Braemar Energy Ventures Finds Value in Energy Technology, Both Clean and Conventional

6/22/11Follow @arleneweintraub

During a panel discussion with three cleantech investors at the Energy Infotech Forum in New York City yesterday, an audience member posed a provocative question: “What won’t you invest in?” he asked. Scott DePasquale, a partner at Braemar Energy Ventures, responded “consumer space travel.”

DePasquale was only half kidding. Ever since Braemar was founded in New York in 2003, it has invested in virtually every corner of the energy sector. “We don’t fashion ourselves as a cleantech fund,” DePasquale said during a sit-down interview at the conference. “We’re an energy venture capital firm. We invest in cleantech and renewables, but we’re also investing in any technologies that can help extract oil and gas more efficiently and in a cleaner way.” DePasquale works in Braemar’s Boston office, which opened in 2007.

Braemar, which is in the process of raising money for its third fund, has a portfolio of more than 25 investments. They run the gamut from Cerion Energy, which makes a fuel-based additive that reduces emissions, to Convey Computer, which has developed a technology to make high-performance computers run faster with less energy. Braemar also has investments in smart grid, energy storage, lighting, clean coal, solar, and biofuel technology companies.

The firm’s co-founders bring a wealth of experience and perspective to energy investing, DePasquale says. Neil Suslak has experience as an investment banker in the energy, communications, and transportations sectors. George Reichenbach ran two divisions of the industrial-products maker Norton Company. And William Lese worked for NPS Industries, which made equipment for the power industry, and Vivendi affiliate Sithe Energies, an independent power producer. “What’s unique about us is our founders have a really good sense of what it means to scale technology solutions around the utility customer,” says DePasquale, who was a vice president at GE Energy Financial Services before joining Braemar in 2009.

Braemar’s first fund made just north of $50 million in investments. An early bet on EnerNOC (NASDAQ: ENOC)—a cleantech firm that pulled off a $98 million initial public offering in 2007—helped Braemar launch a second fund with a total of $250 million to invest. And according to a May regulatory filing, Braemar is now in the process of raising $300 million for the third fund.

DePasquale makes a strong case that there’s rarely been a better time for energy entrepreneurs with good ideas to raise capital. Quoting figures from the National Venture Capital Association, he points out that cleantech companies raised $3.7 billion in 2010. “It was the number two sector behind biotech and about even with IT,” DePasquale says. And it almost matched cleantech’s banner year, 2008, when the sector raised $4 billion. “The dollars going into cleantech are still robust.”

Investments in energy infotech continue to grow, according to Anand Sanwal of CB Insights, a New York company that collects data on venture and angel investments in private companies. “If the trend continues, we’re looking at a record year,” he told the crowd at the Energy Infotech Forum, which was held at the New York Academy of Sciences.

Braemar has proven that cleantech investing can pay off for VCs who make early bets on innovative solutions. Other Braemar investments that have gone public include lithium-ion battery maker A123 Systems (NASDAQ: AONE), and Verenium (NASDAQ: VRNM), which makes industrial enzymes from bacteria and fungi.

On May 27, Braemar portfolio company Solazyme (NASDAQ: SZYM) went public and saw its shares soar 15 percent to $20.71 in its first day of trading. The South San Francisco-based company, which raised $198 million in that IPO, uses biotechnology to create renewable oil from certain strains of algae. The company also has a joint venture to market algae-based nutritional products, such as oils and powders, to consumer food manufacturers. “Selling a nutraceutical product is a wonderful hedge for the business,” DePasquale says. Overall, he adds, Solazyme represents all the ingredients of a good energy investment: “Multiple markets, multiple access points to scale the business, and novel technology.”

Braemar’s VCs lean heavily on their advisory board, which includes nine veterans of the energy and technology industries. Among them: David Fitzsimmons, former CEO of BP’s international oil trading business, Eugene McGrath, retired CEO of Con Edison, and Mohammad Al-Ramadhan, the president of KPC Ventures, the technology investment arm of the Kuwait Petroleum Corporation. “We have a lot of deep expertise, and that helps our portfolio companies develop their strategies,” DePasquale says.

While it’s unlikely they’re going to invest in consumer space travel anytime soon, Braemar’s VCs continue to maintain an open-minded attitude towards energy investing. They’re seeking opportunities in both technologies that improve old-line oil and gas industries and those that seek to promote energy alternatives, DePasquale says. “We remind people that oil and gas is still going to be a predominant part of the energy mix for the foreseeable future,” he says. “We have to find a way to invest in the renewable space but not ignore the things that are driving the economy today.”

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