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One Earth becomes newest entrant in cleantech arena

Early stage venture firm One Earth Capital, a San Francisco-based firm with backing from one LP, is unconventional in a number of ways.

First, Managing Director Chris Berkner and Principal Joe Hudson—two longtime friends—have never worked before as venture capitalists. Berkner previously funded a business intelligence startup called AnalyViz. Hudson, who founded an online coupon company in the late 1990s, has more recently worked as a consultant to financial, wireless and environmental startups, helping connect them to funding sources.

In fact, it was when Hudson was asked to help raise money for a wind power development company that One Earth began to come together.

“I called Chris to help me raise capital for the company,” he says, “and the first investor we called ended up being someone who wanted to continue to work with us on other projects.”

That investor is the One Earth’s sole limited partner, an undisclosed family trust that has invested in four startups and is seeking other opportunities.

The One Earth team also doesn’t keep an office, having recently given up on a short-term lease in San Francisco. Hudson lives in the North Bay town of Sebastopol, Calif., while Berkner lives about two hours away on the coast in Santa Cruz, Calif.

“There’s a great adage in venture capital that we found to be true,” says Hudson. “If you’re at the office, you’re probably not out doing your job.”

The launch this year of One Earth comes as there’s no shortage of interest in cleantech. A total of 158 cleantech companies received a record $2.6 billion in funding in the third quarter of this year, a full 37% more money than was deployed in the third quarter of 2007, according to the Cleantech Group.

The firm looks to invest $2 million to $5 million in deals initially and $6 million to $10 million over the life of a company. It also has an exceptionally narrow mandate.

Unlike most cleantech funds or efforts within broader-based venture firms, One Earth doesn’t invest across a spectrum of cleantech industries, such as solar and wind. Instead, One Earth focuses on decentralized water power and agriculture, two areas that the partners believe where most VCs have yet to start shopping.

In March, One Earth invested $2.75 million in Oakland, Calif.-based PureSense, which has developed a technology that lets farmers make better informed irrigation and fertilization decisions through water and chemical monitoring.

In July, alongside Labrador Ventures, Clean Pacific Ventures and others, One Earth invested $10 million in Marrone Organics Innovations, a Davis, Calif.-based company focused on developing natural products from microorganisms that kill weeds, pests and roundworms.

One Earth also participated in an undisclosed amount of funding for EarthWater Global, which draws on data generated from technologies used by the oil and gas industry to locate and develop groundwater resources. Hudson says that Merrill Lynch was among four other co-investors in the deal.

The firm also shops outside its mandate. In May, it invested an undisclosed amount in Hum Cycles, a San Francisco-based electric motorcycle startup founded by former Tesla Motors engineer Forrest Deuth.

Hudson and Berkner say that they will take board seats when it makes sense. Hudson sits on the board of Marrone and is a board observer at PureSense.

When asked how much money they have to invest, Hudson says the fund is open-ended, which gives them the luxury of investing at whatever pace they feel most comfortable.

“Part of the venture model is broken in that you have to put $300 million to work in X period of time,” Hudson says. “It doesn’t make any sense unless you want a specific return on investment. We’re more of a hedge against global warming and we’ll invest when we see good opportunities.”