DFJ Gives Green Light To Clean Tech Fund

Draper Fisher Jurvetson’s new clean technology affiliate fund – DFJ Element – is aiming to raise $150 million and has teamed with former EnerTech Capital Partners Managing Director David Lincoln and the energy staff from Advent International to help with the effort, PE Week has learned.

The fund, formerly known as DFJ Alta Terra, will invest in the clean technology space, a market that is forecast to grow to $89 billion by 2012, a nine-fold increase from $9.5 billion in 2002, according to Clean Edge Inc., an energy research and consulting firm based in Oakland, Calif.

Menlo Park, Calif.-based DFJ is a general partner in the fund and has been working with it throughout the year. DFJ Managing Director Raj Atluru is overseeing the effort, but he declined to comment, citing Securities and Exchange Commission regulations. The energy fund is not listed among DFJ’s affiliate funds on the DFJ website, though a placeholder website of www.dfjelement.com identifies the firm as a DFJ affiliate.

Lincoln also did not return calls seeking comment in time for PE Week’s deadline last Thursday.

So far, DFJ Element has secured an $8.5 million commitment from the California Clean Energy Fund (CalCEF), which is a $30 million public benefit fund created as part of Pacific Gas & Electric’s bankruptcy settlement. DFJ has partnered with CalCEF, along with Nth Power and VantagePoint Venture Partners to invest in funds. DFJ and Nth Power have also pledged to match each dollar of CalCEF’s investment.

As more venture firms target energy investing, clean technology has emerged as the sixth largest venture investment category in the United States and Canada, behind information technology, software, biotechnology, health care, and telecommunications, according to the Cleantech Venture Network.

In fact, investors lit up industrial and energy private equity deals with about $8.9 billion in investments last year, compared to about $7.5 billion in 2003 and almost double the 2002 deal flow of $4.5 billion, according to Thomson Venture Economics (publisher of PE Week).

Some have suggested that too many clean tech funds are in the market, but others disagree.

“There are an awful lot of clean tech funds raising money now, but there’s also an awful lot of interest,” says Rob Day, a principal with San Francisco-based Expansion Capital Partners and a frequent blogger on the subject of clean technology. Expansion Capital itself held a first close on a $20 million clean tech fund in January and is expected to hold a final close on more than $50 million early next year.

Potential limited partners aren’t just more receptive because of recent natural disasters that have put high energy prices in the news, like Hurricane Katrina. “Right now prices are high in part because of these events, but many LPs are interested in this space because they see higher energy prices as a long-term trend,” Day says.

Additional reporting by Lawrence Aragon.