Westly cleans up with second fund

The Westly Group, a cleantech firm launched by former California controller Steve Westly last year, is closing in on a second fund totaling $130 million.

As of mid-June, the Menlo Park, Calif.-based firm had locked down $79 million, and expected to wrap up fund-raising in August.

Limited partners include Tudor Investment Corp., the State of Indiana Public Employees’ Retirement Fund, Lehman Brothers, and San Francisco’s Goldman family, heirs to the Levi Strauss fortune.

Westly himself is a major LP in the fund, as is the firm’s only other managing director, Michael Dorsey. While most venture firms typically request that partners contribute 1% to 3% of a fund’s total, Westly says he and Dorsey each committed about 20% of their net assets Westly Group II. That works out to about $25 million for Westly and about $5 million for while Dorsey.

“I used to sit on boards of CalPERS and CalSTRS, and it didn’t matter what kind of fund you had,” Westly says. “The number one correlation to being successful was the amount of capital the principals themselves had committed. If you have $1 million of your own money in the deal, you’re going to work pretty hard. I’m working pretty hard, too.”

Like its debut fund $12 million, The Westly Group’s sophomore vehicle will concentrate mostly on cleantech investments. Up to 25% of its portfolio companies may fall outside the sector, however.

“We think diversification is good, and we’re seeing a lot of great deals because of my experience in government and my experience in e-commerce from eBay,” says Westly, who was vice president of marketing at eBay in its early years.

He adds that “everyone at the firm,” including several junior staffers, “is focusing on cleantech.”

Westly has had a strong case to make to prospective LPs. His first fund, backed exclusively with money from his own pocket, was profitable within 11 months, thanks to a $3.5 million investment he made in Akeena Solar (Nasdaq: AKNS), a company that installs solar panel systems nationwide and was trading over the counter at the time of the investment. The Westly Group has sold about $16 million worth of Akeena shares. —Constance Loizos