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As VentureWire puts it in this article, there’s a new term out there called “the Solyndra Effect,” which describes the sickly feeling that the limited partners of the venture funds that backed Solyndra are feeling right now. The reality is that losses that large can make fund raising really difficult for VCs, particularly in an environment when some funds have struggled to raise money.

Solyndra’s VC and private capital investors include Madrone Capital, RockPort Capital, the George Kaiser Family Foundation, CMEA Capital, Redpoint Ventures, U.S. Venture Partners and Virgin Green Fund. The involvement of the George Kaiser Family Foundation, Solyndra’s biggest backer, is the reason why Republicans are calling foul, as Kaiser has supported the Obama administration.

While Solyndra could still sell its assets for some amount of money, not many solar execs and VCs I’ve talked to think the assets are worth all that much. For the case of solar manufacturer Evergreen Solar, which also filed for bankruptcy recently, its secured debtors are trying to recoup $165 million in notes from an asset fire sale and its unsecured debtors are praying that Evergreen’s assets might exceed that figure, leaving something for them. But as our GigaOM Pro Green IT curator Adam Lesser put it for Evergreen: “Good luck,” getting more than that out.

Another huge loss for VCs was when fiber optic network company Western Integrated Networks (WINfirst) raised $889 million in the broadband build-out era of the late 90′s, and then fell into bankruptcy. WINfirst was able to sell its assets for $12 million.

Solyndra's factory full of panels in April

Solyndra also has reportedly drawn down $527 million of the $535 million loan guaranteed by the Department of Energy. Loan guarantees essentially serve as a promise by the government to make good on a loan if the company can’t, and typically enable better interest rates and lower costs than would otherwise be available to a company for project financing. But Solyndra actually borrowed the loan from the Federal Financing Bank, part of the Treasury Department, so basically the government was acting as a lender to the company directly. So there’s that $527 million to pay back, too, (on top of the $1.1 billion in private funds) if there are any assets out of the Solyndra bankruptcy.

Perhaps you’re wondering how investors could keep funding a company that couldn’t draw enough interest from investors to fulfill its IPO plans back in the Summer of 2010. Beyond the somewhat unexpected change in the economics of the solar industry (panel prices dropped dramatically while Solyndra grew), once investors put money into a company, it can be a difficult decision of when to pull out and when to put in more money.

Say, a fund puts in $50 million in a round, and then Solyndra later says it needs another $50 million to be able to expand production and deliver an economy of scale to reduce manufacturing costs, and some day recoup the fund’s initial investment. Does the fund double down and try to save the initial investment or pull out early on and cut its losses? As recently as March of this year, VentureWire reports that at least three of Solyndra’s backers — Madrone Capital, RockPort Capital and the George Kaiser Family Foundation — put more money into Solyndra in a recapitalization round. When you’re stuck in a hole, sometimes its hard to know if digging is going to help get you out, or send you deeper.

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• Growing pains in the solar PV industry
• Flash analysis: lessons from Solyndra’s fall
• The growth and promise of the LED market

• Investor made a significant contribution to the cleantech investment sector
• More smart looking investments than stupid looking investments
• On balance, I’d like to have your portfolio.
• I actually might like you.

And the middle two criteria have some wiggle room.

So our Power 5 this year are:

1. CMEA Capital – A long time player, with a slice of venture capital in last year’s top cleantech IPO, A123, one of this year’s top cleantech IPOs, Codexis, and this decade’s biggest cleantech gamble, Solyndra, real hard to leave them off the list.  They come in at number 1.  Hopefully Solyndra doesn’t take back all those profits when it’s solar cattle-guard finally gets caught out.
2. CalPERS – Despite somewhat skeptical on the performance to date, CalPERS has certainly played its part, and really anchored the explosion of venture money in cleantech.  And it continues to support it with another $500 million commitment this fall.
3. Bayard Capital – Makes the list for 1 deal, that is all their deals in one company.  This is the Australian firm who turned their capital fund into Landis + Gyr through a series of acquisitions before anyone in the U.S. had heard of the smart grid.
4. Us – I mean the U.S. DOE – Single-handedly carrying the the entire cleantech venture sector on its back? Wow.
5. Foundation Capital – Makes it because despite a couple of deals in their portfolio that make me cringe, they’ve gotten a lot of kudos in California for sticking it out with Silver Spring in the early days, and with one of the better cleantech exits behind them in EnerNOC and multiple bets in both solar power development and financing, and smart grid, I have to like the strategy.

And the 5 for the Royal Questioner to Question:

1. Advanced Equities - If I need to explain why, you shouldn’t be in investing.  Do your Google search.  I’m not even going to give you some links to point to this time.
2. Every single cellulosic biofuels investor – Hey you guys, start reading our blog and stop playing the “watch my magically shrinking cellulosic biofuels forecast and my oh so please don’t notice the bait and switch to bio-anything but fuels business plan”.  Let alone the, “we can be cheaper than gasoline” or “this process has solved the oh so tricky problems and it’s just a little engineering scale-up”.  And for the record, we think the Cello Energy debacle is hilarious.
3. Kleiner Perkins – EEStor, Bloom Energy, I turn green 1/3rd of the way down their list.  They’re the originators of the fundamentally flawed “stealth in cleantech investing strategy.”  And they make me look humble (which is hard to do).  Even making a few dollars in Amyris, doesn’t come close to making it up.  Of course, maybe the latest news articles are right, and they’re pulling out of cleantech?
4. The American Taxpayer/ errrrr, I mean the DOE – Hmmmmmmh.  Who’s the genius who signed off on massive low interest loan guarantees to Solyndra, Tesla, Beacon, and friends?  But just wait until the conditional commitments in big project dollars get spent, I’m sure that will fix it.  But for the record, it’s not generally a good sign when the government brags about out investing the private sector.  How about you guys invest my share of the total in a real chief credit officer.  I’d apply for the job, but only if you term it chief workout officer.
5. Ok, we’re stopping, now, my stomach is still churning after number 4.

