Plus, funds have time limits on them; they have to get their money in play and get a return in five to six years so they can get the returns to fuel the next fund.”

In 2004, when northern California utility Pacific Gas & Electric (PG&E) was coming out of bankruptcy, the Public Utilities Commission (PUC) required the utility to set aside $30 million to establish the nonprofit California Clean Energy Fund (CalCEF) to invest in clean energy technology, with a focus on taking products from research to commercialization. The $30 million was entrusted to three venture capital firms, which were asked to invest the money in cleantech.

“What CalCEF found out was that VC funds, as a rule, don’t invest in the early stage, and that was a disappointment,” says Sue Preston, general partner for the CalCEF Clean Energy Angel Fund. “They were making good investments but they weren’t targeting the area the utilities commission was interested in, which was moving technology from the lab to the early stages of commercialization.”

That problem was the motivating force behind the creation in 2008 of the California Clean Energy Angel Fund, which brings together angel investors to focus on such early stage investments.

Early stage investments are a desirable opportunity for angel investors, who can have more say in company decisions than they would have as a smaller investor in a large VC-led deal. “With the early stage cleantech deals, where we’re contributing all or most of the funds, it generates a lot of momentum on the investor side,” says Bonnano. “We at least get to be at the table, discussing terms.”

The CalCEF angel fund has a similar approach, according to Preston. “Our primary goal is early stage investment so there is likely to be funding after us,” she says. “We’d like to have a signature role in the first funding round and participate in the second round, but our level of involvement will diminish as VCs get more involved. We see ourselves as adding value to the management team and market strategy and helping to further and finalize the development of technology, so that when our portfolio companies go out for VC financing, we have increased their valuation.”

Companies that receive funding from Keiretsu also benefit from the forum’s vast professional network. Each quarter, Keiretsu picks its most promising companies and sets up face-to-face meetings with as many as 15 of the top VCs in the country. “Our network is either working at these funds or has friends there, so when we invest in a company and they do well, we put them in front of name-brand VCs,” Bonnano says. “For an entrepreneur it’s fantastic.”

The CalCEF fund is planning to raise $20 million and 750 Keiretsu members contribute anywhere from $200,000 to $2 million per deal, but Preston and Bonnano both say there is a need for more cleantech investments in the $500,000 to $3 million range.

“I’ve seen a few angel funds increase their focus in this area and work to figure out how to get into the space, but we certainly need more,” says Preston. “Most angels are prior successful entrepreneurs who invest in areas that they have a comfort and experience with, but this is a new area so we don’t have a stable of entrepreneurs who have been there and are now investing; most angel investors don’t know how to evaluate cleantech companies.”

Preston says there also need to be more, different types of early-stage funding in cleantech. “There still aren’t a lot of resources at the early stage for companies,” she says. “Money is competitive, and part of the problem for a lot of entrepreneurs is that they have a great idea that might make for a good business for a small group of individuals but doesn’t provide enough liquidity for an institutional investor. In such cases, individual angels may be willing to invest and share in revenue, and I’m hoping that grant money, particularly federal grant money, will open up in the next five to 10 years or else we really will have a stagnation problem here.”

That funding may open up even sooner. At press time, the Department of Energy had announced the distribution of $126.6 million in research grants to two large-scale carbon sequestration projects and $7.5 million to marine energy research projects, while the BP-backed (NYSE: BP) Energy Biosciences Institute announced a set of 49 cellulosic biofuel research projects that will share $20 million. The World Bank teamed up with the U.S., UK, and Japanese governments to launch a $500 million cleantech fund solely for early stage research and development.

Just reverse it
So, once cleantech companies get off the ground, how do investors collect on their bets? Unlike other tech companies, a lucrative public offering is not always the best growth strategy for cleantech companies. As a result, so-called “reverse mergers” have become increasingly popular, particularly as more companies, such as Akeena Solar and Carmanah Technologies (trading on the Toronto Stock Exchange under the symbol CMH), have illustrated how well the mechanism can work for a variety of cleantech sectors.

In a reverse merger, a company looking to secure funding finds a “shell company”—an overthe- counter (OTC) stock that is publicly traded but no longer conducting business. The public shell company agrees to acquire the private company and relinquish the majority of shares and control of the board to the private company. It allows a private company to go public without the time and money required to go through the IPO process.

Once on the OTC Bulletin Board, the company can trade its shares, grow revenue and eventually qualify for trading on a major stock exchange. Reverse mergers are often combined with Private Investment in Public Equity (PIPE) investments, in which case they are sometimes referred to as “alternative public offerings” or APOs. PIPE money comes in the form of either stock issued at a set price or convertible debt issued to raise capital. In Akeena Solar’s case, for example, the company concurrently raised $3 million in PIPE financing as it traded its stock on the Bulletin Board.

Akeena CEO Cinnamon says he had experience with nearly every type of financing through various startup experiences, but when it came time to source funds for Akeena, he listened to friend and financial advisor Joe Abrams, who “likes to do reverse mergers,” according to Cinnamon. Cinnamon says two things contributed to the reverse merger’s success: an experienced advisor (Abrams oversaw the process for a company called Intermix, which eventually became MySpace), and his company’s ability to meet stated goals.

Akeena raised the money it needed and qualified for the Nasdaq in late 2007. Cinnamon says he thinks a reverse merger could be an appropriate funding model for any cleantech company, but cautions that CEOs need to be aware of the pitfalls of the process, beginning with finding the right advisor to help find the right shell company. “You need partners who really know what they’re doing and you need to really know your business, because you’ll probably need to keep raising money, and the next round goes a lot better if you’ve delivered on your promises to your first investors,” he says.

It’s also important to get and keep investors aware of and interested in your company when you’re on the OTC Bulletin Board, Cinnamon says. “It doesn’t do you any good to be a public company if no one knows about you and no one invests,” he says.

There are also challenges involved in being a very small public company. “You still have to do all the things Wall Street investors expect,” Cinnamon says. “You have to file quarterly, hold earnings calls, send out press releases, ensure that your business dealings are transparent—I had done it before, so it wasn’t new, but it’s not easy managing all that while you’re trying to grow your company.”

On the positive side, CEOs of public companies can’t be replaced as easily as venture capital investors can replace the CEO of one of their portfolio companies. A public company’s management team also doesn’t need to deal with as much input from investors who, as can often be the case in cleantech, don’t know their business well.

Although reverse mergers are gaining favor thanks to their usefulness in the cleantech market, Cinnamon says there is still a stigma attached to them. “It’s kind of like we grew up on the wrong side of tracks,” he says. “Some people have a real distaste for reverse mergers, but we were confident and we made it work.”

“Plus, I think we were also lucky,” he adds.

Long-term value
In the end, just as a variety of cleantech solutions are needed to address global energy, water and transportation needs, a variety of financing options are necessary to support the huge variety of cleantech companies and sectors. Currently, the trend in VC and institutional finance is a focus on late-stage growth funds, leaving a gap in early-stage financing.

But where there’s a gap there’s an opportunity, which angel investors and some committed early-stage VC players such as Chrysalix are hoping to exploit. “We need more people doing this,” Bonnano says. “We need many more people and many more dollars working to find best-of-breed technologies and scale them up fast.”

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