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Justin Hibbard
BUSINESS DIRECTORY
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March 14, 2005

How Many Californians to Screw in a Lightbulb?

Justin Hibbard

A little more VC money is about to slosh into the energy sector. The California Clean Energy Fund (CalCEF) announced today that is has picked three VC firms--Nth Power, Draper Fisher Jurvetson, and VantagePoint Venture Partners--to invest $25.5 million in clean energy startups. CalCEF is a non-profit that was formed last year as part of Pacific Gas & Electric's bankruptcy settlement with the California Public Utilities Commission. PG&E had to fork over $30 million of shareholder money to start the fund, which is earmarked for investments in such areas as renewable energy, energy efficiency, and energy storage. Nth Power has already made one investment with CalCEF money: SpectraSensors.

Based in San Dimas, Calif., SpectraSensors makes laser and light emitting diode (LED) sensors that monitor gas pipelines for water and carbon dioxide, which cause corrosion. The company was founded in 1999 as a spin-off of the NASA/Caltech Jet Propulsion Laboratory (JPL) in Pasadena, Calif. It's a model of the kind of company CalCEF seeks to fund: based in California and focused on energy efficiency. "We believe our charter is not only to support clean energy through direct investments but also to show an increase in economic benefit and environmental benefit," says Lisa Bicker, president of CalCEF.

The VC firms selected to invest the funds will be compensated in the usual way: management fees and carried interest. DFJ and Nth Power will each manage $8.5 million in CalCEF's fund and will match investments with money from their own funds. The arrangement with VantagePoint is a little different: CalCEF has committed $8.5 million as a limited partner in a new energy-focused fund that VantagePoint is raising.

VCs' interest in energy has been growing ever since the Great Bubble burst and investors started hunting for the next big thing. Nth Power says VCs invested $500 million in U.S. energy companies last year, about 2% of all VC money invested in the U.S. Much of those funds have flowed to California, where state government, academia, and industry have rallied around alternative energy since the state's 2000-2001 electricity crisis. "Our deal flow shows that about 25% of the companies we see come from California," says Rodrigo Prudencio, a partner at Nth Power. Is a new industry being born under Silicon Valley's nose? Write us at dealflow@businessweek.com.

09:38 PM


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