Five signs that green is the next bubble

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We're tired of bubbles, right? Anyone 30 or older has lived through two big ones so far, with a brief period of prosperity separating the decimation of dot-com largesse and mortgage-fueled paper wealth. It could take until 2014 for the jobs lost to be replenished, and there's little reason for optimism.

So, with the economy in the tank, we can focus elsewhere -- maybe on saving the planet. If we can't put green in our wallets, maybe we can add some to our lifestyles. Or, you could do both. Green technology could be the next boom in the United States, even if we do lag some parts of the world, and investing in clean solutions is really nothing other than investing in the next big thing. Even if you don't give a damn about climate change (or don't think it exists at all), the green market could likely become your employer -- or trigger the economic growth that will create your next job.

Some signs are visible already.

Continue reading Five signs that green is the next bubble

Five signs that green is the next bubble originally appeared on BloggingStocks on Wed, 07 Oct 2009 12:00:00 EST. Please see our terms for use of feeds.

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Cleantech VC funding up in Q3

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Venture capital investment in clean technology grew 10% from the second quarter to the third this year. According to a report by the Cleantech Group and Deloitte, 134 companies received investments of $1.59 billion - up from $1.2 billion in the second quarter. The sector's upward trajectory continues, with last quarter marking the second in a row of double-digit growth. In the first quarter of 2009, venture capital investment in cleantech companies hit a low of $1 billion.

The strong third quarter has made the cleantech sector the largest in the venture capital business, according to the Cleantech Group, pulling ahead of biotech. Twenty-seven percent of venture capital funds invested in the second quarter of 2009 went to cleantech companies - up from 3% at the beginning of 2004.

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Cleantech VC funding up in Q3 originally appeared on BloggingStocks on Fri, 02 Oct 2009 15:20:00 EST. Please see our terms for use of feeds.

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MetRx Founder Is Back, And On Prowl for Venture Capital

Ten years ago, Scott Connelly sold his bodybuilding supplement empire MetRx for $108 million. Now he’s back with a new product and a pitchbook for potential investors.

Connelley’s latest effort is called Progenex Dairy BioActives Inc., which is developing a line of nonfat cow milk-based products aimed at accelerating wound healing and tissue regeneration. Its initial line is for athletes — the company’s advisory board includes ex-jocks like Joe Montana and Warren Moon, while Minnesota Vikings runningback Adrian Peterson and Chicago Bulls forward Luol Deng are beta clients — and it hopes to later launch a medical division that would focus on such things as treating burn victims.

According to documents obtained by peHUB, Progenex is looking to raise around $5 million in seed funding at a $15 million pre-money valuation. That’s obviously a rich asking price, which the company justifies by pointing out that Connelly has already invested $25 million of his own money. Progenex also adds that the medical unit could be where the big ROI is found, and that Connelly left the MetRx board after its new owners abandonned similar plans for that product.

A first close is expected on October 20, with a $50 million fund named Venture Pharma (an affiliate of Mercury Ventures) serving as lead investor. The company also expects to target a subsequent Series A round of $100 million, although no timing details were disclosed.


Florida Growth Fund

Earlier this week I attended a Florida Venture Forum welcome event for the Florida Growth Fund, a $250 million hybrid fund-of-funds managed by Hamilton Lane for the Florida State Board of Administration. A say “hybrid” because the fund has two missions: 1) invest into Florida-focused venture capital funds and 2) invest directly into Florida companies. […]

VC-Backed Busts: OmniSonics Medical Technologies

#2. OmniSonics Medical Technologies

Wilmington, Mass.-based developer of ultrasound technology for breaking up blood clots.

OnmiSonics raised around $113 million between 2000 and 2007, from firms like Canaan Partners, Domain Associates, GE Pension Trust, H&Q Capital Management, Johnson & Johnson Development Corp., JPMorgan Partners, Mitsubishi Corp., Nomura Phase4 Ventures, New England Partners and Prism VentureWorks.

What Happened?
The company ceased operations in January, and filed to liquidate via Chapter 7 bankruptcy in March. Scientific advisor Paramjit Chopra told the NY Times that the company was conducting studies on new applications for its FDA-approved device, but “they shut it down cold turkey.”

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VC-Backed Busts: Novafora

#1. Novafora

San Jose, Calif.-based provider of video processing technology.

The company raised $12 million in 2007 Vertex Management and Gemini Israel Funds, but the big dollars came earlier this year when those same VCs helped finance Novafora’s $255 million acquisition of publicly-listed Transmeta Corp.

What Happened?
The company was cash-positive, but shut its doors and laid off all 40 employees on June 29, after being unable to attract additional venture capital funding.

“VC appetite has really dried up for later-stage semiconductor companies,” says a former Novafora executive, reached by peHUB less than 24 hours after the collapse. “They all want to do social networking and things like that.”

