Clean technology has emerged as the hottest funding area for venture capitalists with some hoping to hit it big in Orange County.
Local clean tech companies raised more than $130 million in venture funding in the second quarter, or nearly half of the $280 million in investments made in startups here in the quarter, according to figures compiled by PricewaterhouseCoopers International Ltd. and the National Venture Capital Association.
Clean tech managed to overtake healthcare, which has dominated local venture funding here for years.
In all, the county made up 10% of the nation’s $1.5 billion in clean tech venture investments in the second quarter, according to PricewaterhouseCoopers and the venture association.
Clean tech is a broad sector that includes providers of alternative energy, pollution control, recycling, green vehicles, energy-efficient lighting and other products and services.
Fisker
The sector’s local standard bearer—in terms of prominence and funding—is Irvine-based Fisker Automotive Inc., a developer of hybrid luxury cars.
Fisker raised $35 million in the second quarter, trailing only Foothill Ranch’s Tri Alpha Energy, a nuclear fusion technology company that raised $50 million.
Since 2007, Fisker has raised more than $320 million in funding, making it the county’s clean tech darling.
“We’ve done very well,” Fisker spokesman Russell Datz said.
Fisker used its recent funding to expand locally, launch a global media campaign and inch toward producing cars early next year.
The company recently took another floor at its headquarters building near John Wayne Airport, doubled its workers to about 100 and started a marketing campaign that seeks to cast its plug-in Karma sedan as a sexy, eco-conscious, luxury ride.
Fisker designs and develops its cars in Irvine and plans to make them in a former General Motors Co. plant in Delaware.
The company also has gotten a $529 million federal loan from the Energy Department of Energy and about $20 million in financing from the state of Delaware to go toward a $175 million retrofitting of its plant in Wilmington, where Fisker plans to hire some 2,500 workers.
A prototype Karma is touring 42 dealerships across the country, including Fisker of Orange County in Irvine.
Another Irvine company, Enovate Corp., raised $1.6 million in the second quarter. Enovate is working on rechargeable batteries for consumer electronics, medical devices and other uses.
“We like the opportunity to grow here in OC,” said Chief Executive Brian Wong, who took over the role in March after serving as head of D2Audio Corp. in Austin, Texas.
Wong said Enovate is trying to replicate the business model of Irvine chipmaker Broadcom Corp., which designs chips in the U.S. and Europe, has them made in Asia and then sells them around the world.
Enovate expects to start producing its batteries in about a year, Wong said.
The company, which has its roots in research at the University of California, Irvine, recently changed its name from Carbon Micro Battery Corp.
Since 2008, Enovate has raised $5.3 million in venture funding from San Diego-based Mission Ventures and Draper Fisher Jurvetson of Menlo Park.
“Going after significantly improved energy density battery solutions for applications in consumer devices and eventually transportation are enormous opportunities,” said Raj Atluru, a Draper Fisher Jurvetson managing director.
In 2001, Draper started a clean tech funding practice and now has 43 companies in the portfolio.
Many have a local presence, including: EnerNoc Inc., a Boston-based energy management company with an Irvine office; Palo Alto electric automaker Tesla Motors Inc., which has a Newport Beach dealership; and Northern California’s SolarCity Inc., a solar power company with a Santa Ana office.
The most active clean tech investor here arguably is Costa Mesa-based Sail Venture Partners, which has invested some $50 million in local clean tech companies, according to managing partner Walter Schindler.
“Clean tech is the world’s fastest growing investment category,” he said. “We continue to see more and more opportunities.”
About 90% of Sail’s backers are institutional investors with JPMorgan Chase & Co. as its lead investor, according to a source familiar with the company.
Sail pays back investors 100% of their money and an 8% annual distribution. Investors receive 80% of profits. General partners get 20%.
800 Pitches
Sail hears pitches from 800 companies a year and narrows its prospect list to about 100, according to Schindler. About five end up being funded, he said.
Investments include Ice Energy, a Windsor Colo., energy storage company that has an office in Costa Mesa; Irvine-based Oryxe Energy International Inc., which produces fuel additives that reduce emissions; Corona-based Paragon Airheater Technologies Inc., which reduces carbon emissions and fuel consumption in factories that use fossil fuel; and Irvine’s FlexEnergy LLC, which generates clean energy from greenhouse gases.
In 2009, more than $5.6 billion in venture capital was invested in clean tech companies in North America, Europe, Israel, China and India, according to San Francisco-based Cleantech Group, an advisory and investment firm.
Last year’s total was off from a record $8.4 billion in 2008, but up from the sector’s $908 million invested in the early days of 2002.
Others believe clean tech is here to stay, led by eco-conscious California. So far, though, there haven’t been a lot of homeruns for investors.
“A lot of venture capitalists believe these technologies are necessary to save the planet,” said John Taylor, vice president of research for Arlington, Va.-based National Venture Capital Association. “The biggest constraint is venture capitalists having the bandwidth to take on new companies. Capital will be available once we get some exits.”
