All CleanTech Sectors Rake in Top Dollars in 2006

By Candace Stuart and Linda Hitchcock

Almost half of the 11 segments tracked by the Cleantech Venture Network had a deal that exceeded $50 million in 2006, according to a preliminary analysis of the year’s activities. Three of the four energy-related categories captured more than $100 million each in a single deal, and even segments that historically attract smaller deal sizes received venture financing above the average venture capital investment* in 2006.

Below is a list of top deals by segment, ranked by amount. The selection is based on information that was compiled and verified through Dec. 21.

Energy Generation
Cilion Inc., a California-based ethanol company, received more than $200 million to operate modular ethanol plants that it claims will be less expensive and greener than standard corn-to-ethanol plants. Cilion was formed in June through a partnership of Western Milling, a grain milling business, and Khosla Ventures, a venture capital firm. Cilion’s goal is to have eight plants in production by 2008. Three of those likely will be in California. In a deal unveiled on Sept. 12, Cilion announced that it raised $200 million in a round that included Khosla Ventures, Western Milling, Virgin Fuels, Advanced Equities Inc. and Yucaipa Companies.

Energy Infrastructure
Everyone seems to be looking for the next Google, apparently even Google. Google is a shareholder in Maryland-based Current Communications Group, whose subsidiary Current Communications received $130 million from TXU Corp., Duke Energy Corp. and EnerTech Capital. Current Communications’ technology improves the efficiency of the electricity flow in power lines to create a more reliable and less expensive distribution infrastructure. The company announced the deal on May 4, and included details about TXU Corp.’s plans to use Current’s Smart Grid capability in an electric delivery system that serves 2 million homes and businesses in the Dallas-Fort Worth area in Texas.

Energy Storage
Ion America, a company that develops solid oxide fuel cell systems, received nearly $102 million from Kleiner Perkins Caufield & Byers, Mobius Venture Capital and New Enterprise Associates in the third quarter. The deal followed a Q2 investment from the same trio for almost $11 million. Ion America, a startup at NASA-operated Moffett Field in California, had kept a low profile before the latest deal. It now is engaging in a trial installation of its fuel cell power generator with Cypress Semiconductor, a minority investor in Ion America. Cypress will use the 5-kilowatt power plant to demonstrate the feasibility of fuel cells as a power source for residential buildings or other applications.

Recycling and Waste
MedServe Inc., a medical waste management company in Houston, combined a $50 million commitment from Avista Capital Partners with $20 million from existing investors to fund efforts to consolidate medical waste operations nationwide. MedServe said its eight acquisitions in the past 18 months helped it become the second largest company in the waste management sector. It intended to continue buying small medical waste operators in 2007. MedServe provides hospitals, clinics and doctor’s offices with waste removal and destruction services, and also offers mobile processing as an alternative to traditional pickup and disposal services.

Materials
Nanosphere Inc., a suburban Chicago company that develops nanoparticle-based technologies for medical diagnostics, water, food and livestock testing and bio-security monitoring, received $57 million from Allen & Co. and Lurie Investments in May. The suburban Chicago company will use the funds to commercialize fast and user-friendly systems for detecting proteins, nucleic acid and other biological materials that indicate diseases, medical disorders and public health hazards.

Transportation
Cleantech with bling. Tesla Motors Inc. received $40 million from VantagePoint Venture Partners, JP Morgan and Draper Fisher Jurvetson in May to launch a high-performance sports roadster that runs solely on electricity. The cars, with a base price of $92,000, have been positively received by automotive aficionados. Tesla expects to begin delivery of its cars in the fall of 2007. The California company says that developing a high-end vehicle will allow it to create other, less expensive energy-efficient models at higher volumes in the future.

Energy Efficiency
Five venture firms partnered in May to provide funding for Massachusetts-based Luminus Devices Inc. to accelerate the manufacturing and marketing of its solid state lighting products. Luminus, which uses photonic lattice structures as the light sources for high-definition TVs and displays, received $38 million from Argonaut Private Equity, Battery Venture Partners, DFJ New England, Eastward Capital and Stata Venture Partners.

Manufacturing/Industrial
UK-based Keronite International Ltd., a developer of an environmentally friendly surface treatment for light alloys, completed what was termed as pre-IPO funding totaling $19 million in August from Bank of Scotland, Fidelity Investments, New Star Asset Management, Quester Capital Management and RAB Capital. Keronite’s treatment allows manufacturers to use lightweight materials such as aluminum rather than steel.

Water and Wastewater
Investors Aurum Ventures and Elron Electronic Industries committed $17 million in funding to Israeli water company Atlantium Inc. in October. Atlantium’s water disinfection process can be used by industries that specialize in food and beverages, drinking water, water recyling and desalination.

Air and Environment
EnvironmentIQ, a UK-based company that supplies risk management software for environmental, health and safety management, received almost $15.2 million in March from investors Cazenove Private Equity and Fidelity Ventures. EnvironmentIQ’s software is designed to let companies control operational risks.

Agriculture
The Frost Group invested $15 million in August in Protalix Biotherapeutics, an Israeli biotech company that developed a method for growing uniform biomass in plants. Protalix’s method allows large-scale manufacturing of proteins without the environmental and regulatory challenges associated with field-grown genetically modified plants.

*The average VC investment in North America was $6.7 million through Q3 2006.

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Candace Stuart is director of publications for Cleantech Venture Network.
Linda Hitchcock is a research and data management specialist at Cleantech Venture Network.

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