Venture Capital News

Venture Capitalist Backs Biofuel

On the search for alternative fuels, Silicon Valley entrepreneur Vinod Khosla says the answer is clear as gin.

Delivering the keynote address at a Stanford Institute for Economic Policy Research forum, titled "Prosperity Despite Expensive Oil: Energy Solutions for California, America and the World," on April 21, Khosla endorsed ethanol technologies, which produce "biofuels" out of switchgrass, wood chips, corn and recycled fast food oil.

"Within the next five years, we can be irreversibly down a trajectory that doesn't need any petroleum in this country," Khosla said. "We can do this in all of the United States for less than half a billion dollars."

During his speech, titled "Biofuels—Think Outside the Barrel," at the Schwab Center to about 100 energy scholars, economists and policymakers, Khosla outlined three "action items" for switching to biofuels:

• 70 percent of all new automobiles should be flex-fuel vehicles, giving drivers the option of gasoline or ethanol;
• 10 percent of gas stations in the United States should distribute ethanol to "achieve criticality";
• Create a tax on cheap oil to stabilize oil prices in the unlikely event they should fall below $40 a barrel. (Oil is currently $72 a barrel.)

"I don't think oil will ever [fall to] $40 a barrel until an alternative appears," Khosla said. "If an alternative appears, we will see the manipulation of oil prices to drive alternatives out of business. This [tax] is to assure Wall Street that [it] will not be subject to oil price manipulation by Saudi Arabia."

Khosla said those who own fewer than 25 fuel stations would not be included in the 10 percent of stations required to distribute ethanol, to keep "mom and pop" gas stations from bearing the burden of ethanol distribution.

"There are lots of things that make sense but will never happen because the interest groups are not aligned," Khosla said, addressing questions from the audience about "greener" alternatives such as solar, wind or hydrogen power.

"Biofuel is the only viable solution," he said. "It's a faster and lower-risk path to a renewable future." Scientific consensus says global climate change is due to an accumulation of greenhouse gases such as carbon dioxide in the atmosphere. According to the Intergovernmental Panel on Climate Change, fossil fuels like gasoline contribute to two-thirds of this buildup. This points to the need for a cleaner energy source that can be brought to consumers quickly.

Khosla is co-chairing a November ballot initiative in California with Hollywood mogul Stephen Bing to reduce petroleum consumption. By taxing oil production in California, the nation's third-largest oil producing state, the initiative would create funds to boost alternative fuel production.

"This is not a green objective," Khosla said. "This is an economic objective." An alternate fuel source could help curb inflation, create tax revenue and new jobs, lower the risk of costly military interventions abroad and ultimately reduce U.S. dependence on foreign oil.

Considered one of Silicon Valley's most influential venture capitalists, Khosla earned an MBA from Stanford in 1980 and went on to co-found Sun Microsystems with Scott McNealy, Bill Joy and Andy Bechtolsheim. In 2004, he began his own venture capital firm, Khosla Ventures.

Experts speaking about topics spanning from energy to economics preceded Khosla's keynote address. Stanford Professors Michael Boskin, Lawrence Goulder, Franklin Orr Jr., Geoffrey Rothwell, James Sweeney and Frank Wolak were among the 13 speakers, who also included California State Controller and gubernatorial candidate Steve Westly.

Ethanol is the best way to ensure cheaper fuel, create secure and diversified energy sources and maintain farm economies, Khosla said. "Even though they won't acknowledge it today, oil companies are best equipped to build biorefineries on a large scale." Some of the "more progressive" companies, like BP and Shell, are aggressively looking at ethanol, he added.

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Arbor Partners and Blue Chip Venture Company Joining Forces

Arbor Partners is joining forces with Blue Chip Venture Company in a relationship that is expected to increase the amount of venture capital available for investment in Michigan-based early stage companies. In connection with the new relationship, Blue Chip has opened a Michigan office located at Arbor Partners. Don Walker and Dick Eidswick of Arbor Partners have become Venture Partners with Blue Chip, and Josh Beebe of Arbor Partners has become a Venture Principal with Blue Chip and will be responsible for Blue Chip's day-to-day activities in Michigan. They will begin working with Blue Chip on new investment opportunities while continuing to manage Arbor Partners' investments in its active portfolio companies.

