Costa Mesa-based venture capital firm Sail Venture Partners LLC is raising money for a second fund to target alternative energy startups.
So far, Sail has raised $100 million with a goal of $250 million, according to Walter Schindler, managing partner with the firm.
About 90% of the money raised has come from pension funds, Schindler said, at a time when many institutional investors still are licking their wounds over investment losses in the past year.
“Raising capital has been our biggest challenge,” he said. “But it’s also our biggest success given the tough economy we’re in.”
Sail focuses 60% of its investments on companies in a niche known as clean tech, which includes technologies related to energy, such as efficiency, gasoline alternatives, storage and lighting.
The rest of its investments are related to water, with purification, recycling, energy and agriculture as targeted areas.
Schindler is a former corporate lawyer at Gibson, Dunn & Crutcher LLP specializing in mergers and acquisitions.
One of Sail’s first investments, South Korean lithium battery maker Kokam America Inc., recently formed a venture with Midland, Mich.-based Dow Chemical Co. to create KD Advanced Battery Group LLC.
In August, KD Advanced was given $161 million in government stimulus money as well as $145 million in tax credits by the state of Michigan to build a factory there.
Last December, Sail invested $12 million in Kokam along with Maryland’s Townsend Ventures LLC.
About 40% of Sail’s investments have gone to local companies.
They include Irvine’s FlexEnergy LLC, which makes portable power plants that run on landfill gas, and Irvine-based WaterHealth International, which cleans water in developing countries.
Sail soon plans to announce another local investment in a wastewater recycling company, according to Schindler.
So far this year, the firm has invested about $16 million. Last year it invested $33 million.
Sail is looking to cash out of some of its investments in the next year or two, Schindler said.
He said he’s encouraged by last month’s $437 million public offering by Watertown, Mass.-based A123 Systems Inc., a maker of lithium batteries with a recent market value of $2 billion.
Sail, which wasn’t an A123 investor, said some of its companies could take a similar path.
Schindler said he speculates the value of KD Advanced to be more than $1 billion, the same as another company Sail has invested in: Kyle, Texas-based Xtreme Power Inc., a maker of batteries designed to smooth out power gaps from wind and solar plants.
He said half of the 12 companies Sail has invested in are set to be profitable next year.
The firm, which started in 2002, raised $50 million for its first fund, which invested mostly in startup companies focusing on energy and water technologies.
It also has an investment in Costa Mesa-based CNS Response Inc., a medical company specializing in treating behavioral disorders.
When Sail started in 2002, it only had two competitors focused on alternative energy and environmental investments, Schindler said.
He said he now counts 40 to 50 competitors, though he thinks the sector still is in its early stages.
In all, about $155 billion last year went into alternative energy investments worldwide, mostly to large projects such as wind farms and solar panels, he said.
In the U.S., $4 billion of about $80 billion in 2008 venture capital investments went into the niche of clean tech, he said.
Silicon Valley and Boston have been two of the hottest areas for alterative energy startups, according to Schindler.
