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Posts Tagged ‘Khosla Ventures’

Article from GigaOm.

Not all venture firms are joining the cleantech exodus. Lux Capital, which invests in a lot of science-based, hardware and infrastructure innovations, has closed its third fund of $245 million, and Lux Capital partner Peter Hebert told me that the firm will continue its current model of investing about a third of its funds into energy tech, a third in information technology and a third in health and biotechnology.

A few of Lux’s portfolio companies appear to be doing pretty well. Kurion, a startup developing nuclear waste cleanup tech, scored a breakthrough deal to help clean waste water for Japan’s Fukushima nuclear meltdown. About a year ago I called them “the most successful greentech startup you haven’t heard of.” Portfolio company Shapeways has become synonymous with the emerging industry of 3D printing, and smart grid startup Gridco just launched to build a next-gen power grid using solid state transformers. Portfolio firms that have been acquired include skin company Magen Biosciences, LED tech company Crystal IS, and chip companies SiBeam and Silicon Clock.

“There’s definitely been negative sentiment towards cleantech in the market,” said Hebert, but it really “depends on the individual Limited Partners” (the groups that put money into venture firms). Our LPs still see substantial innovation ahead around energy and resources, said Hebert. Going forward in 2013 “we remain disciplined and selective,” said Hebert.

While Lux says it remains committed to energy tech investing, other firms have been unable to raise new cleantech funds, and some have dialed back or transformed their energy and cleantech focused divisions to make them more capital efficient. VantagePoint Capital Partners shut down its efforts to raise a $1.25 billion cleantech fund recently, and firms like Mohr Davidow and Draper Fisher Jurvetson have reduced their commitments and turned to backing IT-based cleantech, or cleanweb companies only. In 2012, venture capital firms put a third less money into cleantech companies compared to 2011.

Still some investors like Lux Capital still see the potential of energy and resources technology innovation. Canadian firm Chrysalix says its energy focused portfolio is doing well. NEA says its still committed to energy investing, though its scaled back a bit. Khosla Ventures still continues to make aggressive and many bets across sustainability from energy to agriculture to smart grid to biofuels.

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Article from GigaOm.

The notion that a lot of venture capitalists — and in particular Kleiner Perkins — have lost money on cleantech startups is now officially mainstream news, via a long article published in Reuters this week. The article isn’t inaccurate, but it misses a whole lot of nuances including  the big picture global trends of population growth and resource management, the long term play and some of the newer trends of the cleantech sector, and a few of the more successful companies in Kleiner’s cleantech portfolio.

We’ve been covering this roller coaster ride, and Kleiner’s plays for years. Back in the summer of 2010, I first wrote “Greentech investing: not working for most;” and in early 2012 I wrote pieces on “the perils of cleantech investing,” as well as “We can thank Moore’s Law for the cleantech VC bust.” Last year I wrote “Kleiner Perkins web woes, add greentech,” and Kleiner is not so great at investing in auto tech.

Cleantech Open western regional 2012

The article does have a pretty amazing tidbit in there, that Doerr dipped into his own pocket for the $2.5 million that Miasole needed to make payroll before it was sold to Hanergy. But here are 5 things I think the article missed:

1). The long-term larger risk, but bigger payoff: A lot of the manufacturing and infrastructure-based cleantech startups have been taking longer to mature and reach commercialization than their digital peers, and they’ve also needed more money. But when some of these rare companies actually do reach scale and are successful, they could be massive players with huge markets. It’s just a different kind of betting — think putting a $100 on 22 on the roulette wheel, versus $5 on a hand of poker. A combination of the two — a small amount of the high risk investments, with a larger amount of the low risk investments — could be a good play.

That was one of the reasons why it seems like investor Vinod Khosla is still investing in cleantech startups. Khosla Ventures’ biocrude portfolio company KiOR — which the firm mostly owns – has a potential market that is no less than an opportunity to displace oil in transportation. Imagine if a venture investor owned a big chunk of Exxon Mobil.

