A new venture group that sprouted from an oil and gas company is the latest fund-raiser to go after clean technology and alternative energy investments.
Houston-based Contango Capital Management announced last week that it is starting to raise its second fund, with a target of $50 million. The group closed its first fund earlier this year with $8.25 million. Contango hopes to close Contango Capital Partners II by the fourth quarter.
The firm was formed by Contango Oil & Gas Co. (AMEX: MCF), which has a 32% interest in Contango Capital. The VC group also counts Sullivan Interests as a limited partner in its first fund.
Contango Capital’s first fund focused on hydrogen generation technology and fuel cell products, but the firm has broadened its investment scope with its second fund. Contango Capital plans to invest in clean energy technologies that include hydrogen, solar and wind power, fuel cell and other portable power products and energy storage and conversion technology. The partners generally seek to invest between $3 million and $5 million per investment, but will look at deals that require as little as $500,000.
Contango Capital’s first fund is approaching the 75% invested stage and the firm’s new Managing Partner, Rogers Herndon, says that the firm will be ready to begin investing the new one as soon as it is closed. He adds that while the fund-raising is in its early stages, the group is getting a “warm reception” from pensions and endowments it has spoken with.
It could be that the LPs have noticed that venture investment in clean energy has steadily grown. Clean technology investing comprised $1.2 billion, or 5.8%, of the $21 billion in venture capital invested across all industries in 2004, according to the Cleantech Venture Network. Plus, last year saw an increase of 3.4% in clean technology investing from the year before.
“Energy is going to be a big factor in terms of overall technology advancement,” says Herndon, who was previously a managing director of Bank of America’s energy power trading business.
He was also a managing director of PSEG Energy Resource and Trade and a vice president in Enron. He joins founding Managing Partner John Berger, also a former Enron executive, who has served as an advisor to venture capital firms as well as the Federal Energy Regulatory Commission.
Contango Capital’s portfolio from its first fund is comprised of companies in the fuel cell industry.
The portfolio companies include Jadoo Power Systems, a Folsom, Calif.-based provider of fuel cell and portable energy products for law enforcement, military and media organizations that closed an $11 million Series C round earlier this year; Prontonex Technology, a Southborough, Mass.-based power cell provider; portable power integrator Synexus Energy; and Orem, Utah-based Trulite, which develops lightweight hydrogen generators for fuel cells.