CMEA Ventures will raise a new $400 million fund early next year to invest in growth-stage clean technology companies, Red Herring has learned.
The San Francisco venture capital firm, which backs lithium-ion battery maker A123 Systems among other clean tech startups, was rumored earlier this year to be considering the new fund. CMEA Managing Director Jim Watson told Red Herring on Thursday that his firm has made the final decision to raise the new fund beginning in March next year.
The fund will invest in companies that have proven technology but lack the capital to build commercial plants. A commercial biofuels or solar plant can cost hundreds of millions of dollars. These projects traditionally have been financed by hedge funds and banks.
Mr. Watson said that with tight credit markets there is a large financing void for VC-backed companies in their growth stage.
“We are seeing an emergence of growth equity capital coming into this white space but the amount that is needed is a hundred times more than what is there,” he said.
The firm will look to partner with other groups interested in growth-stage investing, Mr. Watson said.
CMEA is not the first venture firm to act on this void. In May, Menlo Park, California-based Kleiner Perkins Caufield & Byers announced the opening of a $500 million fund to focus on clean tech companies entering their growth phase.