Kleiner Perkins raising green growth fund

Kleiner Perkins Caufield & Byers has hired at least one executive from Goldman Sachs to help run a growth stage cleantech fund that one source says may top out over $400 million, PE Week has learned.

John Doerr and new hire Al Gore have been pitching the “Green Growth” fund to limited partners. One LP who heard the duo’s pitch at a recent meeting in New York said that the proposed fund would make both private and public investments as well as do carve outs and spinouts in the clean energy and resource efficiency market. Doerr told LPs at the meeting that Kleiner had invested in the first commercial web browser just 14 years ago, which prompted Gore to jokingly caution him against claiming credit for creating the Internet, according to an LP who asked not to be named.

The green growth fund is separate from Kleiner Perkins’s existing early stage greentech initiative, which it launched in 2006 as part of its $600 million main fund.

Doerr did not respond to a request for comment.

Kleiner Perkins aims to raise more than $400 million, according to Mark Donahue, a general partner at cleantech investor Expansion Partners. Donahue says that Kleiner has been making calls looking to recruit talent to do the same types of deals Expansion specializes in. Donahue declined to comment if members of his team had been targeted.

Kleiner Perkins has already hired at least one executive, sources say. Goldman Sachs had a team in its Special Situations Group that focused on growth stage cleantech deals and one or two members from that group are now at Kleiner Perkins, says Anup Jacob, a partner at cleantech investor Virgin Green Fund.

The other investors from Goldman’s green growth group founded Hudson Capital, a middle market growth fund that invests in cleantech deals backed by Credit Suisse and Goldman. The Special Situations Group has some track record in growth stage cleantech investments, having backed both First Solar and Horizon Wind, says Jacob.

A limited partner in previous Kleiner Perkins funds confirmed that the firm had made at least one hire from Goldman.

Steve Westly, a cleantech investor who shares offices with Kleiner, declined to comment on the details of the firm’s latest fund, but said: “The fact that they’ve committed the substantial resources they’ve had to cleantech and have dedicated resources to a late stage fund is a testament to their ability to see the future and to move quickly.”

The move into growth investing isn’t surprising to most investors familiar with Kleiner Perkins.

“They’ve been looking at the space for a while in a couple different segments in both the solar and the transportation side,” says Jacob. “If you look at the macro trend here, I don’t think there’s any other sector that’s going to be consistently growing at high double digits for the next decade. The interest is driven by sector.”

Growth stage investing in cleantech is looking increasingly attractive to venture firms as energy and efficiency startups move from technology hurdles to execution issues.

Kelly DePonte, a partner with San Francisco-based placement agency Probitas Partners, says that he hadn’t heard about Kleiner’s plans, but that another cleantech venture capital firm recently approached him with the same idea. (He declined to name the firm.)

“They felt there were a number of opportunities not being addressed by buyout folks or VCs that are in the less risky part of the [cleantech] sector—companies that are established and generating revenue but need capital for growth,” DePonte says.

One of the upsides to such growth investments is that “the investment payoff is in months as opposed to years,” he notes.

Growth funds, because of their size, can also mean bigger fees for general partners. The distinction between stages in cleantech is less clear than it is in IT, but many investors are interested in later stage or growth stage investing in cleantech companies because it is seen as less risky companies than early stage, says Westly.

Among the other VC funds in the market with cleantech funds are:

NGEN Partners. The firm is in the market trying to raise $500 million for its latest fund, according to VentureWire. The Santa Barbara, Calif.-based firm closed on a second fund of $180 million in September 2006, according to Thomson. That fund has invested in at least six companies, none of which has gone public or been acquired.

Rockport Capital Partners. It expects to close soon on a third fund totaling at least $450 million, according to VentureWire. The Boston-based firm raised $261.2 million for its second fund in March 2006 and it has invested in at least seven companies, including one that went public, SatCon Technology Corp. (Nasdaq: SATC), according to Thomson Financial (publisher of PE Week).

• The Virgin Green Fund. It is “in the middle of fund-raising,” according to a source at the firm. It has closed on $181.4 million from mogul Richard Branson and others so far. The firm declined to say how much it hopes to raise. It plans to make investments of $15 million to $20 million in each company it backs.

The Westly Group. Westly told PE Week that he has raised about two-thirds of his fund, which reportedly has a $100 million target. Westly says the fund will be stage agnostic.

Joanna Glasner and Lawrence Aragon contributed to this report.