KiOR1

2). The bigger trend of population growth and resource management: Many venture capitalists might be steering away from the cleantech investing style of years prior, but the overall global trends that originally drove these early cleantech investments will only continue to grow. These planetary trends aren’t wrong, it’s just that a bunch of the investments that were made weren’t that smart. The world will have 9 billion people by 2050, and energy, water and food will have to be managed much more carefully. The climate is also changing, because too many people are using too many fossil fuel-based resources. Technologies — including IT — that manage these resources and replace them with more sustainable ones will have large markets, particularly in developing countries.WindGoogleLady

3). Beyond venture: For many cases, the cleantech investing model isn’t a fit for venture capital. But that doesn’t mean it’s not a good fit for other types of investors like private equity and project finance. Google has put a billion dollars into clean power projects, because those can deliver relatively safe and decent returns. Corporate investors — like GE or NRG Energy — are putting money into cleantech startups because it’s more than just a return, it’s a strategic investment. Cleantech innovation will also continue to come out of university and government labs and will be spurred along by government support of basic science research. Does cleantech innovation need a cleantech VC bubble to start changing the world?

 

4). Kleiner’s portfolio is more nuanced: The Reuters story accurately pointed out Kleiner’s struggling cleantech companies like Fisker, Miasole, Amonix, and others. And also rightly pointed out how the few cleantech companies it backed that went public — like Amyris and Enphase Energy — are now trading below their IPO prices. But the article didn’t mention the exit of solar thermal company Ausra, and also didn’t name some of the more successful and growing companies in Kleiner’s portfolio like Opower, Clean Power Finance, Enlighted, Nest, and RecycleBank. Opower is the energy software company to beat these days.

Honeywell & Opower's iPad smart thermostat app

Honeywell & Opower’s iPad smart thermostat app

5). Cleanweb: See a trend in Kleiner’s more successful and growing cleantech startups? They’re mostly software and digital based. The latest trend in cleantech VC investing is the so-called “clean web,” or using social, mobile, and software to management energy and other resources. Some of these companies are pretty interesting and inspiring, like crowd-funding solar site Solar Mosaic.

Finally, as a side note, it’s now in vogue to point out how cleantech investors have lost money. Many have. But I think investors that have paved the way for world-changing innovation, and taken large risks to do so, should in part be lauded.

 

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A new report from health startup accelerator Rock Health shows that funders have invested $1.08 billion in digital health startups this year, which already eclipses the $956 million they spent in all of last year.

cash roll

Venture capital support for traditional life sciences companies may be up for debate, but enthusiasm for digital health startups certainly seems to be on the rise.

According to a report out Wednesday from health startup accelerator Rock Health, in the third quarter of this year, VCs invested 70 percent more money in 84 percent more deals than in the same quarter last year.  Those trends are in line with a mid-year funding report released by Rock Health this summer.

The reports say funders have invested $1.08 billion in digital health startups this year, which already eclipses the $956 million they spent in all of last year.  By the third quarter of last year, VCs invested just $626 million in digital health.

The biggest funders of the year, so far, are Aberdare, Founders Fund, Khosla Ventures and New Enterprise Associates. But the report also notes that the field is attracting newcomers – 10 percent are first time health investors, the report said.

The four largest deals this year – which involved Castlight Health, GoHealth, Care.com and Best Doctors – comprise more than 20 percent of the year’s funding and most of the funding rounds were Series A and B, the report said. But interesting startups including Mango Health, pingmd and Meddik have raised smaller seed rounds.

The report comes a week after the Wall Street Journal said that “the health-care industry in general has fallen out of favor with venture capitalists.” While some in the industry say they’ve seen VC interest shift away from biotech and traditional life sciences that require more time and capital, and are subject to more regulation, Rock Health’s report shows that interest in digital health is still strong.

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Article from NYTimes.

MENLO PARK, Calif. — New York, London and Hong Kong are common addresses for blue-chip multinationals. Now Silicon Valley is, too.

From downtown San Francisco to Palo Alto, companies like American Express and Ford are opening offices and investing millions of dollars in local start-ups. This year, American Express opened a venture capital office in Facebook’s old headquarters in downtown Palo Alto. Less than three miles away, General Motors’ research lab houses full-time investment professionals, recent transplants from Detroit.

