RockPorts third fund a shoo-in for LPs

Limited partner demand for cleantech funds remains strong, if RockPort Capital Partners’ experience is any indication.

The dedicated cleantech investor, which has offices in Boston and Menlo Park, Calif., last week announced that it raised $453 million for its third balanced stage cleantech fund, increasing its fund size to take a larger ownership position in its portfolio companies.

“We could have raised substantially more money if we were in the business of raising money instead of spending it,” says General Partner Wilber James.

The fund took five months to raise, according to General Partner Janet James (Wilber and Janet James are married).

“We didn’t really go out on a road show to canvas the marketplace,” she says. “We had great success with our existing investors who returned for fund three. Then there were other investors who we had had contact with over the years that were in the wait-and-see mode who contacted us to be part of fund three.”

The firm declined to name its limited partners.

RockPort’s third fund is substantially larger than the $261 million it raised in 2005. The increased fund size corresponds with a trend to raise bigger, late stage funds for cleantech, to help sustain companies that have proved their technology but have yet to secure project financing to build out production plants or other large industrial instillations.

Kleiner Perkins Caufield & Byers, for example, raised a $500 million “Green Growth” fund to help bridge this financing gap for its portfolio earlier this year.

RockPort, however, is maintaining a balanced stage investment strategy.

“There are big opportunities for a fund that can participate in every round,” Wilber James says. “Instead of diluting ourselves by going out for more money we can provide that money ourselves. We’d own more of the companies because our fund philosophy is that we’re actively involved in them, so let’s own more instead of less. We’ve found that we do just as much for something we own 7% of as 25% of.”

Since its founding in 2000, RockPort has invested in nearly 40 cleantech companies, and it is one of the few firms that have had success with their cleantech companies launching IPOs. RockPort has seen four of its portfolio companies go public, including electronic equipment manufacturer Satcon Technology (Nasdaq: SATC); panel maker Evergreen Solar (Nasdaq: ESLR); converter maker Catalytic Solutions (AIM: CTS); and energy demand-response company Comverge (Nasdaq: COMV).

What’s more, the firm’s investors are optimistic for more IPOs later this year.

“There’s some pent up market demand for companies in this sector,” says Janet James. “No company is going to have an easy time going public this year due to general market conditions. But if things ease up, the cleantech market could be well poised.”

Over the years, as more and more cleantech funds have cropped up from established venture investors and emerging firms, Wilber James says that he sees several trends in cleantech investing that he thinks will spur more cleantech exits. One of the most obvious, he says, is the increasing number of talented managers that are pushing cleantech forward.

“In 2000, when cleantech didn’t exist, the biggest problem wasn’t finding interesting technologies but finding mangers and entrepreneurs.”