In 2004, when the New England-based Clean Energy Venture Group was first coming together, “cleantech” was still extremely nascent.
“In the early days we were really helping to form or reform companies,” CEVG’s Executive Managing Director David Miller told me. Today, cleantech is a major plank of venture capital, constituting 15-17% of total venture dollars.
Nonetheless, the early stage funding landscape for cleantech has remained quite limited. The “valley of death” looms large in the industry, with cautious VC’s waiting for technological proof points and few angels around to fill in the gap.
But while that has been hard on the industry, it has been an opportunity for CEVG, which has grown from just four individuals when it was founded to 13 today. “From our perspective, it’s frustrating that we’re not able to do all the good deals that we see,” said Miller.
CEVG typically negotiates deal terms as a group, with one investor leading due diligence, but then each individual chooses to invest on his or her own. And once an investment is made, CEVG doesn’t step back like some angels.
“Our real value add is assisting these early stage companies,” said Miller.
Miller told me that he is starting to see a shift in the early stage cleantech funding market, albeit slowly.
“When we started there were no other angels working in this space,” he said. “We have been beginning to see other angels who are interested.”
I asked Miller about CEVG’s investment thesis and its view of the sector, and his answers are below. Below that, take a look at CEVG’s members.
1) Are there specific areas in which you focus your investments? Areas in which you’re particularly bullish right now?
As angels, we prefer capital efficient companies, which in clean energy, often (but not always) translates to energy efficiency and smart-grid companies. Conserved kWh are the cheapest source of energy. Most of the companies in which we have invested have an energy efficiency component… Energy efficiency is the ‘low hanging fruit’ (or is already on the ground, as some say), and there remains tremendous untapped opportunity in that space.
That said, I’m bullish in the long term on all economic aspects of clean energy (including generation of electricity and fuels from solar, wind, fuel cells, biomass, etc.), energy storage, practical energy conversion technologies, and ancillary and financial products and services that enable their deployment. Energy is a multi trillion dollar global industry and there’s no choice but for it to transition to clean energy over time, creating one of the largest economic opportunities of our lifetime.
2) There’s a lot of talk about an early stage gap in cleantech. Is there one? Do we need more cleantech angel activity? Other sources of early stage capital?
Yes, yes and yes. We see many more great ideas and entrepreneurs with great potential than we could possibly fund, and they appear to have limited other options at the early stage. And the fact that we are increasingly getting asked to look at deals and clean tech efforts elsewhere in the country is evidence that this is catching on outside of New England and Silicon Valley.
In response to this, we have expanded our own capacity, found other angels, VCs and institutions to work with, and identified other sources of early stage capital. However, more is needed to extend the network and make the capital raising process more efficient.
Meet CEVG’s founding members (see all of its current members here):
Image via Cleantech Open
