Chrysalix surges ahead as LPs pull back

Chrysalix Energy has raised $82.8 million toward its third fund and is more than halfway to its target, PE Week has learned.

The firm originally set out to raise $250 million for Chrysalix Energy III in June 2008, but it has since lowered its target to $150 million, says firm founder and Executive Director Michael Brown.

“We got whacked by the general economic malaise,” Brown tells PE Week. “We had a lot of the commitments lined up, but a fair number had to pull out.”

Brown says that nearly all of the Vancouver-based firm’s financial investors faced the denominator problem, a condition where an institution’s illiquid investments in venture capital and private equity funds exceed its target allocations due to falling public market prices.

Still, Chrysalix has been aggressively investing despite the downturn and revised fund-raising target. Brown says he expects the firm will have invested half of its third fund by the end of this year. So far, it has done three deal from the new fund, and is close to wrapping up a fourth.

“The quality of opportunities is very high,” Brown says. “We keep seeing real breakthroughs where people thought there were none.”

One such breakthrough came in the form of General Fusion, a startup looking to dramatically increase the efficiency of nuclear power plants using something called magnetized target fusion. The company is based on technology developed in U.S. laboratories, but never applied because it requires high-power computing that has only recently become available, says Brown. The company raised $9 million of a proposed $13.75 million round in July from Chrysalix and others, according to a regulatory filing.

Other recent Chrysalix investments include electric motorcycle maker Brammo, which raised $10 million from Chrysalix and BestBuy last year; and plastic waste recycling company Plas2Fuel, which has raised $3.25 million of a $4.25 million round.

Chyrsalix launched a European affiliate fund with institutional limited partner Robeco at the end of 2007. The $78 million fund received commitments from Delta NV and Essent NV, records show.

Chrysalix was considering launching an affiliate fund in Southeast Asia, but those plans are now on hold, says Brown.

“We’re continuing to have dialogue with a high-quality management team [in Southeast Asia],” he says. “The idea of clean things being valuable has not quite percolated into the public consciousness there yet.”