Note to all:  This list is waaaaaaaaaaaaaaaaaaaay too US centric.  I’m feeling very parochial.  More international suggestions please?

This post originally appeared on the Cleantech Blog.

Neal Dikeman is a founding partner of Jane Capital Partners LLC, a cleantech merchant bank whose clients have included the technology arms of multinational energy companies. He has served as a director of several technology companies, is chief blogger for Cleantech Blog, named one of the 50 Best Business Blogs by the London Times, and chairs industry portal Cleantech.org. He is currently the Chairman of Jane Capital’s recently acquired Greenhome.com operating company, the original ecommerce ecostore. He is a cofounder and director of venture backed carbon IT startup Carbonflow, a Jane Capital spin-out in SaaS worfklow for the carbon markets where he served as founding CEO and raised the first two rounds of finance.

Image courtesy of Terren in Virginia.

There’s one major reason that the prospects for the electric car market are brighter this time around than they were in the days of General Motors’ EV-1, when the plug-in car biz came and went faster than a Tesla Roadster: a decade of battery tech advances. That’s according to Nancy Gioia, Ford’s Global Electrification chief, who expressed the sentiment on a panel Tuesday at the Plug-in 2010 conference in San Jose, Calif.

The upcoming generation of electric vehicles will mainly use lithium-ion battery technology, which can typically pack more energy for their weight than the types of batteries deployed in the electric cars introduced a decade ago.

Maurice Gunderson, a senior partner for CMEA Capital’s Energy and Materials group, describes the progression of battery tech from one chemistry family to the next (i.e. lead acid to nickel cadmium, to nickel metal hydride and, most recently, to the lithium-ion batteries powering laptops and plug-in cars) as ”quantum leaps.” With each “leap,” new opportunities arise for entrepreneurs and investors working with energy storage as well as electronic devices.

But major breakthroughs in energy storage technology don’t flow out of research labs all that often. And when they do, turning that breakthrough into a sustainable business presents another challenge, said Gunderson. The team, he said, needs to “define what’s the killer application? Who’s willing to pay for it?”

Over on GigaOM Pro (subscription required), Gunderson has walked us through some of the key steps in CMEA’s process of getting to know and ultimately backing battery startup Contour Energy Systems (previously named CFX Battery). We’ve also taken a look at Contour and CMEA-backed battery maker A123 Systems’ hunt for these killer apps.

A123 sold its first products for the consumer market in the first quarter of 2006. A year later, it followed that move with sales into the transportation market. While electric grid services have made up a growing portion of A123’s revenue during the last few years, the company has only recently shipped its first products for the electric grid services market, according to regulatory filings.

Contour’s chemistry, meanwhile, is particularly well suited to withstanding high heat, so the company is pursuing applications in specialized instruments used in oil wells. For military applications, Gunderson said Contour’s battery meets the demands of light-weight and long run times for devices that soldiers would carry in the battlefield.

Contour is still at a relatively early stage with what are called primary lithium carbon fluoride battery systems (which can’t be recharged) and working on rechargeable carbon fluoride battery packs. The company’s first revenue shipments are slated to begin around September, said Gunderson, and deliveries of rechargeable batteries are still at least a year and a half away.

What will be the killer app for the next generation of battery tech?

For the full article on going beyond the breakthrough to build a better battery business, check out GigaOM Pro.

Image courtesy of ReVolt Technology

Holy smokes – that makes the company one of the most capitalized startups (in terms of private equity) that I’ve heard of. According to Dow Jones VentureSource there’s only one company that raised more than Solyndra has: fiber optic network company Western Integrated Networks (WINfirst), which raised $889 million in the broadband build-out era of the late 90′s. Hopefully Solyndra won’t go the way of that wayard telecom firm, which fell into bankruptcy and sold its assets for $12 million.

Kelly Truman, Solyndra’s Vice President, Marketing & Business Development, told us that most of the new round came from existing investors, but that some new, undisclosed investors also joined the latest round. Existing investors include Redpoint Ventures, RockPort Capital, Argonaut, CMEA Capital, U.S. Venture Partners, the Walton family fund Madrone Capital, Abu Dubai’s MASDAR and Richard Branson’s Virgin Green Fund. As part of the conditions of the DOE loan guarantee, which will go toward building its second factory in Fremont, Solyndra had to raise this new equity to cover 27 percent of the cost of the factory. The $535 million loan commitment provides the remaining 73 percent.

When you get into this level of private equity financing it becomes a whole new ball game for investors. There’s so many investors involved, with many of them adding in very sizable amounts. Tom Baruch, founder and managing director of CMEA Capital, who’s fund reinvested in Solyndra’s latest round, said while the deal is unusual for his firm (CMEA does a lot of early stage investments), he said Solyndra’s intellectual property and differentiation is so great that in this case it’s OK that the deal is capital intensive. “It’s unusual, but our business is changing rapidly. We have to evolve too.”

As for Solyndra’s ground breaking ceremony, it was a good day for the investors. Baruch called it “one of the most exciting moments” he’s experienced in his years of investing.

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