Meet Bernays T. Barclay, partner with the Toronto-based
international law firm, Torys. Barclay, who prefers to be called
Buz, is a giant of a man who is passionate about the need for
venture capital in the power business.
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Martin Rosenberg
Guest Editor |
Two weeks ago, I caught up with Buz at a Boston hotel while he
was taking a breather during the hectic-paced Energy Venture Fair
-- his creation. In a warren of conference rooms a few paces from
the ballroom in which we sat, venture capitalists listened to
brief presentations from 80 companies during the two-day program.
The presenters outlined an invention, business plan or an idea of
how to revolutionize some aspect of the creation, delivery or use
of energy. Full disclosure: Energy Central, publisher of this
newsletter and EnergyBiz magazine, is a co-sponsor of the
event.
Buz says he conceived of the Fair several years ago when he
"noticed a lot of interest in the private equity community in
energy and an increasing number of emerging growth companies in
the energy space." The problem, he realized, was getting them
together. "Most information is passed around in an inefficient
way."
The first Fair was held in early 2001. Companies invited to
present are broken down as follows: one-third hardware, one-third
software and one-third services. Furthermore, they were at various
points in their evolution: one-third early-stage, one-third
middle-stage and one-third mature -- even post initial public
offering.
That formula, Buz says, "gives us the ability to attract a
large book of private equity investors." Way more than 80
companies vie for an opportunity to present. Those not skilled in
writing business plans are quickly coached prior to the event. In
attendance at the Fair this month -- in addition to those seeking
investor support -- were 100 investors representing approximately
75-100 companies. Some are well known powerhouses. A former Nobel
Prize winner was in attendance. Also on hand was one high-tech
billionaire with "more money than everybody in this room," Buz
says. "If he is interested in this space..." He did not have to
finish his sentence. Startup energy ventures are poised to
capitalize on a perfect moment, when lots of venture capital is
out in search of energy ventures.
Indeed, the economy is apparently poised for an explosive
rebound in venture capital investment in entrepreneurial startups
of all kinds. In a gushing article in the current issue of
Business 2.0, writers Michael V. Copeland and Om Malik assert,
"Venture capital is flowing more profusely than it has since the
late 1990s; money invested in early-stage startups could top $1.5
billion this year, up 50 percent from last year and almost double
2003's figure." Furthermore, they continue, the floodgates have
been thrown open. "... the average seed investment, $4.4 million,
is three times what it was a year ago and larger than it was in
2000."
Back to Boston
I ask Buz whether Infocast, which puts on the Fair, has done
any follow-up studies of the amount of investment that flows as a
direct result of the networking event. "There was $250 million
worth of new investment in companies that made presentations in
2004, and that number continues to go up," he says. He cites the
story of Pentadyne Power Corp., which after presenting at the Fair
managed to attract $37 million to enable it to develop energy
storage devices. It now has orders from the U.S. Department of
Defense for 500 installations and is well on its way to viability.
So who are possible winners of the future? The Fair has
attendees vote on the five most promising companies making
presentations at the gathering. This year's winners:
EnerNOC, Inc.
Ice Energy
Seattle Biodiesel
Selsam Innovations/Superturbine Inc.
WellDog, Inc.
Separate articles could justifiably be written about all five
of these companies -- as well as many other promising ventures at
the Fair. I will briefly write about two.
I sat in on EnerNoc's presentation about its model to be paid
by grid operators and utilities to shave their peak demand.
EnerNoc aggregates commercial and industrial customers willing to
have their power supply interrupted on occasion in exchange for a
quarterly check of $10,000 or $25,000. "We say, 'you can be the
utility's insurance policy and get paid every month,'" the
presenter said. Energy users sign a 5-year contract and can
arrange alternate sources of energy when needed. There are
mechanisms for them to get out of their agreement with EnerNoc on
occasion, should the need arise. EnerNoc will top $10 million in
revenue this year and is headed toward $16 million to $20 million
in 2006 and $25 million to $50 million in 2007, the presenter
said.
Ice Energy now has $1 million in annual revenues and seeks $30
million in financing for its plan to boost the energy efficiency
of air conditioning systems, thereby drastically reducing peak
demand. The company provides distributed energy storage for
commercial and residential buildings, enabling customers to shift
peak energy consumption to the night when demand is lower.
You would think utilities would be very interested in learning
about EnerNoc, Ice Energy and other similar ventures by attending
the Fair and snapping up company information and business cards.
Utilities intent on diversifying may want to direct shareholder
funds towards these ventures. Utilities wanting to streamline
their operations need to know the new business ideas that are
bubbling up from the entrepreneurial strata of our economy.
Unfortunately, unless they were disguising themselves as venture
capitalists, I did not notice any representatives of utilities in
attendance at the Fair.
Looking to the future, Buz sees the stars aligned for
innovation in the energy sector on an unprecedented scale. For one
thing, the new energy act signed into law by President Bush this
summer places "extraordinary emphasis on technology and that is
going to be an accelerator." For another, the recent drought in
IPOs has bottled up venture funds reluctant to bet on ventures
that did not offer clear exit options. Initial public offerings
will rebound, and so too will venture capital investments in
energy, Buz says.
Let's not forget that energy is the most important industry in
the United States, and it is three times the size of
telecommunications, he continues. Opportunities will quickly
multiply for investors with an interest in energy. Buz's vision of
the future is -- well -- electric.
As he puts it: "Private equity in emerging growth companies in
energy is going to quadruple in the next few years -- and it could
grow faster than that."
Martin Rosenberg is editor-in-chief of EnergyBiz magazine,
a bimonthly energy industry print magazine that circulates to more
than 20,000 senior executives and managers. EnergyBiz, in
its first year of publication, was recently awarded a gold medal
in the "energy/utilities/engineering" category in the prestigious
Folio magazine competition.
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