Novafora’s creditors were in control at last check, and were assigning a trustee who would manage a sale of Transmeta’s intellectual property (designed, in part, by Linus Torvalds).

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VC-Backed Busts: Hammerhead Systems

#3. Hammerhead Systems

Mountain View, Calif.-based data communications equipment vendor.

Hammerhead had raised just over $100 million in VC funding since its 2002 inception, from firms like Foundation Capital, Mayfield Fund, Enterprise Partners Venture Capital, Pequot Ventures, Silver Creek Ventures and Apex Venture Partners.

What Happened?
The company had interest — and claimed to have two tentative deals — with carrier customers, but failed to land a hardware partner that the carriers wanted for fiscal stability (apparently all that VC funding wasn’t sufficient). Hammerhead officially shut down on March 19.

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VC-Backed Busts: ConSentry Networks

#5. Consentry Networks

Milpitas, Calif.-based developer of network access control solutions.

ConSentry raised nearly $80 million in VC funding between 2004 and 2009, in VC funding, including a $9.4 million infusion just this past January. Backers included Accel Partners, DAG Ventures, Invesco Private Capital, Northgate Capital, Translink Capital and Vedanta Capital. 

What happened?
ConSentry shut its doors on August 20, but neither it nor its investors ever explained the failure. The only public comment came from company founder and chief scientist Mario Nemirovsky, who told Computer World that it was “a sad day.”

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VC-Backed Busts: Protostar Ltd.

#4. Protostar Ltd.

Bermuda-based geostationary satellite services operator.

Protstar raised an undisclosed amount of Series A funding in early 2005 from New Enterprise Associates and SpaceVest (now RedShift Ventures) in March 2005. It added a $90 million Series B round in November 2006 led by VantagePoint Venture Partners, plus $120 million in convertible notes. Pure venture investment over $90 million, although total investment easily tops $200 million.

What happened?
Protstar says that Agrani Satellite Services, which had agreed to lease capacity on ProtoStar’s first satellite, illegally terminated the agreement in March. The eventual result was that the company defaulted on its working capital facility, and a bankruptcy filing in July.

Protostar said it would look to sell its two satellites via a court-supervised auction, and that it received DIP financing from its lenders.

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VC-Backed Busts: Sequoia Communications

#6. Sequoia Communications

San Diego-based fabless RF semiconductor company

The company raised around $75 million between 2000 and 2008, including around $10 million in Series F funding last September. Backers included BlueRun Ventures, Gabriel Venture Partners, Huntington Ventures, Motorola Ventures and Tallwood Venture Capital.

[Update: Xconomy ran a story saying that Sequoia had raised $86m, which would put it a bit higher on our list. There often are discrepencies in funding totals -- particularly for defunct companies -- so we're just going to stick with figures from our VentureXpert database when available. Suffice to say, both $75m and $86m are a lot to sink into a shuttered company.]

What happened?
This was simply a case of VCs running out of patience and money, a toxic combination in an already-difficult economy for chipmakers. Sequoia was behind schedule in producing its tranceivers for mobile devices, and proved unable to secure an outside investor to lead (yet another) round. The company officially shut down in August, laying off all 30 employees.

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VC-Backed Busts: Autonomic Networks

#7. Autonomic Networks

 Mountain View, Calif.-based provider of network security compliance solutions.

Autonomic Networks raised around $71 million in VC funding since its 2001 formation as Vernier Networks, from firms like Allegis Capital, FT Ventures, DCM, Foundation Capital, Masthead Venture Partners, Weber Capital Management, UV Partners and Venrock. This includes a $21 million Series E round in 2005, and some subsequent bridge financing.

What happened?
This is the second NAC vendor on our list, following ConSentry Networks at number five. It’s basically a space that raised tons of venture capital, but one in which small companies were caught off guard when the heat — and customers — began to wear off. Plus, it didn’t help that big players had consolidation on the brain. Autonomic made a last-ditch effort to switch from security to compliance (thus the name change from Vernier), but gave up the ghost in February after failing to secure new funding.

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VC-Backed Busts: SiCortex

#8. SiCortex Inc.

Maynard, Mass.-based maker of high-performance computing systems.

This is a bit of a weird one, in that SiCortex is not actually in our VentureXpert database. Instead, our info on its financing comes from a post on the website of Gerbsman Partners, which announced on May 28 that it had been retained to sell off the company’s assets. It listed $68.1 million in total funding from Flagship Ventures, Polaris Venture Partners, Prism VentureWorks, JK&B Capital and Chevron Technology Ventures.

What happened?
Again, not much background on this one. The Gerbsman post does not explain why the company shut down, particularly since its job is to make SiCortex as attractive as possible. Tech trade pub HCPwire reported that one of the VC firms pulled out of a new round due to a lack of available capital, although each of the above firms has dry powder — which makes me think that a pullout was more by choice than necessity. 

