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Their numbers remain small, but investors in energy technology say California's energy crisis this summer may be a boon.
Energy venture capitalists at Nth Power Technologies spent three-and-a-half years , from 1993 to 1996, to raise the firm's first fund of $63 million. Fast-forward to Oct. 11, 2000, when the VC firm announced that after only nine months of effort it had raised $120.5 million for its second fund, more than doubling the size of the first.
"And the only reason it took us that long is that we purposely wanted to have global representation, so we went all over the world," says cofounder and managing director Nancy Floyd. The effort led to investments in Nth Power from interests from Canada to Europe to Japan.
Though both the number of players and the amount of cash coming in remains low relative to other VC investment sectors, interest in energy venture capital, particularly for power technology, seems to be increasing. It appears that for now, investors remain undeterred by the investment fears that have plagued other technology sectors such as the dot-coms, or even the industry restructuring question marks spawned by last summer's price spikes in San Diego.
A Small But Bullish Herd
Certainly, those venture capitalists that already have sunk money into energy technology will have you believe that the rush is on.
"The climate has changed drastically in the last 12 months," says Floyd, pointing out that while the technology-heavy NASDAQ is down for the year, the energy technology sector (though small) has surged upwardÑby an impressive 134 percent, she says. "It's outperformed everything else. No wonder we're getting phone calls."
Nth Power has targeted five energy investment areas: (1) distributed generation and storage; (2) communications, control, and information technology; (3) end-use products; (4) power quality; (5) transmission and distribution automation; and (6) outsourcing and business services. One noted area that the company has not invested in: emissions control.
The company has invested the most capital in its distributed generation category, and its investments in that area run the gamut of technologies, from companies involved in natural gas microturbines (Capstone) to fuel cell ventures (Metallic Power) to solar technology (Evergreen Solar) and beyond. "We believe that there will be many distributed generation [winners]," Floyd says.
A Capstone natural gas turbine, say, might be the right option for powering a McDonald's restaurant, while Evergreen Solar panels would be more appropriate for a village in a developing country, where small amounts of power would be needed.
But is there more money available than there are opportunities, with uninformed investors wanting in? Floyd phrases it this way: "There's probably more money out there than there are really, really high-quality deals. There are plenty of deals to get done, and that's where we're very selective."
With a $120.5 million fund just raised, Floyd says getting the money is not the challenge; finding the right places to invest it is. "I'm getting almost a phone call a day, and that is not an exaggeration, from other venture capital funds, saying, 'Gee, we're really interested in