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An accelerator emerges as one of the most active cleantech VCs

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Following a down year for cleantech venture capital investing, an accelerator is emerging as one of the more aggressive venture capital firms in cleantech. Greenstart, based in San Francisco, has decided to drop its accelerator program and has decided to act as a venture capital firm focused on early stage startups that work on cleanweb technologies, which are IT-based cleantech, like energy software, or web-based ride-sharing services.

Greenstart Managing Partner Mitch Lowe told me in a phone interview last week that Greenstart hopes to make 10 to 12 investments in early stage cleanweb companies in 2013, which he said in terms of the number of investments “sadly makes us one of the most active cleantech investors out there.” Greenstart has a small $7 million fund, half of which has been invested into 15 companies. Lowe says Greenstart will likely raise more money early next year for another fund.

Greenstart launched in the Spring of 2011, and since then has shifted its strategy a couple times. First, it dropped its focus on strictly cleantech startups — it’s original batch of startups included a biofuel company and a window efficiency coating company — and decided to only back cleanweb companies. Cleanweb is a term coined by investor Sunil Paul, to explain digital technologies that deal with managing resource constraints from energy to food to water.

Now Greenstart has dropped its accelerator model completely because the partners say the 3-month program wasn’t delivering the startups enough time, and it was too “one size fits all,” explained Lowe. Instead, Greenstart will work with the companies throughout their lifetime.

In addition, Greenstart is offering its companies in-house design services, and the fund now has 10 designers that will help startups build products, and design the user experience of their services. Increasingly venture firms have been launching design focuses and studios, as a way to work with designer founders, and to provides services to startups beyond just money.

Designer David Merkoski, who was formerly the Executive Creative Director at frog design in San Francisco, is leading Greenstart’s design studio. Merkoski tells me that Greenstart won’t just be helping startups with marketing and branding, but that they’ll be taking an IDEO-style approach to help startups think about their products and the experience of their users. IDEO is a two-decade-old design and consulting firm that pioneered “design thinking” as a method for product creation.

One thing that Greenstart won’t change is its focus on cleanweb companies, Lowe tells me, in response to my question of whether the theme of the fund could change down the road. Cleantech isn’t a hot area of investments in 2013, and in 2012 cleantech VC investments dropped by a third. But cleanweb investments are increasingly making up many of the cleantech investing happening these days, because the capital requirements are lower and the timelines to maturity are shorter (more like web and mobile companies).

But the firms that are still investing in cleantech hardware — like solar technologies, batteries and biofuels — see cleanweb as a move away from cleantech. Firms like Khosla Ventures, Lux Capital and Braemar Energy, which are some of the few still doing new early stage cleantech investing, aren’t being aggressive on cleanweb companies.

Whatever the definitions, expect to see cleantech and cleanweb investing continue to morph and evolve until the investors find something that works for them and the entrepreneurs that they back.

4 Responses to “An accelerator emerges as one of the most active cleantech VCs”

  1. On the contrary, SURGE is investing deeper into its program as are the institutional and individual investors behind it. The accelerator model is not for every company or location. It primarily benefits early-stage companies in industries, sectors and locations where there is a concentration of knowledgeable capital, customers, and/or industry experience, and where the companies are similar enough in terms of the structural problems they are solving or the customer groups they are serving that they can take advantage of this concentrated expertise. This is particularly the case in the energy industry. And cleantech and cleanweb are important subsets of a much larger industry that needs to be massively transformed.

    SURGE frames its program as a validator rather than an accelerator. The purpose for a 90-day program is to validate the team, value proposition and connect founders to customers. One of the main reasons this equals value is that reputation risk is high in the energy industry. In order to establish real long-term customer relationships and partnerships, entrepreneurs need introductions from proven and respected insiders. It takes a technology 16 years to reach market acceptance in the energy industry. 3 months is not long enough to reach maturity but it is long enough for the market makers, the customers and key investors to do the due diligence required to determine if the team and concept can make the journey.

    We’ve funded about a dozen cleanweb companies, and we’ve looked at hundreds more. We’ve found that one of the biggest dangers of early-stage cleanweb companies is that they bring valuable expertise from software or consumer businesses, but don’t necessarily grasp the fundamentals of energy. The reality, bizarre as it may seem, is that a lifelong veteran of oil or conventional utility industries often has more insight to contribute to cleanweb companies than the most “green-friendly” software executives do. Companies in our last class raised over $9MM since last May. Many of these companies have real products and real revenues already, because they focus on enterprise deals in the energy value chain, and take advantage of the intros and expertise our program offered.