Blue Chip, founded in 1992, was Cincinnati's first venture capital firm and has grown to become one of the largest venture capital firms in the Midwest. The firm has invested in over 50 Midwest companies. Blue Chip and Arbor Partners have co-invested in six companies including Michigan-based Bluegill Technologies and Sircon.

Arbor Partners, founded in 1996, is an Ann Arbor, Michigan-based venture capital firm committed to helping entrepreneurs build lasting growth companies. Arbor Partners invests exclusively in companies in the Information Technology sector. With over $38 million under management, Arbor Partners has been one of the most active venture capital investors in Michigan.

Beebe, Eidswick and Walker's relationship with Blue Chip will not affect the day-to-day management of Arbor Partners and its portfolio companies, which will continue to be managed by Arbor Partners.

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Arcapita Ventures Leads $11 Million Round of Financing in Prenova

Representatives of Arcapita Ventures, the venture capital arm of Arcapita Bank B.S.C. announced Wednesday that the group has led an $11 million round of investment in Prenova, Inc., one of the nation's leading energy management solutions providers. Joining Arcapita in the round were existing investors Austin Ventures, Frontenac Company, River Cities Capital Funds and Colonnade Strategies. As part of the financing, John Huntz and Ramsay Battin of Arcapita Ventures have joined Prenova's Board of Directors.

Prenova's suite of technology-enabled services has been proven to significantly reduce customers' energy-related expenses. As energy expenditures continue to increase in the retail, commercial and manufacturing sectors, Prenova provides its customers with a solution set that lowers the direct costs of their energy supplies, reduces their total energy usage and extends the life of their energy assets. The combination of these services also provides customers with a higher level of visibility, manageability and predictability within their energy budgets. Prenova's customers include AT&T, Costco, Crate & Barrel, Dollar Tree, Eddie Bauer, Famous Footwear, Kroger, MCI, Owens Corning and 24 Hour Fitness.

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Hyperic Announces Series A Funding From Accel Partners

Representatives of Hyperic, a leader in open management frameworks for IT operations, announced Wednesday it has acquired first round Series A investment from Accel Partners, a well-known Silicon Valley venture capital company. Among other uses, the funding will be used to shape Hyperic's business model and product lines in order to address new opportunities in the IT management space.

Concurrent with today's news, Hyperic announced that Larry Augustin, a leading open source authority, has joined Hyperic's board of directors. Bob Bickel, former Executive Vice President of Strategy and Corporate Development at JBoss, is serving as a key strategic advisor to Hyperic.

Hyperic's unified IT management solution, Hyperic HQ, offers cross-platform and cross-technology discovery, monitoring, alerting, reporting and control of enterprise IT assets. The product has been adopted by dozens of world-class companies, including several Fortune 100 companies, and today manages many of the world's largest Web infrastructures. The success of Hyperic's flagship product enabled the company to be profitable since its founding, and to self-fund its growth until the present time.

New board member Larry Augustin currently serves on the boards of several early-stage technology companies. In 1993 he founded VA Linux (now VA Software), serving as its CEO until 2002. One of the group who coined the term "Open Source," he has written and spoken extensively on Open Source topics worldwide.

Bob Bickel currently serves a number of companies as an active advisor or board member. Before his service to JBoss, Bickel was general manager of the HP Middleware Division; he also worked at Bluestone Software, Inc., acquired by HP in 2001, as executive vice president of products. At Bluestone, Bickel introduced that company's application server technology to market, helping grow the company's annual revenue run rate to over $60 million.

