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Summary:

A cleantech investing renaissance could be on its way with an emphasis on finding companies outside of the U.S., and scaling up already-proven clean technology companies.

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A learning curve — it’s starting to happen slowly but surely for investors in the cleantech industry. Or as Adam Grosser, former Foundation Capital partner and the lead investor of a new clean energy fund for private equity company Silver Lake, explained to me in an interview this week, he thinks a cleantech “renaissance” is coming.

That second wave — or Cleantech 2.0 — will likely be more focused on private equity, will look to scale some of the already proven innovations past the so-called Valley of Death, and will be far more global in scale. At least that’s what the new cleantech world looks like to Grosser and Silver Lake Managing Director Greg Mondre.

Before launching the clean energy fund, Silver Lake, in partnership with billionaire investor George Soros, spent 18 months reviewing what had worked and what hadn’t for cleantech investing, and has been developing an investment thesis. What the team has learned is: 1) focus on growth scale financing, and 2) go global.

“We got really excited about this growth area,” said Mondre. The bulk of funding for cleantech has gone into early stage high-risk companies, and there’s been very limited capital going into helping people scale businesses once they’ve reached technological feasibility.

Part of that is also because it’s taken a lot longer for cleantech startups to reach commercial-scale than IT companies, so investors weren’t ready for the size of capital deployment necessary to scale the companies. Then investors had to rely on a next stage of parties to step in to fund scaling the companies, which often had different ideas about valuations and commercialization.

In the past, venture firms have also made the mistake of being solely focused on the U.S., and sometimes even just California. In contrast, Silver Lake plans to be early at investing in cleantech in China, India, Europe and Brazil.

Silver Lake isn’t the only firm with a new angle on cleantech investing. VentureBeat reported this week that Accel Partners is planning to raise $2 billion in new funds and invest more broadly into energy opportunities in China. VantagePoint Venture Partners launched a $100 million fund focused on energy in China and managed in conjunction with Tianjin Hi-Tech Holding Group and Tianjin Binhai Development Investment Holding. Like I said in this article, the giant sucking sound in greentech is China.

Lower-profile firms are also still raising smaller funds and will no doubt put into practice what they’ve learned over the years. Israel Cleantech Ventures, which focuses on finding innovative Israeli cleantech firms, is in the process of raising a $100 million fund, according to a filing last week. And the Westly Group — former eBay entrepreneur and California state controller Steve Westly’s investment group — is reportedly looking to close a $175 million, cleantech-focused, third fund by spring 2011.

Investor (and blogger) Rob Day thinks the next wave of cleantech venture firms will be created by upcoming, ambitious, young investors who have left larger firms with new ideas about how to invest, and with knowledge of the mistakes their senior peers have made. Combine that with some of the few seasoned investors who have had modest (or actually pretty good) investing success, and you have Cleantech 2.0 on your hands.

For more research, check out GigaOM Pro (subscription required):

Image courtesy of Space Ritual.

  1. The success of companies with such an attitude are always depending on the public and the degree of its “green” view. You can experience it everywhere that ecologic products are booming and you can have almost every price you want for those products. This is driven due to events like the BP crash in the Caribbeab Sea and the rising extrem wheather events. People recognize that there is a time to shift and this time is quite close.

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  2. [...] the heels of private equity firm Silver Lake announcing a new growth stage clean power fund last week, there’s been more new moves in the new clean power [...]

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  3. This thesis is spot on. I run the US operations for a mid-sized European manufacturer – we commercialized a University developed technology in 2004. The business opened international offices in the US and Tokyo in 2008 right before the downturn.

    We continue to see University spin outs here in the US and globally enter our space with technology that is 4-5 years away from being mature and business models that don’t fit the needs of the end market. Many have been backed by smaller ‘Clean/Green-Tech’ VCs that lack an international perspective and market facing perspective.

    LPs who have backed these GPs have basically flushed away their capital. The GPs lacked the patience to understand the supply chain that the company will be selling into and did not take into account the potential presence of a large, well-funded and established international competitor.

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  4. [...] Cleantech 2.0 is coming and will be led by investors like Silver Lake Kraftwerk’s Adam Grosser (formerly from Foundation Capital) and Cathy Zoi (formerly the DOE’s Under-Secretary for Energy). Both will be interviewed by Katie Fehrenbacher at Green:Net 2011. [...]

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  5. [...] Cleantech 2.0 is coming and will be led by investors like Silver Lake Kraftwerk’s Adam Grosser (formerly from Foundation Capital) and Cathy Zoi (formerly the DOE’s Under-Secretary for Energy). Both will be interviewed by Katie Fehrenbacher at Green:Net 2011. [...]

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  6. [...] Partner Adam Grosser, and former Obama Administration energy official Cathy Zoi. According to Grosser, the new fund will be focused on growth scale financing and a global breadth of investment. (Hear from Grosser and Zoi at Green:Net 2011 on April 21 in San [...]

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  7. [...] there is a cleantech investing renaissance, or cleantech 2.0, coming, I’d bet on the growing team at Silver Lake Kraftwerk to find it. According to Dan [...]

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  8. [...] is occurring. Whether the next round of investors have more success than the previous ones, (or Cleantech investing 2.0) remains to be seen. But there’s nothing like losing — or gaining — significant [...]

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  9. [...] cleantech just not work for most VCs? Does a second wave of cleantech investing, we described as cleantech investing 2.0, involve the general venture capitalist? Will there be another up in a couple years? A cleantech [...]

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