The VC bidding wars, and how SolFocus more than doubled its money
San Francisco firm Nth Power has been active in clean technology investments for several years, and was among the many firms jockeying to invest in the company, valuing it in the single-digit or low teens of millions of dollars. Other firms were doing the same.
One existing investor was venture firm NGEN, which had given seed money a few months earlier. It got squeezed, because the money it had invested in that initial was converted to the value of last month's round, meaning that NGEN too was paying a high price to invest in SolFocus, even though it had put in months of sweat equity. "It went from being a great deal for NGEN to a good deal for NGEN," said Rob Koch, who is southern California-based NGEN's point person here in Silicon Valley. "Would we rather be on the sidelines?" he asks, rhetorically. "No. Without a doubt, we'd rather be in this deal at a higher valuation."
The end result is that SolFocus, which had set out to raise only $12.5 million, finished with $32 million in the bank. That sounds good, right? Well, looked at another way, SolFocus is going to have to make a whole lot more money now to produce the returns demanded by eager investors.
It is the latest aggressive move by NEA, and we expect to see more.
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