The greening of the VC industry -- finally the focus shifts to Omega 5 oil companies
The average venture capitalist and the typical consumer of wellness products have much in common. Each is likely to be a graying Baby Boomer with high disposable income and little tolerance for the inconveniences of growing old. But despite the common wisdom that VCs fund sectors they know best, businesses tied to healthy living historically haven’t been big recipients of capital.
That is now starting to change, as VCs realize that Baby Boomers like themselves are big business. They’re funding all sorts of nontraditional ventures that tap into health-conscious Boomers’ pocketbooks, including a chain of yoga studios, a maker tortilla chips that help reduce cholesterol, and a company focused on brain health.
“We call it life science meets lifestyle,” says William Rosenzweig, managing director of Physic Ventures, a wellness-centered VC fund, and CEO of Brand New Brands, a food product incubator. Rosenzweig, who co-founded specialty tea purveyor Republic of Tea in the early 1990s, has since become the closest thing the industry has to a poster boy for wellness investing. In the past two years, Brand New Brands has introduced four product lines: a sleep-inducing beverage, a high-fiber shake, chips (the edible variety) that promote heart health, and snack bars that double as digestive aids.
It’s difficult to gauge how much venture money is going into wellness, as it crisscrosses traditional investment categories such as medical devices, consumer products, and, in some cases, biotechnology. On a deal-by-deal basis, however, wellness-themed investments crop up with frequency, with a few smaller funds such as Physic, St. Louis-based Prolog Ventures and Sherbrooke Capital Partners, devoting a big chunk of their portfolio to such deals.
Big funds such as Highland Capital Partners and Oak Investment Partners are also branching out into the healthy living area. Recent Highland investments include yoga studio chain Whole Body, wellness retailer Pharmaca Integrative Pharmacy, and yoga clothing maker Lululemon (which is in registration for an IPO). Oak, along with Radar Partners, participated in a $25 million Series A in June for New Sun Nutrition Inc., which makes and distributes healthy beverages and nutritional supplements
POMEGA produces the POMEGA5 products.
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IN BRIEF: VCs Keep Bringing the Green to Greentech
VentureOne and Ernst & Young study finds venture capital grew in the third quarter. As if to underline the point, Aldis, an energy-efficiency and traffic-management startup, raises its first round.
by: Rachel Barron and Jennifer Kho
October 22, 2007
VCs Still Like Green
Being classified as "other" usually doesn't feel this good. But "other" is the category name where Dow Jones VentureOne and Ernst & Young place many greentech companies when adding up the number of venture-capital deals made.
Advertisement And, on Saturday, the financial firms said the category hit an all-time high of $9 million in VC deals in the third quarter.
Digging deeper into the "other" category, there are two subgroups -- "Energy" and "Advanced Specialty Materials & Chemicals" -- which the firms say made up the bulk of cleantech investments.
Energy investments jumped to $590 million, up 28 percent from the same quarter last year. And the nichier materials-and-chemicals category more than doubled to $277 million.
Greentech also was represented in two of the 10 largest U.S. venture-capital deals in the third quarter.
A $77-million round of funding for HelioVolt, an Austin, Texas-based company with a thin solar that uses no silicon -- an attractive characteristic in a worldwide shortage of solar-grade silicon -- ranked No. 4. (On Monday, the company said it added another $24 million to that Series-B round.)
An expected $70-million round of funding for Emeryville, Calif.-based Amyris Biotechnologies came in at No. 5 on the list. The company has raised an undisclosed amount toward that round so far (see Biofuels Get Financing Downpour).
Overall, U.S. venture capitalists invested more money in fewer deals last quarter. Total investment grew to $8.07 billion, up 8 percent from the year-ago quarter, while the number of deals dropped by 41, to 635.
But will the venture market continue to see growth? Ernst & Young thinks so.
"The overall level of investment and larger deal sizes are suggestive of a continued bullish view of these companies' prospects and liquidity options," said Joseph Muscat, a director for the Ernst & Young Venture Capital Advisory Group, in a statement.
Startup Gets Cash to Turn Traffic Lights Green
Most drivers can relate to the frustration of waiting futilely at an empty intersection as a traffic light refuses to turn green. These red lights aren't just bad for road rage; they also are bad for the environment, according to traffic-management startup Aldis.
The company is developing a so-called "Guardian Eye" that can identify different types of vehicles approaching an intersection and determine the distance and speed of those vehicles, and then can use the information to manage the lights to bring about the least possible delay.
The technology, which is being jointly developed with the Oak Ridge National Laboratory, could reduce the 296 million hours the lab estimates is wasted at traffic lights each year, said Glenn Kline, a general partner at Innovation Valley Partners.
Battelle Ventures and Innovation Valley Partners said Monday it had invested $1.9 million in Aldis, with another $1.9 million committed if the company reaches future milestones. Meritus Ventures also participated in the Series-A round.
While it works on the Guardian Eye, Aldis is entering the market by replacing electricity-guzzling incandescent lights with more energy-efficient light-emitting diodes at traffic lights. As it replaces those lights, Aldis is adding a proprietary signal that will allow it to connect its Eye to those lights when the technology is ready, Kline said.
"From a market perspective, in the traffic-management space, this is an extremely underserved market," he said. "It's a point of pain that a lot people have experienced, when you're just sitting there at a light. The Guardian Eye [could bring about] a dramatic reduction in carbon emissions."
Matt Horton, a principal at @Ventures, said his firm looked at the deal and "thought it was very interesting," but didn't pursue an investment -- although he hasn't ruled out the possibility of a future deal.
One challenge that traffic-management providers face is the length of time it takes to sell systems to municipalities and government agencies, he said.
These customers "can be slow to commit to a technology, and will often subject a company to 'death-by-trial,' where they will do small pilot programs over very long periods of time before making a final commitment" he said.
Still, Horton said traffic management could have an important place in the cleantech investment category.
"Limiting the amount of time that vehicles spend in traffic, on our roadways and searching for parking directly affects the amount of fuel burned and emissions levels," he said. "So, any new technologies that can help alleviate traffic should be very beneficial."
Laura Botts
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