Some 30 years after the solar energy craze flared out, mainstream venture capitalists are warming up to the maturing technology.
Just last week, Mohr, Davidow Ventures (MDV) led a $16.5 million Series A in Energy Innovations Inc., a Pasadena, Calif.-based startup that makes low-cost solar power systems. And New Enterprise Associates (NEA) pumped $8 million into a Series A for HelioVolt Corp., an Austin, Texas-based company working on a way to embed photovoltaic technology in building materials.
A week earlier, Kleiner Perkins Caufield & Byers, Benchmark Capital and others got in on the solar energy mini-craze. KP led a $16 million Series B in Miasole, a San Jose-based startup working on a flexible solar cell, while Benchmark was among four investors that juiced up Palo Alto, Calif.-based solar cell-maker Nanosolar with a $20 million Series B. (MDV led the Nanosolar deal.)
It wasn’t like a light bulb went off over the heads of venture capitalists. Their interest in the energy sector has grown gradually. “In three years of talking [to generalist firms] I have seen a real transformation in terms of interest level and depth of partner interest,” says Andre Beebe, president of Energy Innovations. “It’s not just one partner going out on a limb.”
It could be that VCs believe that energy technology has finally matured to the point where sales and profits are no longer just a pipe dream.
“While a couple of years ago I was very skeptical about alternative energy, there are now a limited number of possibilities for a handful of really good advances and if we find some of those companies, we’re going to invest in them,” says Arno Penzias, a venture partner at NEA and a Nobel Prize-winning physicist who is the head of the scientific advisory board at HelioVolt. NEA Venture Partner James Treybig is a member of HelioVolt’s board of directors.
Penzias became interested in HelioVolt last year after hearing its CEO and founder, Billy Stanbery, speak at a solar energy conference.
Penzias says that VCs are attracted to solar power technology because it is more scalable than other areas of alternative energy. For example, a startup can sell its products directly to manufacturers and bypass the more cumbersome parts of the energy market.
“You don’t need to go to GE or someone else,” he says. “A glass company can put these products on their skyscraper. It’s not a global decision that has to happen. There’s no real barrier. That’s why the photovoltaic area is so good.”
Despite the increased interest in the overall energy space by mainstream VCs, most remain wary of the sector, says Tim Woodward, a managing director with energy specialist VC firm Nth Power of San Francisco.
“There are more [VCs] that are still on the fence for a variety of reasons,” he says. “They don’t know the sector; they think it’s too capital intensive and heavily regulated.”
But that could be changing. While 12% of VCs worldwide invests in energy and the environment today, 21% say they plan to make investments in those sectors over the next five years, according to the 2005 Global Venture Capital Survey released last week by Deloitte & Touche and the National Venture Capital Association.