Even though the San Francisco-based firm owned less than 3% of the newly public company, the stock of A123 has performed well in the aftermarket and the company is sitting with a market capitalization of $1.6 billion.
Nonetheless, CMEA has scuttled its plans to raise a $500 million cleantech fund focused specifically on late stage and large investments.
Whether CMEA would have been able to raise such a fund amidst a tough economic environment is uncertain. Its management did not formally approach limited partners with a pitch. But there must have been some push back from investors at least at an informal level.
“Most of the later stage renewable energy deals are not economically feasible for us or our investors,” says CMEA Managing General Partner Jim Watson. “You have to recognize as a fund what you’re good at, and match opportunities to that.”
Meanwhile, CMEA has gotten more aggressive about seed stage investing. It started the strategy 18 months ago after it raised its $400 million seventh fund, according to Managing Director Faysal Sohail.
“We’ve been given a lot of opportunities that normally would have gotten funded by angels and others but have not been getting funded,” he said. “We’re also finding a lot of deals coming to us from returning entrepreneurs.”
CMEA has done seven seed investments from fund VII to date and may do one more, because, Sohail said, “they take longer to bake and exit so these are not deals you want to be doing in the fourth or fifth year of a fund.”
CMEA did not invest in A123 until the startup’s Series D round, nearly six years after Sequoia Capital, North Bridge Venture Partners and YankeeTek Ventures invested in the Series A round, according to Thomson Reuters (publisher of PE Week).
To be sure, cleantech is a small part of CMEA’s overall investment strategy. The firm’s $400 million, 2007-vintage fund also invests in health care, biotechnology and information technology. CMEA has invested in four cleantech companies so far this year—A123 Systems, CFX Battery, Reel Solar and Superprotonic—out of a total of 23 investments, according to data from Thomson Reuters. —Alex Haislip