Santa Barbara-based NGEN Partners (www.ngenpartners.com), a venture capital firm focused on the materials and clean technology area, recently announced their second fund, NGEN Partners II. We spoke with Peter Grubstein, Managing Partner of the firm, about the new fund and a little bit about what the firm is investing in.
Ben Kuo: Tell me a little bit about your new fund?
Peter Grubstein: The new fund is focused on clean technology and materials. We are now running a little over a quarter billion dollars, and our first fund was focused on the same areas, so we have been doing this since 2001. We have 20 investments in the area, and we believe we have groundbreaking investments in solar concentrators, green building materials, and also in alternative energy and the water sector.
Ben Kuo: Is the fund's focus on clean technology new? How are the opportunities in this area looking for you?
Peter Grubstein: The opportunities are looking terrific. If you look at Fund I, 75% of our investments were in that sector, prior to the interest in clean technology. They were in the area of resource constraints, energy in the environment, all of those buzzwords put together. In our portfolio to date, there is more of a focus on alternative energy, we have three photovoltaic firms in our portfolio, and the markets have also moved forward from our perspective post-prototype. There are more companies able to get their prototypes into customer's hands much faster, there is demand being supplied by renewable portfolio standards from states like California, and consumer awareness and corporate awareness for the first time. Companies are seeing that resource constraints are affecting profitability, and are looking at all costs, such as total cost of ownership of things like light bulbs. That allows solid state lighting companies, for example, to get into fixtures, instead of just being a replacement like a compact fluorescent light bulb.
Ben Kuo: You've made lots of material sciences investments, which usually have a hard time getting from lab to market. What's your view on those investments?
Peter Grubstein: What happens is, historically is people tend to invest in what becomes a component--where you're not controlling your destiny. In our view, you have to invest not just in a component, but in leading the charge on a solution set. You need to have an IP advantage because of the materials , but also be in a position to demand and maintain growth by providing the whole solution. It's not just a light bulb, but also a fixture. It's not just optics, it's also the controls. It's not just the substrates.
Ben Kuo: What kinds of investments are you most interested in, and for entrepreneurs who do you want to hear from?
Peter Grubstein: We want to hear from guys who have a product that responds to market demands, and has intellectual property from patents or trade secrets. We want someone who can maintain a sustainable edge based on that intellectual property.
Ben Kuo: UCSB has a notable material science presence there, has that helped the fund being located in Santa Barbara?
Peter Grubstein: This is one of the centers for materials in the country, as well as environmental work, which does help. However our business is nationwide, and all over the place. I wish it were more in California, but it's not.
Ben Kuo: Finally, for those entrepreneurs in green technology or materials, what piece of advice would you give them on how to make their companies successful?
Peter Grubstein: Concentrate on where the profit is. What is your value add you bring to the product or a customer? Never forget the value.
Ben Kuo: Thanks!