SAN FRANCISCO – Nth Power Technologies Inc., which launched its sophomore effort in July, is expecting a first close on about $25 million in January, said Maurice Gunderson, a managing director at the firm.
Targeted at between $75 million and $100 million, Nth Power Technologies Fund II L.P. will back early-stage companies positioned to capitalize on the deregulating energy sector (see story, page 40).
The fund will back some 15 to 20 companies in the United States and Europe. Typical investments will range from $1 million to $4 million, over several rounds of financing. Nth Power usually leads its deals and prefers not to invest alone.
The concept behind the firm’s investments is simple: as the energy industry becomes increasingly competitive, power companies will be forced to differentiate themselves. Nth Power plans to back companies that will assist with this process.
As there are different grades of gasoline, electricity eventually will be sold in a variety of qualities, Gunderson predicted. A hospital, for example, might be willing to purchasing a higher grade of uninterrupted power than an office building.
The firm’s previous $65 million Nth Power Technologies Fund I L.P., is invested in 13 companies and will back two to four more in the first quarter before completing new investments, said Nancy Floyd a managing director at the firm. The firm’s portfolio includes companies such as Electric Lighting Inc., which makes energy-efficient dimmable fluorescent lighting systems.
Raising the first fund was a three-year process, which the managing directors describe as “a very long sell,” but the second time around, fund raising has been considerably smoother. They attribute the difference to their eight years of working together and the growing popularity of their target portfolio.
Nth Power expects a majority of its limited partners from the first fund – almost all of which are utility companies – to invest in the second vehicle. Repeat investors will be joined by some newcomers, likely to include pension funds and funds-of-funds investing purely for financial reasons. The firm employs a traditional carried interest split of 80%/20% and a standard 2.5% management fee.
The firm regularly consults with three special limited partners: Catherine Lego, a former general partner at Oak Investment Partners; Robert Shaw, founder of the Arete Funds; and Mason Willrich, the former chief executive officer at Pacific Gas and Electric Enterprises.
Nth Power was co-founded in 1992 by Floyd and Gunderson, both of whom work with Tim Woodward, also a managing director, and one recently hired associate.