Sequoia Aims for Killer Cleantech Batting Average

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It’s easy to invest in the growing number of cleantech startups — open wallet, toss money out onto the eco-friendly craps table. But it’s proving a lot harder to get returns from the companies, which often have longer exit cycles, and can require more capital than many traditional tech investments. As Fortune pointed out in November, five years after Kleiner Perkins made its first green investment, the firm had yet to make an exit.

That’s why we’ve been carefully watching the green thumb of granddaddy venture capital firm Sequoia Capital, which after more than three decades has helped fund industry pillars including Apple, Cisco, Electronic Arts, and Oracle. Sequoia has made fewer investments in the cleantech space than many of its green-minded peers, but if its electric vehicle battery bet A123Systems goes public, which it’s reportedly considering doing as early as this year, its batting average could be among the best in the cleantech investing world.

Sequoia partner and National Semiconductor Co-founder Pierre Lamond told us the firm’s cleantech strategy has been “more cautious” than its peers.

“We have not fallen into the feeding frenzy of our friends.

So far, in addition to A123Systems, the company has just publicly invested in efficient diesel engine company Achates Power, methanol fuel cell company Oorja Protonics (though that company is still in stealth), and efficient light company Luxim (which raised more funding recently). Lamond said Sequoia has several other cleantech investments as well, such as a solar photovoltaic startup, but that the firm isn’t talking about them right now.

That’s a relatively small cleantech portfolio for a big firm, compared to peers at DFJ, Kleiner Perkins and Khosla Ventures, which have seeded dozens of cleantech startups. Sequoia’s cleantech strategy is to “not invest in concepts,” according to Lamond. “The company has to have a real product and a competitive advantage.” It’s an obvious answer, but something he says the company learned with its big hits and major misses in the dot-com boom. Hoping to not recreate some of the hype-induced failures of the late 90s, Lamond says he has looked at many ethanol companies and passed on all of them.

Lamond and Sequoia are, mind you, actively looking for more cleantech entrepreneurs with which to do deals. “If you know of any send them my way,” he joked. We’ll see if A123Systems follows through on its IPO plans; if it does, Sequoia may be on the verge of an awesome cleantech exit performance, by percentage alone.

17 Comments

Theycouncil

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westley

Frankly i think Valence Tech. is in the forefront of the pack in the Phosphate Lithium Battery field and it is already a public Co. However the feet draging big auto industry with oil ethanol etc. interests will eventually get on board with the political winds of this environmentaly friendly & not uneconomical power source compared to current or even $80 a barrel oil prices. When they do it will be a really big market & A123 might very well have a good chunk of it. I really believe that the batteries available today are for many drivers needs good enough to be more viable than internal cumbustion gasoline engines for their health & pocket book. The mass produced cars are just not available. So Far. But if the big car CO’s live up to their current projections availability will snowball & if they don’t they risk circumvention by start up competitors the time is close, stalling is getting risky for them. I hope I’m wrong in this cynical perspective but I even imagine patents they have been sitting on will be expireing giving them added incentive.

Web

Green energy is definitely the best solution in most cases. Technology like solar energy, wind power, fuel cells, zaps electric vehicles, EV hybrids, etc have come so far recently. Green energy even costs way less than oil and gas in many cases.

Anthony Kuhn

Katie:

I’m interested to see what becomes of Kholsa’s investments when compared to Sequoia’s. The world is wide open for an increase in investments that lead to a cleaner Earth and non-polluting sources of energy and consumer goods. Thanks for your thoughts and insights.

Jason Morris

Hi Praveen,

Things like tidal. I am a believer in tidal as a potential energy resource. I simply get disappointed when I see some of the utilities complain about the efficiency of current technologies and the economics of meeting mandates, and then they turn and focus their investment in areas that are further off from bearing fruit. I am a believer that they should invest and support areas that are realistic now and those that offer promise in the future. Maybe it is a perception thing more than reality, but there are too many examples of “deflect, delay” PR strategies in the past from traditional industry for me to be without some healthy skepticism.

Praveen

Jason, What investments/concepts in particular are you referring to in your comment?

Jason Morris

I understand Sequoia’s strategy and it makes sense on some levels. What I don’t get is some of the major utilities investing in unproven concepts instead of investing money in established approaches like wind, solar and others. It gives the impression that some want to delay the inevitable and give the appearance of pursuing clean options.

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