“American Express is a 162-year-old company, and this is a moment of transformation,” said Harshul Sanghi, a managing partner at American Express Ventures, the venture capital arm of the financial company. “We’re here to be a part of the fabric of innovation.”

The companies are raising their profiles in Silicon Valley at a shaky time for the broader venture capital industry. While top players like Andreessen Horowitz and Accel Partners have grown bigger, most venture capital firms are struggling with anemic returns.

The market for start-ups has also dimmed, in the wake of the sharp stock declines of Facebook, Zynga and Groupon, the once high-flying threesome that was supposed to lead the next Internet boom.

But unlike traditional venture capitalists, multinationals are less interested in profits. They are here to buy innovation — or at least get a peek at the next wave of emerging technologies.

In August, Starbucks invested $25 million in Square, the mobile payments company based in San Francisco, which will be used in the coffee chain’s stores. This year, Citi Ventures, a unit of Citigroup, invested in Plastic Jungle, an online exchange for gift cards, and Jumio, an online credit card scanner.

Banco Bilbao Vizcaya Argentaria, the large Spanish banking group, opened an office in San Francisco last year. The team, which has about $100 million to fund local start-ups, is looking for consumer applications that will help the bank create new businesses and better understand its customers.

“We are in one of the most regulated and risk-averse industries in the world, so innovation doesn’t come naturally to us,” said Jay Reinemann, the head of the BBVA office. “We want to avoid the video-rental model. We want to evolve alongside our consumers.”

The companies are hoping to tap into the entrepreneurial mind-set. Multinationals, with their huge payrolls and sprawling operations, are not as nimble as the younger upstarts. While they are rich in resources, big companies tend to be more gun-shy and usually require more time to bring a product to market.

“Companies cannot innovate as fast as start-ups; increasingly they realize they have to look outside,” said Gerald Brady, a managing director at Silicon Valley Bank, who previously led the early-stage venture arm of Siemens. “We think it’s happening a lot more than people recognize or acknowledge.”

Of the 750 corporate venture units, roughly 200 were established in the last two years, according to Global Corporate Venturing, a publication that tracks the market. In the last year, corporations participated in more than $20 billion of start-up investments.

Big business has played the role of venture capitalist before, with limited success. During the waning days of the dot-com boom, financial, media and telecommunications companies sank billions of dollars into start-ups.

The collapse was devastating. Although some managed to make money, far more burned through their cash. In 2002, Accenture, the consulting firm, scrapped its venture capital unit after taking more than $200 million in write-downs. The previous year, Wells Fargo reported $1.6 billion in losses on its venture capital investments. Dell, the computer maker, closed its venture arm in 2004 and sold its portfolio to an investment firm. (It resurrected the unit last year).

Companies say they are taking a different approach this time. Rather than making big bets across the Internet sector, investments are smaller and more selective.

“We invest with the idea that we’re a potential customer for a company,” Jon Lauckner, G.M.’s chief technology officer said. “We’re not looking to make several $5 million investments and make $10 million on each. That would be nice, but it’s not important.”

As they try to find the right start-ups, some are forging tight bonds with local firms. BBVA, for example, is an investor in 500 Startups, a venture firm that specializes in early-stage start-ups and is run by Dave McClure, a former PayPal executive.

Unilever and PepsiCo are limited partners in Physic Ventures, a venture capital firm designed to help corporate investors build commercial partnerships with portfolio companies. Both Unilever and PepsiCo have installed full-time employees in Physic’s downtown San Francisco offices.

American Express has stacked its investment team with technology veterans. Mr. Sanghi, the head of the office, has spent roughly three decades in Silicon Valley and formerly led Motorola Mobility’s venture arm. Through its network of relationships, the office has met with roughly 300 start-ups in the last six months.

The connections have started to pay off. Vinod Khosla, the head of Khosla Ventures and a co-founder of Sun Microsystems, introduced the American Express team to the executives at Ness Computing, a mobile start-up. In August, American Express partnered with Singtel, the Singapore wireless company, to invest $15 million in Ness.

Mr. Sanghi says Ness is a logical investment and a potential partner. The start-up’s application connects users to local businesses through customized search results.

