GE, Sequoia on A123Systems and cleantech (AONE)

From Dealscape:

Back in 2001, when Sequoia Capital participated in the Series A for lithium-ion battery maker A123Systems Inc. (NASDAQ:AONE), the investment marked the Silicon Valley venture capital firm's debut into the cleantech category -- "only it wasn't even called cleantech then," recalled Sequoia partner Michael Goguen at a media forum on cleantech VC investing hosted by GE Energy Financial Services at GE Global Research, the company's research and technology development center in Niskayuna, N.Y., earlier this week. A123Systems ultimately raised $350 million before its successful initial public offering last month. (The company will announce earnings on Nov. 10, with a conference call scheduled at 5:00 p.m. EST that day.)

When asked to compare and contrast investing in cleantech versus traditional VC-backed categories, such as information technology, Goguen said that "the common elements in building a sustainable company include the right entrepreneurs and frugality, but there are some undeniable differences."

"The customer base tends to be pretty difficult to sell into in the energy world," continued Goguen. "We found that unlike in the IT world or the enterprise software world, close cooperation with 'big brothers' were much more paramount here. Having the right partner was crucial."

Enter GE, which began backing A123Systems in 2006 with its Series C when the battery maker's only customer was Black and Decker Corp. (NYSE:BDK), said Ric Fulop, a co-founder of the company, who spoke on another panel at the media forum.

"Most VCs I've worked with don't really have the resources to dig into the technology and do the type of heavy-lifting research work at the molecule level that GE does," said Fulop.

Since 2006, GE has invested $160 million in 20 private companies, a small but important part of the $4 billion GE has spent on alternative energy over that period, CEO of GE Energy Financial Services Alex Urquhart said at the media forum.

"GE brings much more than money to the companies we back," he said, citing connections to GE companies and partners, the research and development center, and the abilities to "look at technology and assess it early on and collaborate along the way.">>>MORE