I have been getting more calls from early-stage cleantech entrepreneurs looking for seed funding. Many of these startup CEO’s have already met with a number of the focused VCs and figured out that their venture is too early for them. A few have tried to pitch the Band of Angels or the Keiretsu Forum unsuccessfully. Yet they appear to be strong entrepreneurs with a great idea. I struggle with where to send them. I know of a few angels investing in the space but they are limited by the number of deals they can do as well as the size of their investments. Where’s the Reid Hoffman for cleantech?
A number of family offices have organized themselves to share dealflow and form investing syndicates. This is terrific news for the sector, and has significantly increased the number of investors who can invest directly into cleantech startups. However, this does not solve the early-stage fundraising challenge. Most family offices prefer not to lead deals and hesitate to participate in deals that are deemed too risky.
Many venture firms claim to invest in seed cleantech deals, but few have done so in the past year or two. Khosla Ventures is the exception. KV continues to proactively seek out and invest in early stage disruptive technology bets and is in the process of raising a second seed fund (Khosla Venture Seed B). KV funds have a clever structure that allow its main fund to invest in maturing deals from its sister seed fund – this unique ability to invest across funds directly addresses the “exit” challenge that keeps most VCs away from the very early stage. More investors should consider this model, even though they may get a bit of “push back” from their limited partners.
But isn’t there tremendous activity with incubators, you might ask? For digital media companies, there’s increasingly stiff competition among incubators and accelerators like Y Combinator and 500 Startups. However, there are only a few strong options for cleantech startups. New York City’s Accelerator for a Clean and Renewable Economy (NYC ACRE) and San Francisco’s Greenstart come to mind as excellent options for early startups looking for co-location. But the programs are narrow and come with limited funding. Also, not all startups want or need a structured incubation program – many just need seed funding.
So, I come back to my search: are you an angel investor looking for early stage cleantech deals? If so, we want to hear from you!
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