Angel Investing Goes from Fringe to Fast-growing

August 21, 2008By Seattle Business Magazine

Angel investors are a major factor in early-stage investing today, with total investments in 2007 of $26 billion, according to the Center for Venture Research at the University of New Hampshire.

An arena that angel investors are becoming increasingly interested in investing in is so-called clean technology. The term cleantech is generally used to describe knowledge-based products or services that improve operational performance, productivity or efficiency while reducing costs, inputs, energy consumption, waste or pollution. Cleantech investing can be divided into three main categories: renewable energy generation, mobility and conservation.

Just a few short years ago, cleantech was considered a fringe area of investment. Savvy angel investors saw opportunity and have made many successful investments. In fact, many early entrepreneurs with limited working capital were funded by angel investors. Good examples of this early movement are Earth Class Mail, Cool Earth Solar and Propel Biofuels.

An influential venture-capital report, conducted in 2005 by the Michigan-based Cleantech Venture Network, showed that between 1999 and 2005 more than $8.8 billion was spent on cleantech venture investments. The report forecasts that capital dedicated to cleantech between 2005 and 2009 could total $10 billion.

Powerful projects
One might think that centralized power generation, traditionally requiring huge capital investments, would be a poor field in which angel investors could have an impact, given the fewer dollars at their disposal. Todays reality has shown that this assumption is far from the truth.
Our society continues to need more energy, but traditional forms have become less attractive due to environmental concerns. Wind, wave, tidal, low-impact hydro-electric, solar and other clean, renewable sources of energy are being intensively developed in response to our global environmental concerns. Many of the sources of these new technologies come from innovative entrepreneurs.

Angels have found opportunities to help newly developed clean technologies move from research to commercial levels of renewable energy generation. In 2001, for instance, Mercer Islands Alla Weinstein licensed a unique wave-energy conversion device called AquaBuoy. This device generates electricity from the constant motion of offshore ocean waves. Scoffed at in its early years, the company grew and was later acquired by multinational firm Finavera Renewables.

M2E Power, another example of cleantech energy production, was co-founded by Seattle entrepreneur Joe ONeill of Tiger Mountain Group LLC. The company has developed a kinetic energy microgenerator that is so small it fits into handheld radios and even mobile phones. Energy from human movement is converted into electricity, which is stored in the battery. This is energy harvesting at its most fundamental level.

Cleantech investing continues to be recognized by the industry as a strong growth sector with significant new investment opportunity. Many venture capitalists have some portion of their practice dedicated to cleantech investing, while others are entirely focused on cleantech. Angels will continue to make vital investments in clean technologies that will help to solve the worlds issues.

M. Todd Dean is president of the Seattle Chapter of the international Keiretsu Forum angel investment community. For more information, contact [email protected].