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Posts Tagged ‘Cleantech’

Think Your Start-up Is Venture Worthy? Think Again.

Pepperdine has a new study out that attempts to shed some light on the clubby, shadowy world of private finance. Researchers polled experts in lending, mezzanine capital, private equity, venture capital and private businesses themselves. Not a big shock, but things don’t look pretty, especially in the venture capital world.

A lot of the stats weren’t surprising. According to VCs, there’s been a 65% decrease in up-rounds (where a company gets a bigger valuation) in the last six months and more than 60% of those polled expect a longer wait for an exit. Similarly, the bulk of the companies getting funding are still California-based.

There does seem to be some shifts on where the money is going. After Northern California and Southern California the biggest area of investment geographically was in international companies. And investors said they intend to invest more in cleantech than software going forward. This is a big reversal, as software has long been the dominant category for venture deals, but it’s unknown whether software has lost favor, or whether it’s just become so pervasive that it doesn’t really hold together as a category anymore.

But it’s when you look between the survey of VCs and the survey of private businesses that things start to get ugly. The businesses, it seems, vastly over-estimate their ability to raise funds. 41% of them feel that they qualify for venture capital funding. Meanwhile, the VCs surveyed indicated that they’re only doing a few deals every six months and go through one hundred business plans to close one deal. Clearly, the rate of acceptance isn’t anything like 41%, says researcher John K. Paglia, Pepperdiine’s Denney Academic Chair and Associate Professor of Finance.

A few more stats make that picture look worse. Researchers divided the portfolio companies into six stages and the startup is still operating a loss in each of the first four. Those categories represent roughly 84% of all portfolio companies. That means the vast majority of privately held companies are still very dependent on venture money to stay in business. And investors aren’t necessarily keen on their prospects. Respondents deemed between 12%-16% of companies generating revenues to be essentially “worthless” and deemed 20%-26% of their pre-revenue investments to be “worthless.”

Add to this that 72.7% of VCs said they had a decreased appetite for risk and that more than half of those polled expect to do between zero and three deals in the next year and you start to get the feeling things are going to get a lot worse for private companies, in aggregate, before they get better.

Of course life isn’t that much better for the VCs: Sixty percent of them say their own prospects for raising new funds have declined over the last six months and 41% said they aren’t planning on even attempting it in 2010.

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Redpoint Ventures raises $400M fund for investments in social, mobile, and more

Redpoint Ventures, a Menlo Park, Calif. venture firm whose investments cover everything from cloud application deployment (Heroku) to document-sharing (Scribd) to solar (Solyndra), has raised a $400 million fourth fund for early-stage investments.

Despite the broader economic climate, Redpoint partner Geoff Yang said he’s still excited about the startup landscape, in part because there are so many industries worth investing in. Ten years ago, everyone was investing in “the commercialization of Web 1.0,” he said. In contrast, with the new fund, Redpoint will continue funding companies in five distinct areas — the social web, mobile, Internet advertising, cloud computing, and cleantech.

In fact, Yang said Redpoint made as many investments in 2009 as it did in 2008, and plans to make just as many or more in 2010. (I asked for a list of 2009 investments, the firm wasn’t able to send it to me before publication time.) It also had a number of successful exits in the last six months, with the acquisitions of LifeSize, WiChorus, Networks in Motion, and Kazeon. Two other portfolio companies, Calix and Solyndra, have filed for an IPO.

Yang acknowledged that the firm’s strategy has shifted due to the economy, in that it casts takes a harder look at how successful a company might be, and adjusts its investment and the valuation accordingly. But that doesn’t mean every startup needs a definite business plan.

“It really depends on the space,” Yang said. “If it’s a mature industry, the threshold is that much higher. If [the investment] doesn’t cost that much and it’s a nascent space that’s still being defined, we can live with a lot of uncertainty.”

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Facebook, Tesla And Solyndra Dominate SecondMarket Transactions In January

Last month SecondMarket published data on private company stock sales that they helped complete in 2009. They’ve now released last month’s data as well.

A total of a little more than $13 million in sales occurred, with the average transaction size of around $2 million. There continues to be very strong demand for consumer products and services startups (which includes companies like Facebook, Twitter, LinkedIn, Digg, etc.). But the sellers are spread out more evenly across all categories, particularly consumer, IT, Healthcare, energy and cleantech.

36% of the transactions were sales of Facebook stock, and we’ve heard from independent sources that sales are being completed for as high as $40 per share (or a $17.6 billion valuation). That’s a substantial price increase from less than a month ago. Tesla took 29% of the transactions, and sales of Solyndra stock were 28% of the total. Gridpoint rounded the group out with 7% of the total.

The complete report is below, and you can download the pdf here.

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Demand for solar equipment on the upswing as prices fall

One of the key takeaways from last week’s Intersolar North America conference in San Francisco was the solar panel makers are seeing a much needed uptick in demand as prices for their equipment continue to decline.

Unfortunately, that demand hasn’t made it across the Atlantic to the U.S. quite yet. Europe is leading, with advantageous government incentives securely in place in Germany, Italy and Spain. China too is ramping up its efforts, which should have a major impact on worldwide trends in the coming months.

China, the rising star in the solar space, is benefiting not only from dropping materials costs, but also basement-low labor and manufacturing costs. Europe can’t quite compete in this area. In Europe, silicon panels cost about $2.25 per watt, and analysts see the figure dropping to $2 or lower by the end of the year, reports VentureWire. In China, the price point could sink as low at $1.75 per watt.

There is some concern that the market slowdown that typically dominates the fourth and first sectors in the solar industry will break the momentum, but there seems to be plenty of work to go around for now. Most European and Chinese solar companies see the U.S. as the next growth market and source of demand — especially once the stimulus package does its duty in the fall. In preparation, several of these companies are already setting up shop in North America.

China recently passed its own economic stimulus legislation, earmarking upwards of $30 billion to foster renewable sources of energy, with solar prime among them. Australia has set aside $1.35 billion to finance solar projects, and South Korea has $2.3 billion for renewables. All of these plans could keep demand for solar materials and equipment on the upswing through the slow seasons and into next year.

This doesn’t mean that solar will be the new cleantech cash cow however. With polysilicon prices dropping to $60-$80 from $80-$100 per kilogram, Barron’s predicts that prices will fall between 15 and 25 percent between 2009 and 2010. The same publication has also reserved its optimism when it comes to increased demand, arguing that liquidity and credit availability must rebound to a greater degree before demand can catch up with the glut of solar products on the market.

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