“It’s trying to bring consumers and merchants together in meaningful ways,” he said. “And we’re always trying to find new ways to build value for our merchant and consumer network.”

For start-ups, a big corporate benefactor can bring resources and an established platform to promote and distribute products. Envia Systems, an electric car battery maker, picked General Motors to lead its last financing round because it wanted to have a close relationship with a major automaker, its “absolute end customer,” said Atul Kapadia, Envia’s chief executive.

Although the company received higher offers from other potential corporate investors, Envia wanted G.M.’s advice on how to build the battery so that one day it could be a standard in the company’s electric cars. After the investment, G.M. offered the start-up access to its experts and facilities in Detroit, which Envia is using.

“You want to listen to your end customer because they will help you figure out what specifications you need to get into the final product,” said Mr. Kapadia.

A marriage with corporate investors can be complicated. Besides G.M., Asahi Kasei and Asahi Glass, the Japanese auto-part makers, are also investors in Envia. They both build rival battery products for Japanese car companies.

Mr. Kapadia, who prizes their insights into Japan’s market, says his company is careful about what intellectual property information it shares with its investors. At board meetings, confidential data about Envia’s customers is discussed only at the end, so that conflicted corporate investors can easily excuse themselves.

“In our marriage, there has not been a single ethics concern, because all the expectations were hashed out in the beginning,” Mr. Kapadia said. “But I can see how this could be a land mine.”

For the big corporations, start-up investing is fraught with the same risk as traditional venture investing. Their bets might be modest, but blowups can be embarrassing and can rankle shareholders, who may see venture investing as a distraction from the core business.

OnLive, an online gaming service, offers a recent reminder.

The company was once a darling of corporate investors, with financing from the likes of Time Warner, AutoDesk, HTC and AT&T. At one point, it was valued north of $1 billion.

Despite its early promise, the start-up crashed in August, taking many in Silicon Valley by surprise. The company laid off its employees, announced a reorganization and in the process slashed the value of the shares to zero.

“It can be painful when a deal goes sour,” James Mawson, the founder of Global Corporate Venturing, said.

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Article from GigaOm.

The Department of Energy’s program that gives grants to early-stage energy projects — called ARPA-E — has allocated another $43 million for 19 battery projects, including grants for futuristic batteries made of new chemical mixes, using brand new architectures and utilizing nanotechnology. The ARPA-E program has been aggressively funding next-generation battery technologies over the years, and though these are small grants, the amount of innovation happening is substantial.

The funds go to projects that are very early stage, and are supposed to help bring disruptive R&D closer to commercialization. While Japanese and Korean conglomerates dominate the industry of producing small format lithium ion batteries for laptops and cell phones, these next-gen batteries are mostly targeted for electric cars and the power grid. Some of these projects also aren’t strictly traditional batteries, and a couple are flow batteries, which are large tanks of chemicals that flow into a containerized system and provide energy storage for the power grid (see Primus Power’s flow battery pictured).

Notable winners of the funds include big companies like Ford, GE, and Eaton, small startups like Khosla Ventures-backed Pellion, and projects out of the labs of Oak Ridge National Laboratory, Battelle Memorial Institute, and Washington University in St. Louis.

Here’s some of the winners (for the full list of 19 go here):

  • Ford: $3.13 million for a very precise battery testing device that can improve forecasting of battery-life.
  • GE Global Research: $3.13 million for sensors thin-film sensors that can detect and monitor temperature and surface pressure for each cell within a battery pack.
  • Eaton: $2.50 million for a system that optimizes the power and operation of hybrid electric vehicles.
  • Pellion Technologies: $2.50 million for the startup’s long range battery for electric vehicles.
  • Sila Nanotechnologies: $1.73 million for the startup’s lithium ion electric car battery that it says has double the capacity of current lithium ion batteries.
  • Xilectric: $1.73 million to “reinvent Thomas Edison’s battery chemistries for today’s electric vehicles.”
  • Energy Storage Systems: $1.73 million for a flow battery for the grid, with an electrolyte made of low cost iron, and using a next-gen cell design.
  • Battelle Memorial Institute: $600K for a sensor to monitor the internal environment of a lithium-ion battery in real-time.

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Article from TechCrunch.

