Here’s some conventional wisdom on cleantech venture capital: Investors made a mistake by backing lots of capital-intensive companies in 2006-2009. Some of these deals were salvaged by government stimulus (e.g., A123), but the smart money has now moved into deals that look more like IT for the energy market than like energy for the broader consumer/industrial market.
But there are exceptions to every rule. Today’s is a company called Orient Green Power, which develops small-scale renewable energy generation facilities in India. It also plans to file for an IPO within the next couple of weeks.
OGP was seeded by Bessemer Venture Partners and Shiram EPC, an Indian engineering and construction consultancy. It then added Olympus Capital Holdings Asia to a Series A round in late 2008, securing a total of $55 million in equity.
Since then, it has become I! ndia’s largest renewable energy producer – and has its sights on becoming one of the nation’s largest energy producers period. To do this in the U.S. would take hundreds of millions in equity and lions in debt, and even then it would likely fail. But a source familiar with the company suggests that OGP is succeeding for four reasons (yes, the source is biased toward OGP, but I haven’t found much in opposition):
1. Supply Starvation: Hundreds of millions of Indian citizens lose power for hours each day. This is different than in the U.S., in which we have a power glut (ever plug in and hope it works?).
2. OGL develops small facilities for its biomass projects, thus reducing the possibility of local farmers teaming up to insist on waste price floors. If you only have one facility in Omaha, you’d be limited to growers within a hundred or so miles of Omaha. But if you put small plants all over the place…
3. India doesn’t necessarily have space for giant plants, but does have plenty of land availability for smaller ones. Plus, the segmentation makes it easier to secure project financing (note: OGP plans to go public in India, where regulators insist that financing be lined up for any future plans listed in the S-1 equivalent – OGP has apparently done this, and will promise major capacity expansion).
4. OGP’s pricing is competitive with traditional energy. Not because of lower transmission costs, but because of the baked-in partnership with Shiram EPC (thus reducing dev costs, and also reducing market-related mistakes). As such, certain customers sign with OGP in order to add to their “green” image among consumers. And, since these contracts often run for 20-25 years, OGP is expected to report that it is both EBITDA positive and net income positive.
OGP obviously isn’t the only renewable power company in India, and its IPO won’t get the type of U.S. media coverage that will come from Silver Spring’s pending registration. But it should be a reminder that just because a certain type of VC deal doesn’t work in Silicon Valley or St. Louis, that doesn’t mean it can’t work.
*** VC-Backed Bust: Corefino, a Sunnyvale, Calif.-based provider of outsourced accounting and financial solutions, is heading toward a divorce with its venture capitalists.
The company raised $13.6 million in Series A funding less than two years ago from Bay Partners and Opus Capital, and quickly secured initial customers. Unfortunately, costs kept exceeding revenue, and the company now needs a financial restructuring and/or acquirer to keep ticking.
Who’s to blame? Well, that! depends on who you ask. CEO Karen Watts told me yesterday that she and two (undisclosed) individuals are in the process of trying to buy out the VCs, and that she has no interest in ever again accepting venture capital. “We’re a tech-enabled service business, and I don’t think it’s the type of things that VCs really understand or have interest in,” she said.
Neal Dempsey, a managing general partner with Bay Partners, says that the investment thesis “was broken almost from the start.” Specifically, he said that the company simply proved unable to run lean, and that costs began rising to unacceptable levels.
Corefino remains in operation, and expect a resolution to the ownership situation shortly.
*** Data Point of the Day: According to fund performance data published by the University of California Regents, Paine & Partners III has called down around $25 million and returned $2. That’s $2 as in a Jefferson note, not as in million.
Top Three
Apollo Management’s $635 million acquisition of theme park operator Cedar Fair (NYSE: FUN) has failed to gain the necessary support from Cedar Fair shareholders. The two parties have agreed to terminate the $11.50 per share deal, which would have had a total value of $2.4 billion (including refinancing of existing debt). Cedar Fair will pay Apollo a $6.5 million termination fee.
Achaogen, a San Francisco-based developer of antibiotics to treat life-threatening, multi-drug resistant bacterial infections, has raised $65 million in Series C funding. Frazier Healthcare Ventures led the round, and was joined by Alta Partners and return backers 5AM Ventures, ARCH Venture Partners, Domain Associates, Venrock Associates, Versant Ventures and the Wellcome Trust. The company previously raised around $42 million.
Aeroflex Holding Corp., a Plainview, N.Y.-based provider of radio frequency and microwave ICs used in wireless communications systems, has filed for a $500 million IPO. It plans to trade on the NYSE under ticker symbol ARX, and reports $297 million in net sales for 2009. The company was acquired in 2007 for $1.1 billion by Veritas Capital, Golden Gate Capital and Goldman Sachs.
VC Deals
Box.net, a Palo Alto, Calif.-based provider of an online filing system, has raised $15 million in Series C funding. Scale Venture Partners led the round, and was joined by return backers Draper Fisher Jurvetson and U.S. Venture Partners. Box.net previously raised around $14.5 million.
Adina for Life Inc., a San Francisco-based maker of natural beverages, has raised $14 million in fourth-round funding. CIC Partners led the round, and was joined by return backers Sherbrooke Capital, Pacific Community Ventures, Good Capital and Seraph.
Applied Quantum Technology, a Santa Clara, Calif.-based developer of CIGS solar cells, has raised $10 million in new VC funding from undisclosed investors. The company! also announced a partnership with equipment maker Intevac.
