By Shera Dalin
Venture capital investors are increasingly
seeking alternative energy and other “cleantech” companies,
putting St. Louis in a prime position to attract investment,
business leaders say.
In fact, the trend toward cleantech and alternative fuels investment
is so energized that entrepreneurial showcase InvestMidwest
is breaking out a cleantech segment at its annual meeting this
coming Feb. 19 through 20 to meet the demand, says Christine
Walsh, executive director of InvestMidwest.
“Alternative energy companies that will be considered for this
track will include companies that specialize in renewable energy,
biofuels, wind energy, solar energy and all related technologies,”
she says, adding that the deadline to apply is Nov. 2nd.
Venture capitalists boosted their investment in cleantech by
41 percent to $264 million in the first quarter of this year
compared to the fourth quarter of 2006, according to the National
Venture Capital Association (NVCA). For 2006, cleantech investments
were $1.5 billion, or an average of $383 million per quarter.
“Particularly in biofuels, there are competitive advantages
for startups located in our region," explains Jay DeLong, vice
president for New Ventures and Capital Formation for the RCGA.
“Having early adopters as customers for your technology is critical
for startups, and the practicality of environmental technologies
should be a plus here.”
To help St. Louis entrepreneurs capitalize on the laser-focus
on this segment, the Nidus Center for Scientific Enterprise
recently joined the Clean Energy Alliance created by the federal
National Renewable Energy Laboratory (NREL) in Golden, Colo.
The Alliance, while not necessarily producing funds to help
launch startups, will link incubators such as Nidus and their
tenants with the considerable resources available at NREL, Nidus
President and Chief Executive Bob Calcaterra says.
Membership in the Alliance means assistance with federal grants
and the ability to tap into NREL research, he says. At least
one local company that could benefit is Akermin Inc., which
is developing a fuel cell that runs off of alcohol.
“I’m doing this with the hope that we might be able to attract
more companies like that,” Calcaterra says.
“A number of (venture) funds are cropping up around the country
whose sole purpose is to grow clean-energy companies. Some venture
funds are in their third or fourth fund committed in part to
clean fuels.
Part of the excitement behind clean energy is the urge to reduce
the U.S. dependence of foreign fuel as well as lessen the greenhouse-gas
effects produced by fossil-fuel pollution.
The backbone of St. Louis’ BioBelt venture investment—life science
and biotechnology companies—is expected to remain strong. In
the first quarter of the year, biotech investment ranked as
the No. 1 industry and medical devices was at an all-time high,
NVCA reported. Later stage investing also bumped up for the
quarter to the highest dollar level since the fourth quarter
of 2000.
That’s good news for the medical device entrepreneurs coming
out of private industry, as well as Washington and Saint Louis
universities, Calcaterra says. He pointed to the increasing
attractiveness of technology, such as a new heart defibrillator
being developed by Wash U’s Dr. Igor Efivmov and a microscope
that can look at living cells in the body under development
by Dr. Samuel Wickline, also at Wash U.
“That’s some really exciting stuff,” Calcaterra says. “One of
the reasons medical devices are always attractive is that the
regulatory hurdles are not as high as with a drug, so it’s an
easier hurdle to clear and it’s faster.”
There is also interest at the earliest stage, or angel investment,
says Gil Bickel, president of the St. Louis Arch Angels investment
network.
“The VCs that we are seeing that are active in the financing
market are looking at bio- and agritechnology companies. They
don’t seem to have a lot of interest in more traditional types
of business, but are much more interested in companies that
have substantial intellectual property with a three- to seven-year
time horizon.”
Agritechnology is an area ripe for the picking because few VCs
are focused on such firms, Calcaterra says.
The principals of the new agritech MidPoint Fund, operated by
IN Partners LLC of Indianapolis, toured St. Louis over the summer
looking for prospective investors and investment opportunities.
Managing partners Ron Meeusen, a former Dow Agrosciences executive,
and Andrew Ziolkowski, engineer/physicist and life sciences
investor, plan to raise $100 million for MidPoint.
The fund will invest in six types of firms and is investigating
several in St. Louis, Meeusen says, declining to name the prospects.
The types of companies MidPoint seeks are bioproducts such as
fuel and plastics; human nutrition, specialty foods and nutraceuticals;
food safety products/processes; animal health and pets; environmental
technology such as converting wastes into usable products; and
general technologies.
The fund plans to make its first round of investments by the
year’s end.
MidPoint is focusing on the Midwest because it has the greatest
concentration of food and agritechnology, Meeusen says.
“There’s a wonderful marketplace here in the billions of dollars,
but there was virtually no dedicated financing chasing those
technologies,” he points out. “There’s a big opportunity and
need.”
Similarly, Augury Capital Partners in Clayton is raising between
$50 million and $100 million for late-stage investment. Augury,
formed in fall 2006, aims to invest in the Midwest, South and
Europe. In particular, investments will be focused on the managing
partners’ areas of expertise: life sciences and financial-services
information technology, particularly electronic payments firms.
The company has already invested in Force10 Networks of San
Jose, Calif., an IT networking company with offices in the U.S.
and Europe.
“Our fund is focused on providing growth capital, so it is quite
late stage. We may invest as much as $10 million in any one
company, but it is typically over a short number of rounds of
funding, one or two, because of our late-stage investing,” explains
David Truetzel, managing partner of Augury with Robert Wetzel.
The partners like the prospects available in the St. Louis area
and are both fifth generation St. Louisans, which is why they
based the fund here.
“St. Louis has some very good technology in each of our industries
and lies in the center of an underserved private capital market
in the Midwest, Mid-Atlantic and the South, where there exists
significant opportunities in payments and life sciences,” Truetzel
says.
Ultimately, the St. Louis region has many of the elements necessary
for strong VC investment, Bickel says.
“You have the universities turning out the technology, a very
strong entrepreneurial community, mentoring with Innovate St.
Louis, the RCGA and capital through Arch Angels,” he says. “You
have the perfect storm.”