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VC-Backed Busts: Cogentus Pharmaceuticals

#9. Cogentus Pharmaceuticals

Menlo Park, Calif.-based developer of antiplatelet therapies for cardiovascular disease.

The company raised over $62.5 million in total VC funding between 2006 and 2008. Backers included Keffi Group, Prospect Venture Partners, Pinnacle Ventures and Ridgeback Capital.

What happened?
The company filed for Chapter 7 bankruptcy protection in January, after running out of money. Its last round was a large Series C financing two years earlier, which was to be used to fund a 4,000-patient Phase III clinical trial. It’s unclear how far along that effort got before the doors were shut. Company co-founder and CEO Mark Goldsmith has since moved on to become CEO of venture-backed Constellation Pharmaceuticals (none of the same investors).

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VC-Backed Busts: Dynogen Pharma

#10. Dynogen Pharmaceuticals

Waltham, Mass.-based drug company focused on gastrointestinal and genitourinary disorders.

Dynogen had raised around $67 million between 2002 and 2007, plus a small amount of subsequent debt financing. Backers included Atlas Venture, HealthCare Ventures, Oxford Bioscience Partners, Abingworth Management, Medica Venture Partners and Pappas Ventures.

What happened?
Dynogen is a case of falling very far very fast. The drugmaker agreed in 2007 to a reverse merger with a blank check acquisition company (i.e., a SPAC), which would have brought Dynogen public and paid investors an initial $98 million. But that deal got called off, and the company said it would seek out more venture capital. Okay plan, except that Dynogen’s lead drug candidate soon failed in a Phase IIb trial — causing its investors to support liquidation via Chapter 7 bankruptcy, which was filed for in February.



The Year of X, Y, Z and Q

It seemed to me that more of companies getting venture funding lately have names that begin with the least-used letters of the alphabet. But after wasting time trying to confirm this on ill-conceived database searches, I figured it’d be better to talk to someone who actually follows this stuff.

So, I talked to Atoll Foden, president of Silicon Valley branding consultancy Brighter Naming, who says obscure letters are indeed in vogue. That’s largely because, with a million-plus domains getting registered each month, all the obvious ones are already taken.

“X, Y, Z and Q names are fabulous names right now,” Foden says. “It solves a lot of legal problems because there aren’t many words in the dictionary beginning with those letters.”

It used to be that everyone wanted a company name to start with A, to get ranked first in Yellow Pages. But today Google doesn’t care what letter your name begins with when doing its ranking, so Z-names fare as well as A-names.

That said, Foden’s fussy about what works.  He’s not fond of the name Zoosk, used by a social network dating service, because it has too many consonants at the end. But he’s quite enamored of Xambala (pronounced Zambala), the name of a Silicon Valley startup that does something called high frequency financial event processing, because it “has a nice, musical sound to it.”

Other trends in naming that Foden has noticed include:

-  Deliberate bad spelling is popular for startups, particularly those targeting the text-messaging generation, who could care less about proper spelling. The trend may have started with Flickr, but imitators include Loopt, the mobile location application, and ScanR, an application for scanning, copying and faxing with a mobile phone or digital camera. These names may be hard to get used to inititally, Foden says “but when you get it, you don’t forget it… it’s called a sticky name.”

–  Obscure foreign language names are big, since most obvious English and Spanish words are taken. Ubuntu, a name apparently derived from the Bantu languages of southern Africa, is perhaps the best-known example of the unusual foreign word choice.  Foden also expects to see more use of Hawaiian and American Indian words in naming.

- Good names don’t have to be obvious matches for the businesses they represent. For example, looking at the two words that make up the name Starbucks, it sounds like the moniker of a bank in Hollywood. But it’s worked well for a coffee company. Same for Safeway, which, were it not a well known grocery brand, Foden observes, “would make a great name for a condom company.”


Insight Venture Partners Talks Twitter

Last Twitter funding note (I promise): Spoke on the phone last night with Jeff Horing of Insight Venture Partners, whose firm led the $100 million-ish round at the $1 billion valuation. Jeff didn’t lead the deal for Insight – that was Jerry Murdock – but clearly knows plenty about it (you don’t do this sort of deal without everyone being very fully briefed). A couple quotes:

* “We look at Twitter as almost an island onto itself. To compare it to anything else other than Facebook, or possibly Google, doesn’t make much sense to us when you look at what it’s accomplished in such a short amount of time.”

* On revenue: “For us it’s a when, not an if… We’re already seeing the ecosystem of Twitter begin to monetize.”


Top VC Recipients of 2009 (so far)

In light of Twitter having raised over $135 million in VC funding so far this year (new round plus January round), I figured it was time for a Top 10 list of 2009 venture recipients.

And, no, Twitter is not in the top spot. That honor goes to Clovis Oncology, which raised over $146 million in a Series A round four months ago.

