It's a Great Time to be an Angel investor?
Julia Reigel of Wilson Sonsini claimed, "It's a great time to be an angel investor. Angels have taken over the jobs of VC seed rounds and A Rounds." in a presentation at the CalCEF Angel Network on Monday. She also spoke of VC "investor-on-investor violence" as the terms for follow-on rounds become challenging.
Contrast this with Bill Gurley of Benchmark Capital, quoted in Venture Beat from his speech at this week's Always On event. He’s seeing “stranded angel deals” - companies that have raised two angel rounds plus a bridge and can’t get more money - because angels are becoming more conservative. It’s now possible for an entrepreneur to get a better deal from a VC than from an angel, Gurley claimed. “Angels want 30% of your company for $1 million, and VCs will give you to $3 to $5 million for the same 30%, so you might as well take the venture firm and get more money.”
The flaw in these claims is that looking at the VC and angel world as a monolithic whole distorts the story. VCs invest in a variety of sectors and ganging the tone of VC and angel investment in social networks, enterprise software, drug discovery, and solar factories blurs the picture.
It's certainly more difficult to get venture capital in general. According to Dow Jones VentureSource only $14.6 billion in VC was invested in 2009 through Q3 versus $31.2 billion for all of 2008.
But focusing on the greentech sector yields a different story. Yes, the numbers are down from 2008. Greentech VC investment in 2008 was about $8 billion versus the approximate $5 billion that will be invested in 2009. Delve a little deeper and there's a positive spin to this story. There will be more greentech VC and angel deals in 2009 than in 2008 according to Greentech Media Research. It's actually been easier to get VC and angel money this year than last. Terms might be a bit more onerous and round size size smaller but the deal can get done.
And entrepreneurs are going to start companies despite what VCs or law firms decree. It's what they do - they can't help it.
Monday's CalCEF Angel Network hosted by Susan Preston of CalCEF and by WSGR showcased a few greentech firms looking for funding and I'll profile two of them.
Greenlite Motors
Tim Miller President and CEO of Greenlite pitched his cool commuter vehicle, specifically designed for commuters in an urban environment. It can use the express lane because it qualifies as a motorcycle, fits two people, can cruise on the highway and gets 100 miles per gallon.
The tilting vehicle has a steel safety cell, four point harnesses and airbags and doesn't sacrifice comfort - it has heat, AC and a quiet environment. And it leans like a motorcycle.
The start-up is in the prototype stage but if you're an investor you can get a test drive.
Unlike the capital-intensive Tesla or Fisker, this start-up claims it can build a new vehicle in a capital efficient manner, using lots of off the shelf components - battery pack, hydraulic system, electric motor, etc. We're "Different than a big metal- stamping car company." according to the CEO.
It's targeted at city-dwelling males, 28-48 years old who commute alone and drives to lots of meetings. The CEO claims that this vehicle represents the dawn of the fabless car maker and that he can use the sales resources of a lot of hungry car dealers that have been fired by Detroit
The firm is looking for a $500K angel round in Q1 2010, a $4.5M round in Q2 and a $10M round from VCs or DOE loans to get to production after that.
Switching gears to a solar start-up...
PV Evolution Labs
Jenya Meydbray, a former PV quality engineer at SunPower, is the CEO of a solar start-up with a novel business plan. They look to be the "First high-throughput PV module testing facility in North America" and provide "Independent risk assessment for the financial services sector."
Driven by growth in domestic manufacturing, this firm looks to help new and established PV manufacturers achieve the sought-after aura of "bankability."
According to Greentech Media Research, there are more PV technology developers in North America than in Europe and Asia combined. And since performance and reliability claims based on in-house testing lack credibility in the marketplace, PV Evolution labs will provide that service.
They look to:
- Act as an outsource testing lab for certification houses like UL
- Act as a outsource test lab for solar manufacturers
- Provide bankability verdicts for the financial markets
Their competition is in-house test labs, NREL, university labs, and certfication labs like TUV or UL. The start-up is looking to raise $1.5 million, about $800,000 of that for test equipment and claims it has term sheets in hand, ready to close by the end of the year.
Despite pronouncements by pundits like Gurley of Benchmark or WSGR - entrepreneurs like PVEL and Greenlite are going to keep innovating and finding ways to get funded.
