Energy Angels Provide Key Support for Cleantech Innovation in NW and Beyond
Washington Gov. Jay Inslee heaped praise on Seattle energy storage materials maker EnerG2 as he celebrated the University of Washington’s Clean Energy Institute last week.
As we’ve reported, the company is a fine example of innovation from a university lab translating to a cleantech job creator. It’s a model Inslee, university leaders, and area investors would love to see more of.
EnerG2 got an important early assist from the Northwest Energy Angels (NWEA), an investing group positioned as a key ingredient in the formula for commercializing energy and cleantech innovations from the UW and beyond—as well as Washington State University and Western Washington University, which have significant cleantech programs of their own.
Aaron Feaver, EnerG2 co-founder and chief technology officer, recounted how the NWEA bet on the company during the crucial period of its transition from UW laboratories to stand-alone startup. The angel group’s investment in 2008 allowed the purchase of a key piece of R&D equipment, still in use today, and a few drums of raw material to produce an initial batch of its high-surface-area activated carbon used in batteries and other energy storage applications.
“That enabled us to go out and raise venture capital and with a straight face tell everyone this was a scaled material, out of the lab, and really worked,” Feaver told NWEA members at their year-end meeting last week.
Now, the raw material comes into the company’s Albany, OR, factory by the truckload. And EnerG2 is rolling out a new product, tuned for use in natural gas tanks.
The company says its specially engineered carbon allows natural gas to be stored at significantly lower pressures, enabling more efficient tank design, cheaper home refueling options, and improved safety—all factors that could help accelerate the market for natural gas-fueled vehicles.
The NWEA, meanwhile, is wrapping up another good year, though its investments don’t look likely to surpass the record of nearly $4.7 million it set in 2012, says Lars Johansson, the group’s co-chairman.
The longest-tenured cleantech angel investing group in the country has continued to expand its geographic footprint, bucking the traditional angel investing mantra of “if you can’t drive to it, don’t invest in it.” The approach makes sense in cleantech, however. As venture capitalist Rick LeFaivre told me last year about OVP Venture Partners’ experience betting on the sector: “It is difficult to be both regional and focused on an area such as cleantech.”
The NWEA received 48 applications for funding this year including 11 from California-based companies, seven from Canada, seven from Washington, six from Oregon, four from Massachusetts, and two each from Montana and New York.
Johansson says the NWEA’s ability to attract companies from around the country reflects the growing cleantech domain expertise of the investing group.
The quality of companies and entrepreneurs coming before the NWEA remains high, he says, despite the sense in some quarters that the area has fallen out of favor.
Johansson also sees some brightening in the broader cleantech investment picture. The marked downturn in cleantech venture investment is starting to ease, he says.
We heard similar notes of optimism from investors and entrepreneurs gathered at the National Renewable Energy Laboratory earlier this month for the government lab’s industry growth forum. Ira Ehrenpreis of cleantech venture capital firm Technology Partners said “a lot of the tourists have left” cleantech investing, leaving a “great opportunity” to committed investors.
Here’s how Johansson puts it: “The reason I do it and a lot of other people here do it is that it’s a form of impact investing. We believe passionately in the need to be smarter about how we produce, distribute, and consume energy. And it is, after all, among the biggest markets in the world. There is going to be demand for these technologies. We can’t keep doing things the way that we’re doing them.”
I asked him the predictable “what’s hot in cleantech” question. Johansson demurred, noting that “we’re really omnivores.”
NWEA’s omnivorous investment appetite came through in presentations from several of its portfolio companies. They include everything from hydroponic lettuce to a renewable energy retail investment fund. Here are some highlights:
—Phytelligence, a Washington State University spin-out based in Pullman, WA, is trying to bring the tree fruit industry better plants faster, and offers genetic analysis so growers know what they’re growing. The company is raising a $900,000 funding round and is building a greenhouse, says CEO Chris Leyerle.
—Suncrest Farms set out to deliver lettuce that’s always fresh and local by building greenhouses with advanced hydroponic setups near major metro areas. After confronting the high capital costs of this model, the company has pivoted to forming licensing and growing agreements with existing greenhouses, which can realize revenue of $30 to $35 per square foot selling premium, local lettuce, says CEO James Day. The company has a full-scale operation set up at a Whidbey Island greenhouse. It has a funding round open now, he says.
—After raising $10 million earlier this year, MicroGREEN Polymers, based in Arlington, WA, continues to ramp up production of its beverage cups made from recycled PET plastic, says company controller Mark Daniel. Passengers on airlines including Alaska, Virgin, WestJet, and, in the spring, United, will be sipping hot beverages from the company’s cups. MicroGREEN—another UW spin-out—will be testing its products in stores of a coffee chain in 2014, Daniel says, without naming the chain.
—Flux Drive, which makes couplings that improve efficiency in applications such as motor-driven pumps and blowers, sees a bright future after a tenuous period. “The Energy Angels have been probably the savior of Flux Drive over the last two to three years,” says founder and CEO Chip Corbin. Boeing has 20 of the company’s drives in use and plans to make them a standard piece of equipment in its Puget Sound manufacturing facilities, he says. The company is in the midst of a $4 million Series C funding round, with $1.8 million raised so far.
Columbia is halfway through the design of its first utility-scale generator, a direct-drive device designed for deployment in at least 60 meters of water. The company won a $3 million grant from the Department of Energy earlier this year, and is raising a Series B funding round, says CEO Reenst Lesemann.
Oscilla is developing a generator that employs magnetostrictive alloys, which can generate electricity as mechanical loads change with no moving parts, says CEO Rahul Shendure. This offers potential savings on operations and maintenance costs, which pose a major challenge to ocean energy project economics. The company plans to test a full-scale generator at a New Hampshire site in 2014. It is on the cusp of closing a $2.2 million funding, Shendure says.
—Scope 5, which makes software to help corporations track all manner of sustainability data, has seen sales improve as it finds “champions” within companies who can make the sustainability business case to corporate management, says co-founder and CEO Yoram Bernet. New reference customers include Outerwall, Oakley, and Vulcan.
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