Venture firm Technology Partners will begin raising a $250 million eighth fund this summer for cleantech and other investments, General Partner Ira Ehrenpreis told PE Week. The firm, which has made a name for itself as a first-mover in cleantech deals, cut back its information technology practice after the boom of the late 1990s. The Palo Alto, Calif.-based firm now puts half of its seventh fund to work in early stage cleantech startups.
The firm shouldn’t have any trouble raising a new fund. In the venture community, firms with a cleantech angle are as popular as “American Idol.” And many cleantech venture investors have expanded to accommodate a growing interest from limited partners.
For example, DFJ Element nearly doubled its fund size to $275 million based on investor interest, as PE Week reported last week. And Expansion Capital Partners, a cleantech focused fund, has extended its fund-raising window to take advantage of investor interest in its second fund. Expansion Capital will likely raise more than its targeted $50 million, which it expects to close this summer.
“There’s certainly a lot of LPs interested in this space,” says Robert Day, a principal with Expansion Capital, who maintains a cleantech blog at
Cleantech deals are certainly hard to ignore, especially after Kleiner Perkins Caufield & Byers raised a $100 million targeted fund earlier this year to go after what it terms “greentech” deals. In May, the firm also announced it would set aside a $100,000 annual prize for the best technology or policy innovation in greentech, and KP’s John Doerr continues to stump for the sector during public addresses.
The sector is also attracting venture heavyweights, such as Vinod Khosla, who has committed several million dollars into funding cleantech startups through his newly formed Khosla Ventures.
But cleantech is far from developing an investment bubble, says Ehrenpreis. “There’s clearly been an awakening by the venture community,” he says, “But there’s still more opportunity available than capital.”
Indeed, the money that funds are raising for cleantech is being put to work faster than ever before. Venture firms invested $513 million in 67 deals in North America during the first quarter, compared to the more than $300 million invested in 49 deals during the same period in 2005, according to a study released last week by the Cleantech Venture Network. And the firms that are investing in cleantech increasingly need more money to get into each deal. The average deal size increased nearly 17% from $7 million in the first quarter if 2005 to $8.3 million during the same period in 2006.
Technology Partners has announced two cleantech deals during the first quarter and has invested $10 million in the two deals combined, Ehrenpreis says. He focuses on cleantech along with General Partner Ted Ardell. Jim Glasheen and Roger Quy oversee the firm’s life sciences investments.
The firm is still working through its seventh fund, also a $250 million vehicle, which was raised in 2000. LPs from fund VII include the California Public Employees’ Retirement System, The Crossroads Group, Fairview Capital Partners, Lifespan Corp. Endowment, Montana Board of Investments, New Mexico State Investment Council, Endowment, Pfizer Inc. and the San Francisco Employees Retirement System.