Livermore Labs takes new approach to seeding cleantech

In the capital intensive cleantech sector, risk is high at every stage of investment. But perhaps nowhere is it higher than during what Lawrence Livermore National Laboratory business development executive Annemarie Meike calls “the valley of death.”

That’s the point, Meike says, when government funding for a project has run out, researchers have unearthed promising findings, and it’s time for private investors to commercialize the technology. Commonly, breakthroughs wind up languishing in tech transfer offices until it’s outdated or forgotten.

Livermore Labs is taking a new approach to preventing the tech-transfer death spiral. Meike likens the strategy to a mutual fund, though it more closely resembles a mini early stage portfolio. Basically, the lab is grouping together technologies it has developed that serve a particular cleantech sector (for example, such as transportation or energy storage), prepping market research, and bringing in a small chunk of private funding to ready them for commercialization.

The amounts of investment are small, about $200,000 per mini-portfolio. Livermore Labs currently operates three: solar thermal for industrial processing and electrical power, energy storage and transportation technology. The technologies offered include an electrostatic generator, a modernized flywheel gizmo, and a heat engine for distributed solar thermal power that reaches maximum efficiency at a lower temperature than engines currently available for such applications.

Funds will go to developing prototypes, Meike says, and investors can potentially see in return a royalty share, an equity share, or some combination of both after the technology is licensed.

The effort comes in the wake of an up year for cleantechn investment. In 2008, VCs invested $8.4 billion in cleantech companies, up nearly 40% from 2007, according to research firm the Cleantech Group. However, as the economy faltered in the fourth quarter, investment activity stalled some. In Q3, VCs poured $2.6 billion into cleantech, a quarterly record, while they invested only $1.7 billion into the sector during the fourth quarter.

But late stage deals account for the vast majority of dollars invested. In 2008, 67% of venture capital invested in clean technology companies came at the later and expansion stages, according to Thomson Reuters (publisher of PE Week). Early stage deals accounted for 18% of the total, and seed stage for just 3%.