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Venture Capital in the Energy Industry
A New Report from Energy Business Reports
 
Phoenix, AZ – January 16, 2007 – In recent years, increasing amounts of venture capital have been invested in cutting edge energy technologies and young, entrepreneurial energy companies via newly emerging, dedicated industry venture capital (VC) funds. Venture capitalists have invested in everything from distributed generation to online energy exchanges to electric vehicles to biofuels.

The latest release from Energy Business Reports, Venture Capital in the Energy Industry, focuses specifically on this changing investment landscape and the market scenario for energy companies looking to obtain funding. From exploring the concept of venture capital to understanding the important role VC plays in the energy industry, this report offers a comprehensive overview of the topic. It describes investment options for VCs, options emerging in sustainable energy, factors influencing energy VC returns, strategies of VCs investing in the energy industry, and a comprehensive description and portfolio analysis of the leading venture capital firms investing in energy.

A surge in venture funding: In the past five years, a noticeable surge in venture funding has occurred. Deregulation and energy industry restructuring have opened up prospects for high-growth technology companies in the utility industry, and private partnerships and closely held corporations funded by pension funds, endowment funds, foundations, and other investors have begun to take notice. Utility companies, as well, see the opportunities and recognize the imperatives. Facing competition, tighter margins, and lower revenues in their traditional businesses, they realize that they must find new ways to raise income and must look to new technologies to become more efficient. Many conventional utility companies have set up venture arms to finance high-growth companies such as Internet exchanges for oil, gas, and power; utility bill presentment and consolidation; and other business-to-business e-commerce services.

Angels: Governments often provide generous tax incentives to encourage venture capital investment. Because of government encouragement and the emergence of a large number of high net worth individuals who are willing to invest, a class of small venture capital investors known as angels has emerged. Typically, angel investors focus on small companies that are too speculative to obtain bank loans and too young to attract conventional venture capital.

Generally, venture capital investors invest in young, rapidly growing companies that have potential to develop into significant economic contributors. Venture capitalists often invest in equity and actively participate in the strategic development of their target companies. Thus, in addition to providing an important source of equity for many start-up companies, VCs offer expertise, access to markets, flexibility, skills and human resources, potential alliances, and publicity. The disadvantages to this form of funding may include loss of control, decrease in financial stake, pressure to perform, and unwanted publicity.

Types of VC firms: The most common type of venture firm, the private independent firm, is independent and unaffiliated with a financial institution. Venture firms may also be affiliates or subsidiaries of commercial banks, investment banks, or insurance companies, and may make investments on behalf of outside investors or a parent firm’s clients. Still other firms may be subsidiaries of non-financial corporations making investments on behalf of the parent itself. There are also government-affiliated investment programs that help start-up companies either through state, local, or federal programs. One common vehicle is the Small Business Investment Company or SBIC program administered by the Small Business Administration, in which a venture capital firm augments its own funds with federal funds and leverages its investment in qualified companies.

Although the predominant form of organization is the limited partnership, in recent years the tax code has allowed formation of Limited Liability Partnerships (LLPs) and Limited Liability Companies (LLCs) as alternative forms. The advantages and disadvantages of these structures have to do with liability, taxation issues, and management responsibility.

Other topics covered in depth in this report are:

• VC valuation methods;
• How to go about receiving venture capital funding;
• What VCs look for in target firms;
• Investment trends and growth drivers;
• Specific energy sectors that hold promise for VC investment, such as wind, solar, hybrid electric vehicles, CBM/CCM, fuel cells, biofuels, and others.

The report contains an extensive list of profiles of major VC investors and investees, as well as a list of VC industry resources and organizations.

About the Publisher: "Venture Capital in the Energy Industry" is published by Energy Business Reports (www.EnergyBusinessReports.com), an energy industry thinktank and leading source for energy industry information and research products. Other reports available from EBR include: Coal Bed Methane Global Potential, Business Process Outsourcing for Utilities, Bitumen Recovery and Technology, Market for Cellulose Ethanol, Oil Sands Market Potential, Weather Risk Management, Natural Gas Storage Effects on Energy Trading, Fuel Cell Technology, Outlook for Unconventional Gas, Securing Energy Assets and Infrastructure, Market for Solar Photovoltaics, and Understanding the China Energy Market. This reports with accompanying VC Company directory sells for $697 and can be ordered at www.EnergyVentureCap.com

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