Clean Wave hopes to invest $100M in alternative energy, sustainable technologies

May 12, 2008

A former Silicon Valley sales executive and a Cincinnati investment manager have formed a venture fund here that's trying to raise $100 million to invest in the new darlings of the investment world: clean technology firms.

Clean Wave Ventures founders Scott Prince and Rick Kieser are banking on soaring energy costs' attracting investors to the risky but potentially lucrative realm of alternative energy and transportation and related fields.

Though neither Prince nor Kieser would comment on the fund, its size was reported in a Dow Jones VentureWire story this month. The fund would invest in early- and expansion-stage firms.

The upstart firm, which is still nailing down initial investors and prospective entrepreneurs, has some big-name help: a group of advisers that includes Ivy Tech Community College President Tom Snyder and auto industry pioneer Bill Wylam, an expert on advanced battery technology.

Also on board is Mike Hatfield, who founded the Indiana Venture Center and three venture-backed technology firms on the West Coast.

The fund could become a crucial jump-start for what is considered by some a huge industry cluster in the making in Indiana, particularly in the alternative fuel arena.

It includes promising biofuels research at Purdue University to make higher energy-yielding forms of ethanol from common grasses and wood materials, and advanced battery technology that began at former General Motors Corp. divisions Delco Remy and Delco Electronics in Indiana 30 years ago.

"Indiana is the nexus of alternative energy," said Ivy Tech's Snyder, the former Remy International CEO who until recently headed the flagship Energy Systems Center in Anderson.

"We have the makings of a cluster here if we have the right resources ... . Holding us back [is that] we haven't had a plethora of venture capital," Snyder added.

That might be because, until now, the sector hasn't seemed sexy.

The public's consciousness of clean technology is rising with the price of oil, global warming and the popularity of environmental sustainability issues, said Lisa Laughner, former vice president for Rolls-Royce Corporate Ventures and another prominent adviser to Clean Wave. "Indiana's heritage in R&D and advanced manufacturing of power electronics, automobiles, batteries and alternative fuels makes it an attractive state for clean-tech venture capital."

And there's more clean-tech capital to be had these days. In the first quarter, $625 million was invested nationally in 44 deals, a 51-percent increase from the same period last year, according to a report by PricewaterhouseCoopers and the National Venture Capital Association.

The report classified clean tech generally as alternative energy, pollution and recycling, power supplies, and conservation-based companies.

Clean Wave Ventures said it is focusing on "energy, transportation, water/environment and advanced materials."

It plans initial-stage investments of $2 million to $7 million, plus additional funding for expansion. It would focus on Midwest companies.

Co-founder Prince, who lives in Indianapolis, declined to elaborate, as did Kieser; they said it would be inappropriate during fund raising.

Just how many so-called clean firms there are in Indiana, let alone which might pique the interest of Clean Wave, is hard to say.

There are well-established and well-capitalized clean-energy companies here, including Indianapolis-based EnerDel Inc., which makes lithium-ion batteries for hybrid cars. It is co-owned by Fort Lauderdale, Fla.-based Ener1 Inc. and by autoparts maker Delphi Corp.

But there are lesser-known, entrepreneurial firms, such as Anderson-based Bright Automotive, which is developing technology for plug-in hybrid vehicles.

Or the next winner might be a firm such as Swift Enterprises, at Purdue Research Park, which recently announced it has developed a viable alternative to lead-based general aviation fuel. Swift's formulation is made from biomass.

It's also hard to gauge just which sectors of the clean-tech world might be closest to developing breakthroughs.

"The graveyard of venture capital is littered with plenty of people who had the right idea but could not make it commercially viable," said George Farra, a partner in Indianapolis investment firm Woodley Farra Manion Portfolio Management.

Farra said he is more inclined to buy stock in an automaker with promising hybrid technology than to pour money into a fund investing in a new molecule.

Breakthroughs in clean technology will have to be economical and affordable to the end user, and that's been difficult.

"It's not that we don't think it's something that can pay off. It's too often just a lot of pie in the sky," he said.

Clean Wave is not necessarily gunning for the exotic: In some cases, investments could be directed to firms with proprietary technology useful in improving efficiency, for example.

Clean Wave claims to have 40 years of early-stage investment and operating experience. It says its team has participated in the founding of nine early-stage companies.

Kieser, who heads Clean Wave's Cincinnati office, was most recently an investment manager at River Cities Capital Funds, in Ohio. Clean Wave's Web site says he has 18 years of private equity, corporate finance and management consulting experience.

Co-founder Prince, a graduate of Indiana University's Kelley School of Business, said he spent the last decade and a half working for Silicon Valley companies. Among the most recent was San Francisco-based Cloudmark Inc., which develops anti-spam and anti-fraud software. There, he was vice president of worldwide sales.

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