This Year’s Model

If you decided to leave the frenetic technology industry for a few years, pay little attention to it, then return, you might think a whole new set of industries has been born in your absence. It seems like marketing people in technology are hopped up on speed with the way they change their categories, sectors and those godawful acronyms. For instance, you may have left in 1999 in a world of cellular phones, dot-coms and CLECs (competitive local exchange carriers) and returned recently to smart phones, Web 2.0 and VNOs (virtual network operators). The evolution of markets in technology has always been at hyperspeed. With every incremental change, there seems to be a burning need to give it a new name, which is part marketing and mostly hype.

Back in the ’90s, a new class of early-stage investing came along that didn’t fit the software, hardware, telecom, semiconductor or biotechnology categories that prevailed at the time. Creatively known as “other,” this new sector of investing was kind of energy but also a bit industrial and screaming for a classification.

Local venture capitalist Michael Brown (then of Ventures West Management Inc.) was on the board of one of these rather successful “other” investments called Ballard Power Systems Inc. At the time, most of the “other” investments were alternatives to existing energy: fuel cell and solar power mainly. Voila! “Alternative energy” was born. New investors emerged globally, focused entirely on this new investment category, including local venture firm Chrysalix Energy. Brown joined Wal van Lierop and some other local investors to raise money completely from the large energy and industrial companies of the world (Mitsubishi and Royal Dutch Shell PLC among them) and invest it in the emerging alternatives. In that first fund of $50 million from 2001, they invested in B.C. companies Angstrom Power Inc. and Polyfuel Inc. but, because of their strict focus on energy, ended up making investments around the world.

Now to the present. Leap ahead a decade and you get . . . “clean technology.” The emergence of Al Gore and global warming (in that order, I think) made every alt-energy investor think more broadly about reducing greenhouse gases and pollution. Sensing this trend and seeing more opportunities in a broader mandate, Chrysalix expanded in two ways in 2005: it became an advocate of the broader clean technologies (alternative fuels, wind power, smart electric grids, electric vehicles) and raised a $70-million fund to invest under that mandate. In the process, it raised money from global financial institutions including Citigroup Inc. and Robeco. This gave van Lierop an idea to expand globally, and, in partnership with Robeco, Chrysalix hired and trained European clean-technology fund investors in Vancouver and helped them raise an affiliated fund of 50 million euros in 2007 (a Singapore affiliate fund is now underway as well).

Back in North America, Chrysalix invested in many companies, providing a good exit for its investors in the Day4 Energy Inc. IPO, and helping B.C. companies such as General Fusion Inc., Day4, Exro Technologies Inc. and Light-Based Technologies Inc.

General Fusion could be B.C.’s Google someday, in terms of size and importance. It will either change the world with its harnessing of fusion, the sun’s method of creating energy, or it won’t. Chrysalix is the largest investor currently in the company (GrowthWorks is also an investor), and I personally like the swing-for-the-fences attitude taken with this opportunity.

Chrysalix is now on its third North American fund, hoping to close above $100 million, and is expanding its affiliate fund idea around the globe. From its False Creek offices, this Vancouver-based fund manager fully expects that it can become a global powerhouse by maintaining its focus on clean-technology investing . . . or whatever it will be called in five years.