Draper Fisher Jurvetson increased the size of its DFJ Element affiliate fund focused on cleantech to $275 million, PE Week has learned
The inaugural fund began fund-raising with a $150 million target in October 2005 and then upped the size to $225 million in January 2006.
Limited partners, as previously reported by PE Week, include ACG America, the California Public Employees’ Retirement System, the Coca-Cola Co. and Swiss Re Partnership Holding. Earlier this year, when the fund was capped at $225 million, the firm was expecting a final close by April. The firm would not say when it expected to hold a final close on $275 million.
The latest increase comes as competition for cleantech deals heats up. North American venture investment jumped nearly 60% during the fourth quarter of 2005, up to more than $500 million from $315 million during the same period in 2004, according to data from the Cleantech Venture Network.
The sector is also attracting venture heavyweights such as Vinod Khosla. Khosla has committed several million dollars into backing startups in this space through his newly formed fund, Khosla Ventures. Also, Khosla is co-chairing a ballot initiative that would require California to add an oil extraction tax, in the hopes of driving up the usage of alternative fuels, such as ethanol.
Meanwhile, Kleiner Perkins Caufield & Byers has committed to investing in what it calls “greentech.” The firm recently backed biofuel maker Altra, which has raised $50 million from Kleiner Perkins, Khosla Ventures, The Angeleno Group, Omninet Private Equity and Sage Capital Partners.
Kleiner Perkins has made other investments in alternative energy companies, as well, such as micro fuel cell maker Lilliputian Systems and solar cell maker Miasole. The firm also has six additional greentech deals in stealth mode.
Beyond investing, Kleiner Perkins has set aside a $100,000 annual prize for the best technology or policy innovation in greentech, founded a think tank-like organization called the Greentech Innovation Network and it has loaned out partner Bill Joy – former chief scientist with Sun Microsystems – to lead talks on the subject.
The pace of cleantech investment may be directly related to limited partner interest in the sector.
“LPs have gotten their arms around the fact that this is a really big industry category,” says Raj Atluru, a managing director at Draper Fisher Jurvetson and a board member of the DFJ Element affiliate. “It’s a dynamic sector and they want to get more exposure to it.”
Atluru points to the strength of solar company IPOs in 2005 as a catalyst for increased LP interest. German solar companies such as Q-Cells and Conergy and China’s Suntech Power Holdings (NYSE:STP) each raised a large IPO last year.
“There were a lot of questions around liquidity that have now been answered,” Atluru says.
But investor interest wasn’t the only driver behind DFJ Element’s increased size. The firm also picked up a new investor. It hired Michael DeRosa, its sixth partner, who previously worked at Cordova Ventures. DeRosa, a Wharton MBA, has hit the ground running and is about to close his first DFJ Element deal, Atluru says.
Previously, DFJ Element invested $6 million in Miatech, a semiconductor design startup in Shanghai, along with sister funds DFJ and DFJ DragonFund China. Additionally, the firm backed Fat Spaniel Technologies, a San Jose, Calif.-based startup that makes it easier to monitor and manage distributed power generation, with a $3.5 million investment.