Druva Software, an India-based provider continuous data protection and disaster recovery products, has raised $5 million in Series A funding. Sequoia Capital India led the round, and was joined by existing backer Indian Angel Network. www.druva.com
GDGT, an online discussion forum for gadet enthusiasts, has raised $3.2 million in VC funding, according to the WSJ Digits blog. Spark Capital and True Ventures co-led the round, and were joined by Betaworks, AOL Ventures and Lerer Media Ventures. The company previously raised $550,000 in seed funding from Betaworks and True Ventures. www.gdgt.com
Bharat Serums and Vaccines Ltd. , an Indian developer of life-saving injectible drugs, has raised an undisclosed amount of VC funding from OrbiMed Advisors.
YCharts, a Chicago-based online stock research engine, has raised an undisclosed amount of Series A funding. Backers include Hyde Park Angels, the Illinois Innovation Accelerator Fund (I2A), Amicus Capital and Social Leverage LLC.
Cardlytics Inc., an Atlanta-based provider of banking rewards solutions, has raised $4 million in venture debt from Gold Hill Capital. Cardlytics previously raised over $8 million in VC funding from Canaan Partners, Polaris Venture Partners and Total Technology Ventures.
Buyouts Deals
The Blackstone Group has agreed to invest around $50 million into Jagran Prakashan (BO: JAGP), an Indian print media company.
Landis+Gyr, a Switerland-based provider of electricity metering and smart meter solutions, has raised $165 million in private equity funding led by DLJ Merchant Banking Partners.
Mason Dixon Energy, a Bridgeport, West Va.-based provider of land services to oil and gas companies east of the Mississippi River, ha! s raised an undisclosed amount of private equity funding from Hudson Ferry Capital.
New Vitality, a Farmingdale, N.Y.-based direct marketer of premium nutritional supplements and personal care products, has raised an undisclosed amount of private equity funding from Baird Capital Partners.
Porter Orlin, a New York-based investment manager who holds nearly 2.3 million shares in CKE Restaurants, has written CKE to object to its proposed buyout by THL Partners.
WestView Capital Partners has sponsored a recapitalization of Peerless Industrial Group Inc., a Winona, Minn.-b! ased manufacturer of chains, fittings, wire forms, tire chains wire ro pe and cordage. No financial terms were disclosed.
Yankee Group, a Boston-based market research company, has raised $10 million in new private equity funding from majority shareholder Alta Communications. The capital will be used to support ” the strategic expansion of its research on the impact of global connectivity.”
PE-Backed IPOs
Alimera Sciences Inc., an Atlanta-based ophthalmic pharmaceutical company, has set its IPO terms to six million common shares being offered at between $15 and $17 per share. It would have an initial market cap of approximately $518 million, were it to price at the high end of its range. Alimera has raised just over $71 million in VC funding since 2004, from firms like Scale Venture Partners (18.44% pre-IPO stake), Domain Associates (18.44%), Intersouth Partners (18.44%), Polaris Venture Partners (18.44%) and Venrock Associates (14.93%). It also received a total of $16.7 million from the sale of two OTC allergy products and a lubricating eye from to Bausch & Lomb.www.alimerasciences.com
PE-Backed M&A
Roofing Supply Group, a wholesale distributor of roofing supplies, has acquired the roofing division assets of Oklahoma City-based Northwest Roofing Supply Inc. No financial terms were disclosed. Roofing Supply Group is a portfolio company of The Sterling Group.
Wigix Inc., a database-driven product catalog company backed by Draper Fisher Jurvetson, has acquired Mag2U, a Shanghai-based business process outsourcing company that focuses on magazine subscriptions in China. No financial terms were disclosed. Wigix is based in Oakland, Calif., but has ooperations in China.
Veoh Networks, ! an onlinevideo-sharing company that laid off its workforce in February, has sold its remaining assets to 2Peer Ltd., according to VentureWire. No financial terms were disclosed. Veoh had raised around $67.5 million in VC funding, including a $30 million Series D round in June 2008. Backers included Shelter Capital Partners, Spark Capital, Goldman Sachs, Adobe Systems Intel Capital and Time Warner Investments.Veoh had been seeking new funding, but was unable to get it. Los Angeles-based 2Peer is backed by Jerusalem Venture Partners.
PE Exits
MatlinPatterson reportedly has hired Blackstone Group to advise on a sale of Polymer Group, a maker of non-woven materials. MatlinPatterson holds a 65% stake in Polymer Group, which has a current market cap of approximately $350 million.
Firms & Funds
Cross Atlantic Partners has resumed fundraising for its sixth vehicle, according to VentureWire. It has reduced its target from $150 million to $100 million, with plans to hold a final close by early 2011. The New York-based firm does not plan to invest in pharmaceutical companies out of the new fund, instead focusing on medical devices, healthcare services and healthcare IT plays. www.crossatlanticpartners.com
DRI Capital, a private equity firm which invests in drug royalty streams, has closed! its second fund with $701 million in capital commitments. It originally targeted $500 million, with Atlantic-Pacific Capital serving as placement agent.
The Ontario Teachers’ Pension Plan reported C$10.9 billion in investment earnings during 2009, for a 13% annual rate of return.
Human Resources
Will Kussell has joined Advent International as an operating partner. He previously was president and chief brand officer of Dunkin’ Donuts Worldwide.
Robert Sheehy, former CEO of UnitedHealthcare, has joined Genstar Capital as an operating partner and member of the firm’s strategic advisory board.
Jim Rutherford has joined 3i Group as a partner responsible for North American investor relations. He previously was with Veronis Suhler Stevenson. 3i also announced that Jennifer Dunstan is transitioning from the firm’s buyouts team to become a London-based partner focused on investor relations in Europe and Asia.
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