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Austin Ventures Announces Partnership With Elisabeth DeMarse to Pursue Information Services and New Media Opportunities

Representatives of Austin Ventures ("AV") today that the company has entered into a partnership with Elisabeth DeMarse to form DeMarseCo, Inc. The new company, headquartered in New York City, will focus on acquiring and/or developing growth companies in the information services market. AV plans to invest up to $50 million of equity capital to support management's strategy to build a leading information services company through both organic growth and acquisition. Ms. DeMarse will serve as Chief Executive Officer of DeMarseCo, Inc.

Ms. DeMarse has over 20 years experience in senior management roles of leading information services companies including Bankrate, Hoovers, Bloomberg L.P., and Citibank. Most recently, DeMarse served as President and Chief Executive Officer of Bankrate, Inc. (Nasdaq:RATE). Recruited by its Board of Directors, she restructured this internet media company to deliver significantly improved operating results. During DeMarse's tenure, she quintupled unique visitors and page views; increased revenue 560%; significantly expanded operating margins to 32%; and delivered 11 quarters of consecutive EPS. Her accomplishments led to a market cap increase from $12 million at her hiring to $300 million, representing an increase in stock price of 1200% in three years. Ms. DeMarse is a graduate of the Harvard Business School and Wellesley College, and a member of The Committee of 200.

Prior to Bankrate, DeMarse served for ten years as a senior executive in a variety of roles at Bloomberg L.P. During her tenure, she created and negotiated over 20 major deals and new business ventures, developed the company's marketing strategy, built the marketing function, evaluated acquisitions/ventures, and re-defined Bloomberg's brand to extend beyond financial services to a broader range of media offerings. Her efforts helped build Bloomberg from a $50MM financial information organization to a $1.5 billion media company.

DeMarse will be based in New York City and will evaluate potential deals throughout the United States. The relationship is part of AV's strategy of partnering with talented executives with proven track records to build growth companies in attractive markets. AV has a dedicated in-house talent function that identifies executives that want a hands-on partner in building their next business.

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TechBiz Connection to Host Panel of Leading Venture Capital Providers

TechBiz Connection's monthly forum will feature a distinguished panel of local venture capital providers who will explain how preparation and planning are the two key factors in accessing capital for startups and emerging companies on Wednesday, May 17, 2006 at 6 p.m., at Connexion by Boeing's headquarters in Irvine.

According to Jack Bicer, TBC president, raising capital is often required when starting a new company or accelerating the growth of a young company. The May forum panel of leading capital providers will provide an opportunity for entrepreneurs and business owners to interact with investors and gain insight regarding preparation requirements for entrepreneurs/business owners, investor introduction recommendations and critical business criteria for investors.

The panel moderator is Frank Peters, president of Tech Coast Angels (TCA). Peters serves on the advisory board for TriTech Consulting SBDC and is the vice chairman of Orange County Innovation.

The TechBiz Connection Forum panelists include:

• Jim Casparie, managing principal, The Venture Alliance (TVA). Casparie has been a significant innovator in the angel and VC investing space for almost 20 years. He was a founding principal in the nationally recognized angel capital firm, Angel Strategies.
• Sid Mohasseb, managing director, Venture Farm LLC. The Venture Farm is an early-stage execution and funding organization. Mohasseb is also an executive member of the Tech Coast Angels.
• Bob Holmen, co-founder, Miramar Venture Partners. Launched in 2001, Miramar is focused on venture investing in early-stage information technology companies, primarily in Southern California.

The forum discussion and subsequent question-and-answer session is sponsored by Business Wire, Daly-Swartz Public Relations, iSeminars Int'l, Savvis, Manatt, Phelps & Phillips and Brilliant Blue with Connexion by Boeing as host sponsor.

Admission to the TechBiz Connection event is $25 prepaid and $35 after May 16 and at the door. Sign-up online or e-mail president@techbizconnection.org.

TBC is located at 3943 Irvine Blvd. #216, Irvine, CA 92602.

TechBiz Connection was created to support Southern California business and technology professionals, companies and entrepreneurs by providing timely education and networking opportunities. The organization focuses on where technology and business intersect; everything a successful high-tech company would want to do.