A few metrics notes: (1) The list only includes U.S.-based companies. It didn’t appear that any non-U.S. companies qualified and, if they did, I didn’t want to get bogged down in currency disputes; (2) The list aggregates all VC funding secured in 2009, rather than individual rounds; (3) The calculations do not include government funding (grants, etc); (4) The ability to secure lots of VC dollars does not necessarily correlate to a strong company or strong returns.

So, without further ado, get the full list below:

#1: Clovis Oncology Inc.
Amount: $146 million
Location: Boulder, Colorado
Business: Anti-cancer therapeutics
Investors: Domain Associates, New Enterprise Associates (NEA), Versant Ventures, Aberdare Ventures, Abingworth, Frazier Healthcare Ventures and ProQuest Investments

#2: Twitter
Amount: $139 million (including approx. $4m in pro rata re-ups on Feb round, according to SEC filing)
Location: San Francisco, California
Business: Micro messaging platform
Investors: Benchmark Capital, Insight Venture Partners, Institutional Venture Partners, Morgan Stanley, Spark Capital, T Rowe Price and Union Square Ventures.

#3: Tesla Motors
Amount: $138 million
Location: San Carlos, California
Business: Electric vehicles
Investors: Draper Fisher Jurvetson, Daimler AG and VantagePoint Venture Partners.

#4: SolFocus
Amount: $77 million
Location: Mountain View, California
Business: Solar concentrator photovoltaic systems
Investors: Demeter Partners, Advanced Equities, Apex Venture Partners, New Enterprise Associates, NGEN Partners and Yellowstone Ventures

#5: Suniva
Amount: $75 million
Location: Norcross, Georgia
Business: Solar photovoltaic technology
Investors: Warburg Pincus, Apex Venture Partners, New Enterprise Associates, H.I.G. Ventures and Advanced Equities

#6: Workday
Amount: $75 million
Location: Pleasanton, California
Business: Enterprise resource planning
Investors: New Enterprise Associates and Greylock Partners

#7: ExactTarget
Amount: $70 million
Location: Indianapolis, Indiana
Business: Email marketing softwar
Investors: Battery Ventures, Scale Venture Partners and Montagu Newhall

#8: Pacific Biosciences
Amount: $68 million
Location: Menlo Park, California
Business: DNA gene sequencing
Investors: Monsanto, Wellcome Trust, Sutter Hill Ventures, Deerfield Management, Intel Capital, Morgan Stanley, Redmile Group, T. Rowe Price, Mohr Davidow Ventures, Kleiner Perkins Caufield and Byers, Alloy Ventures, Maverick Capital, AllianceBernstein, DAG Ventures, Teachers’ Private Capital and Blackstone Cleantech Venture Partners.

#9: V-Vehicle Company
Amount: $62 million (up to $66m, based on SEC filing)
Location: San Diego, California
Business: Electric vehicles
Investors: Kleiner Perkins Caufield & Byers, T Boone Pickens

#10 (tied): Hyperion Therapeutics
Amount: $60 million
Location: San Francisco, California
Business: Gastroenterology and hepatology drugs
Investors: Bay City Capital, Panorama Capital, Highland Capital Partners, New Enterprise Associates and Sofinnova Ventures

#10 (tied): Serious Materials
Amount: $60 million
Location: Sunnyvale, California
Business: Green building materials
Investors: Mesirow Financial Capital, New Enterprise Associates, Foundation Capital, Navitas Capital, Rustic Canyon, Enertech Capital, Cheyenne and Saints Capital


In India, Downturn Is Hardest On New Startups

Last year, U.S. seed-stage companies attracted more dollars than they had since 2000 and investments in U.S. early-stage companies were down by less than 10 percent.

In India, however, investments in early-stage startups plunged in 2008 by 90%, even though overall venture investment was down by *just* 63%, from $22 billion to $8.1 billion (according to the India Venture Capital & Private Equity Report 2009 by Thillai Rajan and Ashish Deshmukh at IIT in Madras).

Young companies in India have trouble getting money anyway — between 2004 and 2008, they attracted only 9% of deals — but in a recession, “venture capitalists play it safe and hardly venture in funding early stage startups,” according to Arun Prabhudesai, author of the Indian business blog

Instead, they go for the more mature companies –  they especially liked late stage deals (33%) and PIPEs (28%).

In the U.S. last year, though, investments in later stage deals and expansion stage deals were both down, by 13% and 9% respectively. (U.S. data comes from the MoneyTree report, put together by the NVCA, PricewaterhouseCoopers and Thomson Reuters).

DFJ’s Mohanjit Jolly told peHUB earlier this month that true seed stage funding doesn’t exist yet in India, and that venture capital can’t function well there until it does. In Silicon Valley, he said, angel investors invest at least as much in startups as VCs.