Top VCs Sound Off on Keeping Their Cleantech Optimism

Early stage cleantech funding has largely dried up, and overall funding is likely to be down this year.

Companies such as BrightSource Energy, Genomatica, Elevance Renewable Sciences and Enerkem have withdrawn IPOs, and while SolarCity looks ready to go out in December, it won’t claim as large a market cap as expected not long ago.

In October, A123 Systems declared bankruptcy, a blow for remaining investors.

It is not an easy time to be a cleantech venture capitalist. Still a hardened group of investors presses on. A handful of these determined GPs gathered on stage at the GoingGreen Silicon Valley conference in San Francisco this week to talk about what keeps them going.

Here are some observations from the trenches:

Tucker Twitmyer: One motivation is better pricing. Building a syndicate is a bigger chore, but it is a good time to price deals aggressively, says Twitmyer, managing director at EnerTech Capital. “And we are doing that.” These days, if an entrepreneur gets a term sheet, the best advice is to “take it,” says Twitmyer.

Stephan Dolezalek: Perseverance comes from knowing the endgame. The business has come through the hype cycle and is deep in the trough. The question is “how to survive” to be in the position to win when things get better, says Dolezalek, managing director at VantagePoint Capital Partners. Venture has previous scars from battles over Ethernet networking and disk drive production.

Nat Goldhaber says he is watching the SolarCity IPO closely. If the company goes out in its range of $13 to $15, it will be a pretty good result for investors, says Goldhaber, managing director at Claremont Creek Ventures. It would have a market cap of more than $1 billion. The company’s business is an example of a niche where profits can be made, says Goldhaber. In cleantech, “I think there are opportunities to make money.”

Another upbeat sign is the continued interest of corporates. Not only are they partnering with startups to build facilities, such as bio-chemical plants, they are becoming avenues to an exit. With the IPO market the way it is, it is useful to view corporate acquisitions as potential exits from the start of an investment, says Twitmyer.

While LP money isn’t as abundant as it was – “they are limiting their support for the space” – cash is available for firms that can show success, says Twitmyer.

Photo of Stephan Dolezalek taken by Mark Boslet.

2 Comments

  • I believe this situation can apply to the landscape in general. Acquisition rather than IPO seemingly is fast becoming the route to go. Similar to Medtech and Nanotech, it’s logical for Cleantech to go this route because of the advantages to investors but as well as buyers. Seeing the advantages to competitors. industry leaders allows you to have a view acquisitions as a more viable exit from the start. LP money; however, is being seen going to 2 places.
    1)Emerging Managers (hopefully w./ invigorating outlooks)
    2)Established large funds (those that can show success)

    Despite naysayers having their thoughts on Cleantech, it’s still a very important sector to focus on…as is Nanotech and many of the other science related specifications. These in the long-run are what will be important to the world. I’ve made comparisons between nanotech and the development of the first silicon microchips. Now recently, that is becoming more and more a reality since the first carbon microchips have been produced using carbon nanotubes stacked to form the circuit. Although energy efficiency is down, the chips are cheaper to make than existing silicon chips.

    Another recently published development is Solar Steam. It’s a process using light sensitive nanoparticles submerged in icewater to produce industrial steam at a higher energy efficiency than any existing photovoltaic panels. Solar Steam is at 24% while solar panels are still at 15% efficiency.

    So even just from those 2 examples, you can see the potential in Cleantech, but you have to look across other industries like nano and bio for new tech that can add value to existing companies.

  • Excellent points. I think there is an interesting and sometimes difficult balance between funding science oriented ventures with the potential for real disruption and financing companies with foreseeable sales growth. These days, many VCs know they need steady returns. So putting money behind the sure thing is hard to resist.

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