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Seventy-five emerging technology companies in the
energy industry converged on Philadelphia yesterday to
introduce their businesses to some of the premier
energy venture capitalists from around the world. The
companies presented their best case for funding to an
audience of investors, including angels, venture
capitalists, equity partners, investment banks, and
utilities.
Analysis: This
unique conference began over two years ago in Boston
and appears to have started a successful continuing
series of conferences focused on ventures in the
energy space. Organized by Infocast, the Energy
Venture Fair-IV witnessed an attendance of over 240.
Held at the Loews Philadelphia Hotel, the fair drew
companies practicing in a variety of fields including
generation, distributed generation, transmission,
distribution, retail, information management and
technology, exploration and production, energy
storage, billing, fuel cell, wind power, hydrogen
technology, power quality, and reliability.
Investors in attendance included the likes of
Technology Partners, EnerTech Capital, Altira, Nth
Power, Eastman Ventures, Advent International, CDP
Capital, Perseus LLC, ACCERA Venture Partners,
RockPort Capital Partners, Hunt Resources,
ChevronTexaco Technology Partners, RBC Capital
Partners, Battelle Ventures, Firelake Capital, Braemar
Energy Ventures, Hydro-Quebec CapiTech, OPG Ventures,
EON Venture Partners, Hamilton Robinson LLC, Exelon
Capital Partners, Angeleno Group, Expansion Capital
Partners, Taproot Ventures, and Stephens, Inc.
The conference began with a panel of investors that
included EnerTech Capital, Nth Power, Altira, Eastman
Ventures, and Technology Partners, and was moderated
by yours truly. According to the panel, the relative
undersupply of capital into the energy technology
sector means that there is less competition for both
companies and venture capitalists alike compared to
some of the more common—and crowded—areas of
information technology investment.
Ira Ehrenpreis, a Partner at Technology Partners (a
20-year old firm investing out of its seventh fund)
explained his firm's interest in the energy technology
sector as follows: “The amount of capital and
investments flowing into Energy Technology companies
relative to other sectors remains small. Although
venture capitalists have more money to invest than
ever before—there's approximately $80 billion of
overhang—much of that capital will flow into other
sectors, such as software, storage, security, and even
telecom. Energy technology companies will garner a
relatively small percentage of that capital because
most of the mainstream funds do not invest in the
space. As a result, there's a great opportunity for
firms like Technology Partners who focus on the energy
technology sector to invest in great deals and stand
out as a leader in the space.”
The panelists did seem to agree that the market
still presented an attractive investment opportunity
for their funds. According to Michael DeRosa,
Principal at EnerTech Capital, “Venture and growth
capital investing in the energy technology sector
continues to be one of the more attractive segments of
private equity investing. As recent world events have
demonstrated, the continual need for innovation in the
energy sector is fundamental to the health of the
global economy. The strong class of companies at this
year's Energy Venture Fair represents the robustness
and vitality of this sector. There are companies here
that offer products and service across a wide variety
of markets within the energy sector. There are also a
range of early stage venture and later stage expansion
capital opportunities.”
After the panel, the fair swiftly turned into a
showcase of the 75 presenting companies. The companies
will make two presentations each in five break-out
rooms over the next day-and-a-half. The first day also
presented great opportunities for attendees to
interact.
During one of these opportunities I had the
opportunity to talk to Mr. Hap Ellis of RockPort
Capital Partners. According to Mr. Ellis, RockPort is
interested in a number of areas, including
distribution automation, renewable technologies, power
electronics, powerline communications, and storage
technologies. “We see more funds expressing interest
in the energy area, but it still is very much a niche
play with a number of strong niche players,” said
Ellis. “Valuations are generally fairly reasonable.
Funds want to put money to work. And, as always,
companies with strong management teams and compelling
technologies will be successful in this market.
Notwithstanding the press coverage, it is not a market
chasing would-be opportunities arising out of the
latest media-hyped “crises” —like the August blackout.
We've all seen that movie.”
I asked Mr. Ellis what type of trends he was seeing
with energy-related companies that are looking for
funding. According to Mr. Ellis it depends on the
technology. “There is a lot of interest in micro fuel
cell technologies for defense and consumer electronics
purposes, said Ellis. “There is a lot of interest in
the renewable sector, particularly photovoltaics. We
see a migration of technologies from the tech sector
to the electricity sector, which includes remote asset
management hardware and software suites.
Interestingly, many companies attempting to raise
money in this area are 'first time' entrepreneurs,
unlike teams in the software or biotech space who may
be out for their second or third ride.”
I also had the opportunity to talk to Scott
MacDonald, an Investment Manager at OPG Ventures.
According to Mr. MacDonald, OPG Ventures finds
technologies that enhance the transmission and
distribution of energy of particular interest. “I find
it truly remarkable that our digital society is
powered by an antiquated electro-mechanical
transmission system,” said MacDonald. “The North
American grid has been described as one of the largest
machines ever built and years of underinvestment in
transmission capacity and control technology have lead
to an inadequate system that is being pushed harder
and is being used in ways for which it was not
designed. The recent North American blackout which
shut down 100 power plants and led to billions of
dollars in losses in both Canada and the U.S. is a
wakeup call that new technologies are required to
create the a self-healing, digital-quality electricity
superhighway. OPG Ventures' recent investments in
RuggedCom, a developer of utility-hardened networking
and communications equipment for substations, and
NxtPhase, a developer of digital and fiber optic
solutions for managing high-voltage electric power,
demonstrates our growing interest in this sector.”
Mr. MacDonald confirmed that he is seeing increased
interest in the energy sector from well established
generalist funds. “Their mood appears to be cautiously
optimistic and their growing presence in the energy
technology space is a good sign for existing investors
and entrepreneurs,” said MacDonald. “The increased
awareness of America's dependence on foreign oil,
raising natural gas costs, poor air quality and our
personal need for dependable electrons to power our
lives has certainly helped to elevate energy
technology investing to the mainstream. Energy is like
oxygen, you only notice it when it is not there.”
Having attended the previous three Energy Venture
Fairs and seeing the presenting companies then, I
would have to agree with the venture capitalist in
that the market does seem to currently present an
attractive investment opportunity. The quality of the
presenting companies has improved and was composed of
31 in the development stage, 34 in the revenue stage,
and 10 actually turning a profit.
At the conclusion of the fair later today,
participants will vote on the best five presentations
and, therefore, the best opportunities for investment.
In Monday's IssueAlert
we will take a closer look at these five emerging
firms.
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