Martin Rosenberg Guest Editor

Two weeks ago, I caught up with Buz at a Boston hotel while he was taking a breather during the hectic-paced Energy Venture Fair -- his creation. In a warren of conference rooms a few paces from the ballroom in which we sat, venture capitalists listened to brief presentations from 80 companies during the two-day program. The presenters outlined an invention, business plan or an idea of how to revolutionize some aspect of the creation, delivery or use of energy. Full disclosure: Energy Central, publisher of this newsletter and EnergyBiz magazine, is a co-sponsor of the event.

Buz says he conceived of the Fair several years ago when he "noticed a lot of interest in the private equity community in energy and an increasing number of emerging growth companies in the energy space." The problem, he realized, was getting them together. "Most information is passed around in an inefficient way."

The first Fair was held in early 2001. Companies invited to present are broken down as follows: one-third hardware, one-third software and one-third services. Furthermore, they were at various points in their evolution: one-third early-stage, one-third middle-stage and one-third mature -- even post initial public offering.

That formula, Buz says, "gives us the ability to attract a large book of private equity investors." Way more than 80 companies vie for an opportunity to present. Those not skilled in writing business plans are quickly coached prior to the event. In attendance at the Fair this month -- in addition to those seeking investor support -- were 100 investors representing approximately 75-100 companies. Some are well known powerhouses. A former Nobel Prize winner was in attendance. Also on hand was one high-tech billionaire with "more money than everybody in this room," Buz says. "If he is interested in this space..." He did not have to finish his sentence. Startup energy ventures are poised to capitalize on a perfect moment, when lots of venture capital is out in search of energy ventures.

Indeed, the economy is apparently poised for an explosive rebound in venture capital investment in entrepreneurial startups of all kinds. In a gushing article in the current issue of Business 2.0, writers Michael V. Copeland and Om Malik assert, "Venture capital is flowing more profusely than it has since the late 1990s; money invested in early-stage startups could top $1.5 billion this year, up 50 percent from last year and almost double 2003's figure." Furthermore, they continue, the floodgates have been thrown open. "... the average seed investment, $4.4 million, is three times what it was a year ago and larger than it was in 2000."

Back to Boston

I ask Buz whether Infocast, which puts on the Fair, has done any follow-up studies of the amount of investment that flows as a direct result of the networking event. "There was $250 million worth of new investment in companies that made presentations in 2004, and that number continues to go up," he says. He cites the story of Pentadyne Power Corp., which after presenting at the Fair managed to attract $37 million to enable it to develop energy storage devices. It now has orders from the U.S. Department of Defense for 500 installations and is well on its way to viability.

So who are possible winners of the future? The Fair has attendees vote on the five most promising companies making presentations at the gathering. This year's winners:

EnerNOC, Inc.
Ice Energy
Seattle Biodiesel
Selsam Innovations/Superturbine Inc.
WellDog, Inc.

Separate articles could justifiably be written about all five of these companies -- as well as many other promising ventures at the Fair. I will briefly write about two.

I sat in on EnerNoc's presentation about its model to be paid by grid operators and utilities to shave their peak demand. EnerNoc aggregates commercial and industrial customers willing to have their power supply interrupted on occasion in exchange for a quarterly check of $10,000 or $25,000. "We say, 'you can be the utility's insurance policy and get paid every month,'" the presenter said. Energy users sign a 5-year contract and can arrange alternate sources of energy when needed. There are mechanisms for them to get out of their agreement with EnerNoc on occasion, should the need arise. EnerNoc will top $10 million in revenue this year and is headed toward $16 million to $20 million in 2006 and $25 million to $50 million in 2007, the presenter said.

Ice Energy now has $1 million in annual revenues and seeks $30 million in financing for its plan to boost the energy efficiency of air conditioning systems, thereby drastically reducing peak demand. The company provides distributed energy storage for commercial and residential buildings, enabling customers to shift peak energy consumption to the night when demand is lower.

You would think utilities would be very interested in learning about EnerNoc, Ice Energy and other similar ventures by attending the Fair and snapping up company information and business cards. Utilities intent on diversifying may want to direct shareholder funds towards these ventures. Utilities wanting to streamline their operations need to know the new business ideas that are bubbling up from the entrepreneurial strata of our economy. Unfortunately, unless they were disguising themselves as venture capitalists, I did not notice any representatives of utilities in attendance at the Fair.

Looking to the future, Buz sees the stars aligned for innovation in the energy sector on an unprecedented scale. For one thing, the new energy act signed into law by President Bush this summer places "extraordinary emphasis on technology and that is going to be an accelerator." For another, the recent drought in IPOs has bottled up venture funds reluctant to bet on ventures that did not offer clear exit options. Initial public offerings will rebound, and so too will venture capital investments in energy, Buz says.

Let's not forget that energy is the most important industry in the United States, and it is three times the size of telecommunications, he continues. Opportunities will quickly multiply for investors with an interest in energy. Buz's vision of the future is -- well -- electric.

As he puts it: "Private equity in emerging growth companies in energy is going to quadruple in the next few years -- and it could grow faster than that."

Martin Rosenberg is editor-in-chief of EnergyBiz magazine, a bimonthly energy industry print magazine that circulates to more than 20,000 senior executives and managers. EnergyBiz, in its first year of publication, was recently awarded a gold medal in the "energy/utilities/engineering" category in the prestigious Folio magazine competition. Subscribe online now.