Looks like the seed funding wave continues to get stronger. The latest evidence: Khosla Ventures, the Silicon Valley venture capital firm headed up by tech industry veteran Vinod Khosla, appears to be raising a new seed fund, according to regulatory documents filed with the Securities and Exchange Commission this afternoon.

According to the filing, the new fund is called “Khosla Ventures Seed B.” At the moment, details are very scarce: No money has been raised just yet, the filing says, and there is no maximum or minimum amount ascribed to the offering.

Khosla Ventures’ last seed-related fund raise was closed in January 2010, when the firm raised $300 million for a fund called “Khosla Ventures Seed.” This past fall, the firm raised $1 billion for its more general venture fund, Khosla Ventures IV.

Want to eventually get a piece of Khosla’s newest seed fund? Here’s what the firm’s website says it looks for in its earliest stage investments:

At the seed stage, what we’re really looking for is a crazy idea that may have a significantly non-zero chance of working. We want good teams. We don’t need complete teams or even complete plans, but the key technology risks of your approach—and the economic and market benefits if it is successful—need to be identified. From a seed perspective, planning for risk elimination at the lowest possible cost is the key variable we look for. Your seed plan should validate your hunches about the market and help you decide what market segment you want to enter.

We’ve reached out to the folks at Khosla Ventures for more details on the raise, and will report back with any additional information we receive.

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Article from SFGate.

“The solar power system Facebook Inc. plans for its new Menlo Park headquarters won’t just supply electricity. It’ll heat water for the showers, too. And maybe help clean dishes in the cafe.

The system will be designed and installed by Cogenra Solar, a Mountain View startup that uses the sun’s energy to produce electricity and hot water at the same time. The collection of solar cells, mirrors and pipes will sit atop Facebook’s 10,000-square-foot fitness center, powering the exercise equipment and churning out steaming water for the locker rooms.

The technology’s dual use makes it far more cost-effective than conventional solar systems that provide electricity alone, said Cogenra CEO Gilad Almogy. And while neither company will say how much the array will cost Facebook, Almogy said the social networking giant will recoup its investment in less than five years.

“It’ll be a shorter payback than any other form of renewable energy,” Almogy said.

Planting solar panels on the office or warehouse roof has become de rigueur for many Bay Area companies. By those standards, Facebook’s solar array will be relatively modest, generating 60 kw of electricity and thermal output, combined. A typical home solar system produces about 3 kilowatts of electricity.

The array will cover only one roof on the nine-building campus, which used to house Sun Microsystems. But Facebook could expand the system if it performs as advertised, possibly using the hot water in the existing cafe and another planned for the campus. John Tenanes, Facebook’s director of global facilities, said his company is taking the same approach to solar that it takes to its Web service – checking out a promising new idea to assess its potential.

“We try stuff and see if it works,” he said. “And that’s what this is. Cogenra is really our initial investment (in solar power), and we’re going to see how well it works.”

Cogenra’s technology is designed to use energy that other solar set-ups waste.

Photovoltaic panels absorb a small fraction of the energy the sun throws at them, typically 15 to 20 percent. The rest is wasted as heat.

Cogenra arrays, however, run fluid-filled tubes behind the solar cells, with the fluid absorbing some of the heat cast off by the cells. The fluid – a chemical compound kept in a sealed loop – then transfers the heat to water. Curved troughs of mirrors concentrate sunlight on the cells, while motors keep the troughs pointed at the sun as it arcs across the sky.

Cogenra has already installed a 272-kilowatt system at a Sonoma winery, which uses the hot water to clean barrels. The Sonoma Wine Co. array, however, is mounted on the ground. The Facebook array will rest on the rooftop and will weigh far less. The company also plans to install a rooftop version of its technology on a University of Arizona dormitory.

“Not all customers who need significant amounts of hot water have nearby land to use,” Almogy said.

Backed by Khosla Ventures, Cogenra also tries to keep costs down by using solar cells, inverters, mirrors and tracking equipment made by other companies. The company’s ability to take off-the-shelf gear and turn it into something new impressed Facebook.

“They mashed together all these different things, and it seems to work well together,” Tenanes said.”

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