A123 began with no cleantech aspirations

Investor says the best performing cleantech IPO did not have "alternative energy" in the biz plan.

Cleantech is still too young to have produced many exits for the venture industry, and it turns out that the sector's flagship IPO, A123 Systems, was not a cleantech company at all for most of its history. In a post last week on PE Hub, Howard Anderson, one of the company's original investors and co-founder of Battery Ventures, says the team started with the eminently geeky goal of utilizing a new deep-dive lithium ion technology to extend battery life for cell phones and laptops.

Today, the investors look like geniuses because we invested in “alternative energy” before it was cool. Really, we did nothing of the sort. We invested in an academic paper in material science that was attempting to take a process and turn it into a product. But trust me, we will never tell that to the case writer from the Harvard Business School.

In the early days (circa 2001), the company was little more than a piece of licensed technology from MIT. Three years later, one of the earliest investors, Anderson's own YankeeTek Ventures, would close its doors after a disappointing fundraising campaign.

Maybe that's too bad. Much of the VC fundraising over the last several years has ended up in digital media, web-based startups, which have shown very little traction in the exit market save for a spat of online ad-networks acquisitions in 2007. As the venture industry slims down and returns to its high-tech roots, LPs may find themselves stuck with a lot of the high-glitz funds, wondering what happened to the geeky VC firms like YankeeTek--the kind that would fund a company named for a mathematical formula.