The California Clean Energy Fund (CalCEF) announced on Monday that Nth Power, Draper Fisher Jurvetson, and VantagePoint Venture Partners will each invest $8.5 million on its behalf.
The investments will be limited to startups focused on clean energy, including renewables, efficiency, storage, and energy-enabling technologies. The fund will invest in both early- and late-stage companies that have some California connection—i.e., customers, headquarters, or development.
CalCEF, which was created as part of Pacific Gas and Electric’s bankruptcy settlement, hopes to pull in market-based returns and also benefit the state. All profits will be reinvested into the fund, which has the dual goals of encouraging economic growth in California around clean energy and reducing California’s dependence on fossil fuels.
“In moving our economy away from fossil fuels, the states are where you see creativity, and California is a real leader here,” said Lisa Bicker, CalCEF’s president.
Twelve states (including California) have established 17 clean energy funds, according to the nonprofit trade group Clean Energy States Alliance. In the last five years, these funds have invested a combined $1.5 billion—though formidable, $300 million is just a tiny slice of the $21 billion invested by U.S. venture capitalists last year, according to the MoneyTree Survey by PriceWaterhouseCoopers. Because it takes several years for venture-funded startups to mature, their success thus far is difficult to measure.
By harnessing the investment knowledge of three very different VC firms, California may have an advantage against nonprofit energy funds in other states. DFJ is known for its ability to spot early-stage funds; Nth Power is an energy technology expert; and VantagePoint is a monster fund that has had success commercializing in-the-lab technologies.
The VCs have something to gain as well—in addition to management fees, Nth Power and DFJ (through its AltaTerra clean technology affiliate fund) will be matching the funds they invest for CalCEF, so if they’re successful, they double their returns. VantagePoint will not make additional investments, and will treat CalCEF like any other LP, though with a focus on clean energy.
CalCEF’s board, which includes heavy hitters from energy agencies, Washington policy circles, and the private equity business, will also advise on the investments. CalCEF is reserving an additional $4.5 million for future funding programs, and the board is considering growing the fund, said Ms. Bicker.
“We have a very activist board, and we think the time for clean energy is now,” said Ms. Bicker. “In the scheme of investment $30 million is not a huge chunk, but it’s not just about the money. We’re about sending a message.”