When it comes to greentech investing, it’s basically all or nothing, says VantagePoint Capital founder Alan Salzman. According to VantagePoint’s analysis there were some 500 funds — from VC to hedge funds, to private equity to corporate investors — that made a single investment in a greentech company over the past 12 months, and Salzman notes that it’s really difficult to maintain any expertise or domain knowledge with one investment a year. “Either you have a commitment to the field,” or you don’t, says Salzman.
VantagePoint certainly had a serious commitment to greentech investing over the past few years. The firm reportedly already committed $1.25 billion to the sector, and is raising over $1 billion for its third cleantech fund. Salzman tells me that VantagePoint is “fully and completely committed to this sector,” and is increasing its efforts, its teams, and its capital. So far VantagePoint has 20 investors in the U.S. and 9 investors in China all focusing on cleantech.
The fund has had at least two exits in the form of IPOs from electric car company Tesla Motors, and algae oil company Solazyme, and solar thermal company BrightSource Energy filed for an IPO this year, too. On top of that, Salzman says that Taiwanese LED tech company Huga Optotech is “in the IPO process,” and he anticipates that at least two more of the fund’s portfolio companies will file for IPOs in the near future.
Salzman says his fund’s strategy is to find the leaders in their respective fields — he points to Tesla, BrightSource, Solazyme and Better Place among others — and then be willing to commit to take the company from the beginning to the end; even if that takes a potential $100 million in a company. In other words, take them “from soup to nuts,” as Salzman puts it.
State of greentech investing
VantagePoint’s aggressiveness and portfolio size bucks the most recent trend in greentech investing. According to Ernst & Young, cleantech venture capital investing dropped 44 percent to $1.1 billion in the second quarter of 2011, compared to the same quarter a year ago. The number of cleantech VC deals was also down by 12 percent to 68 deals for the quarter.
A good portion of the generalist VCs that made sporadic investments in cleantech companies a few years ago have changed course. Earlier this year, Mass High Tech published a report that studied 10 venture firms that made five or more new cleantech deals between 2003 and 2008, then completely pulled back from new cleantech investments after 2008. Ernst & Young found that in its latest second-quarter report, that later stage companies were responsible for $865.2 million, or 79 percent of the quarter’s funding, and that investors had pulled back significantly on early stage investing.
However funds that have made large commitments, like VantagePoint, Kleiner Perkins, and Khosla Ventures don’t seem to be pulling back all that much, and instead seem to be almost doubling down. Kleiner Partner Ray Lane told me last week that Kleiner is not moving away from greentech investing. And now, in a way, these more aggressive firms, have less competition around to fight over deals and boost valuations.