Last week, we reported that Prometheus Energy, the Redmond, WA-based liquid natural gas producer, closed a $10 million investment from Shell Technology Ventures in a deal that is still resonating in the local alternative energy community. Prometheus, led by co-founder and chief executive Kirt Montague, has gone through many ups and downs since its formation in 2003. Now, through a strategic partnership with Big Oil, the company is looking to go global with its technology for taking methane gas from landfills and other waste sources and converting it into relatively clean-burning liquid natural gas fuel.
I heard from a couple of Northwest cleantech venture capitalists who commented on the significance of the deal. To me, their reactions help underscore the importance of finding the right partner at the right stage in a company’s life, especially in the tricky world of alternative fuels.
From Gregg Semler, co-founder and managing director at Portland, OR-based Pivotal Investments:
“I think it is an important deal from many perspectives. It not only validates the business opportunity for waste to energy deals but it demonstrates how important startups can be to the innovation cycle for global companies like Shell. As you know, a lot of cleantech is disrupting very large, global markets where the major competition is already well established. It can be challenging for startups to break in to an existing market. This demonstrates that companies like Shell are strongly motivated to do deals with innovative companies like Prometheus. As part of the aligning of interest, often times they will provide the necessary capital to get to the next stage of validation. Often times this kind of relationship is compelling to venture investors and helps if you are trying to raise additional venture capital. There are many other waste to energy companies in the Northwest as well as other startups where corporate partnering makes a whole lot of sense. It is not an easy time to be raising capital. This deal should motivate other early stage clean tech companies to source strong strategic corporate partners that can make a difference to achieve their goals.”
From Rick LeFaivre, managing director at Kirkland, WA-based OVP Venture Partners:
“I applaud Kirt for hanging in there and landing a strategic investor. Alternative fuel ventures quickly become ‘project build out’ deals that require lots of capital to build plants. They typically aren’t early-stage venture deals, which is why we tend to steer away (which is not to say they won’t be good investments for someone—just not us). Bringing in a strategic partner who can invest the capital required to scale the business is exactly the right way to go. This differentiation is important: I continue to hear discussion about ‘the lack of early-stage venture capital in the [Pacific Northwest] for cleantech ventures.’ The reality is that firms like OVP are actively looking for early-stage ventures in this space, but that typically means a leveragable technology platform that leads to profitability on a modest amount of investment with significant upside potential, vs. large project finance opportunities that require hundreds of millions of dollars to scale the business. It’s not that one model is ‘better’ than the other, but rather they are different kinds of investments, requiring different kinds of investors.”
“Bottom line: great to see another Seattle-based cleantech deal get funded, and it sounds like the funding came from the right kind of investor.”
