Clean Technology Investment Soars, Report Says

Deborah Gage, Chronicle Staff Writer
San Francisco Chronicle
July 8, 2008

Venture investments in clean technology hit a record
$2 billion in the second quarter, up nearly 60 percent from a year ago,
according to a new report.

The investments defy trends seen in other parts of the venture industry,
where the amount of money invested in startups is falling and
opportunities for companies to go public have dried up.

But startups that can enable new sources of energy, clean water and
sustainable agriculture will continue to be hot targets for venture
capitalists, especially with oil prices so high, because there's so much
work to be done, said Brian Fan, senior director of research for Cleantech
Group of San Francisco, which promotes environmentally friendly investments.

New investors - governments and corporate investors such as Intel Capital
- are moving into clean technology, Fan said, and "we're seeing a wave of
talent and ideas and companies being formed. For high-powered veterans (of
Silicon Valley), this is a real focus."

The two technologies that attracted the most money in the second quarter
were solar thermal and second-generation biofuels.

Solar thermal companies capture the sun's rays, store them as heat (in
boiling water, for example, or molten salt), then convert that energy to
steam that powers turbines to generate electricity. They have an advantage
at the moment over solar photovoltaic companies and wind farms, Fan said,
because the energy they generate can be reliably stored.

Second-generation biofuel companies create fuel from algae or wood or
other organic matter - not food crops such as corn. One such company,
Sapphire Energy of San Diego, uses algae to convert carbon dioxide into
gasoline that meets international standards for quality and performance.
Sapphire attracted $50 million, the biggest single investment received by
an algae company so far.

U.S. companies attracted most of the money - 74 percent - and companies in
California accounted for 40 percent of that.

Four of the five top venture investors - Kleiner Perkins Caufield & Byers,
Foundation Capital, Khosla Ventures and Draper Fisher Jurvetson - are in
Silicon Valley, which Fan said speaks to the region's ability to nurture
growing companies.

"It's much harder to start a company in Europe, where capital isn't as
available and a failure will haunt you for the rest of your career," Fan
said. "Also, there's a migration of battle-tested talent (in Silicon
Valley) from technology companies to clean technology companies."

But all investors see their startups as global companies, he said, and
several are developing products with global customers in mind.

Amyris Biotechnologies, one of Khosla Ventures' companies, is inserting
genes into microorganisms to produce a drug to treat malaria, a disease
that kills 1 million to 2 million children in Africa and Asia each year.

Amyris also has been funded by the Bill & Melinda Gates Foundation.

European companies, especially in the United Kingdom, attracted 13 percent
of investments, followed by Chinese companies at 12 percent and Indian
companies at 0.6 percent.

The largest investment in China was in Yingbin Nature, a sustainable
forest products company that attracted $100 million. Investments in India
were focused on clean-water and clean-development mechanisms.
E-mail Deborah Gage at dgage@sfchronicle.com.


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