'Green' startups draw investors, capital from California pension fund
The Sacramento Bee, Calif. --Nov. 29
Nov. 29--Venture capitalists see green in the next generation rechargeable battery from PowerGenix Systems.
In the past six months, VCs, including one funded by the giant California
Public Employees' Retirement System, have put down $13.75 million on PowerGenix.
Increasingly, clean technology companies like PowerGenix are generating a
buzz in the multibillion-dollar venture capital industry. Investor interest is
expected to grow even further with plans by Cal-PERS and the California State
Teachers' Retirement System to inject a combined $950 million into the fledgling
industry in the coming years.
"There are new industries growing, and we ought to be on the leading
edge of investment in these," said state Treasurer Phil Angelides, a
CalPERS and CalSTRS trustee and the driving force behind the funds' "green
wave" investment program. "It's a place where we can win."
Experts say the upstart industry could grow quickly and capture 10 to 20
percent of the venture capital dollars over the next decade.
That could be good for California's sluggish economy. A new study by the
National Resources Defense Council predicts clean technology companies could
create 52,000 to 114,000 high-paying jobs and generate $11 billion to $25
billion in annual revenues in the state over the next six years.
Key players include CalPERS, the nation's largest public pension fund with
$177.8 billion in assets, and CalSTRS, the No. 3 fund with $118.5 billion in
assets.
While $950 million is only a small part of their investment portfolio, the
money is considered significant for the industry.
Clean technology companies received $580 million from venture capitalists
during the first half of 2004, according to the Cleantech Venture Network, which
tracks deals in the industry. That compares with $11 billion for all VC
investments.
Nicholas Parker, chairman of the Cleantech Venture Network, said European
investors are far ahead of their American counterparts in understanding the
risks and opportunities in clean technology.
"The CalPERS and CalSTRS initiative is very important and
groundbreaking. It is the first time leading (U.S.) pension funds have actually
made a commitment," Parker said.
Bob Epstein, co-founder of Environmental Entrepreneurs, agrees: "CalPERS
and CalSTRS make that market attractive. They are looking for a way to get a
better return on investment and also get an environment side effect."
As an emerging industry, clean technology covers the spectrum of
environmentally friendly products and services with the common goal of cutting
costly energy consumption and waste.
Many entrepreneurs have graduated from the high-tech boom in the 1990s to
launch new startups that explore water treatment technology for homes and
government agencies, wireless sensors to monitor power usage in supermarkets,
wind power generators, paper-thin solar cells, biological products for plant
growers, nuclear waste disposal programs and ocean wave power-generating
systems.
Unlike the past, investments in these technologies aren't spurred by onerous
environmental regulations. Instead, businesses are looking for ways to slash
costs to remain competitive in the global marketplace.
"It's driven by economics. None of these companies is doing it because
they think they have an environmental mission," Epstein said.
Companies like NanoAmp Solutions in San Jose and Advanced Analogic
Technologies in Sunnyvale are developing chips to increase the battery life for
cell phones, notebook computers and other small electronic devices -- something
consumers are demanding.
In the highly competitive cell-phone industry, manufacturers are constantly
adding new features such as Internet access to woo consumers.
"Any time they add these new functions you just increase the power
budget of the phone," said Erik Ogren of Advanced Analogic. The cell-phone
manufacturers "want long battery life, and they want a smaller size
(battery)."
The result: A green cell phone that consumers don't have to constantly
recharge. While consumer convenience is paramount, there is an added bonus for
the environment. The fewer times a battery is recharged, the more energy is
saved. A longer lasting battery also means less waste in the landfills.
Scientists estimate developing more efficient power supplies for PCs could
save enough energy annually to light up the city of Chicago.
"Everything has to be as low-power as you can get it," said Simon
Westbrook, chief financial officer of NanoAmp, whose chips are being designed to
reduce energy consumption by hand-held electronic and medical devices, including
pacemakers.
Stepped-up campaigns to reduce toxic nickel-cadmium battery waste have
prompted power tool manufacturers to pursue alternatives, including batteries
from PowerGenix.
"The marketplace is looking for an edge," said Joe Yeagley, a vice
president at PowerGenix. The company believes its next-generation battery will
give manufacturers that competitive advantage.
The cutting-edge fuel cell membrane technology by PolyFuels Inc. in Mountain
View also has attracted the attention of venture capital funds, including the
Cal PERS-supported Technology Partners. PolyFuels has raised $40 million from
venture funds.
PolyFuel has developed an advanced fuel cell membrane for portable electronic
devices and the automobile industry. The membrane, which resembles plastic wrap,
is designed to boost the efficiency of hydrogen fuel cells.
"The membrane is the heart of the fuel cell. If you control the
membrane, you control the industry," said Jim Balcom, president and chief
executive officer of PolyFuel.
Unlike other venture-backed companies, clean technology investments could
generate steadier returns, according to experts.
"You're going to have fewer strikeouts," said Parker of the
Cleantech Venture Network. But instead of the big financial home run,
"you're going to see a lot of base hits."
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