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Proprietary materials developer Konarka Technologies Inc. raised $45 million in a late-stage round co-led by money manager Mackenzie Financial Corp. and previous investor Good Energies of New York, to complete commercialization of a polymer-based film for a variety of lightweight solar power collection applications.
The deal brings total investment in the six-year-old Lowell, Mass., company to $105 million and is expected to provide enough capital to take the company through the launch of several revenue-generating partnerships next year and to positive cash flow. In addition to funds managed by Toronto-based Mackenzie, including the $6.7 billion Ivy Global Natural Resources Fund, the round includes Pegasus Capital Advisors of New York and a long list of previous investors including Draper Fisher Jurvetson, New Enterprise Associates and 3i Group plc, all of Menlo Park, Calif.; Asenqua Ventures and Vanguard Ventures, both of Palo Alto, Calif.; ChevronTexaco Technology Ventures of San Ramon, Calif.; Massachusetts Green Energy Fund LP of Brookline, Mass.; NGEN Partners of Santa Barbara, Calif.; and Angeleno Group of Los Angeles. Konarka co-founder and executive chairman Howard Berke said the company began fundraising for the current round in May as it ramps up a pilot production facility in Lowell and pursues three partnership avenues for commercialization of its products next year. The company is refining manufacturing processes internally, but it will form joint ventures and other partnerships with chemical and materials companies as suppliers, coating and printing company partners as contract manufacturers, and applications partners to create end-user products. Berke said the new money will allow the company to patiently pursue a business model of significant participation in partnerships with leading companies in a variety of areas. He said the company retains the option of selling its technology directly but has primarily focused on partnerships, which it has just begun to announce. "There might be some licensing, but the predominant model will be joint ventures with leading companies within a number of vertical markets," Berke said. "We are working with battery producers, power supply, sensors, detectors, traditional panel producers and others, and we are in an optimal financial position to launch our renewable energy technology into a variety of markets." Konarka has more than 300 patents on technology originally developed by co-founder Alan Heeger at the University of California, Santa Barbara, for which he won the Nobel Prize for chemistry in 2000. Since the company's formation in 2001, Konarka has refined its chemistry to allow for low-cost production of flexible photovoltaic generating films using manufacturing processes from traditional printing and coating industries. "It has always been the challenge to put together the appropriate chemistry to make this work, because the deal was not to maximize efficiency but to maximize watts-per-gram," said Arno Penzias, also a Nobel laureate for physics in 1978, and a venture partner and head of NEA's energy practice. "When we invested in 2004 they had the organic photovoltaic material, and it worked in a glass tube, but they have now developed materials that are really light and flexible and not expensive." Penzias said applications for Konarka's materials are limitless, but will focus on things where flexibility and portability are particularly necessary. He cited a portable solar collector that could be rolled out to recharge an electric scooter while its rider enjoys a picnic. Fred Sturm, chief investment strategist with Mackenzie Financial, said funds the company manages are the largest investors in resources in North America and that it is building a portfolio of renewable energy investments as part of that. He said the managed funds invest in leading companies in particular markets, but he also said Konarka stood out. "We believe that in the next decade it will become increasingly challenging to satisfy the world energy needs solely with traditional fossil fuels, and while the renewable energy space has already had a lot of growth in the last 10 years, it will have a lot more in the next 10," Sturm said. "We have a number of leading companies in our portfolio, and Konarka is one of the leading companies in the solar space, but we believe there will particularly be a need for low energy capture at low cost, and that Konaraka could be a leader in this space." Berke said the new investment had multiple competing term sheets and came at an attractive valuation, but would not disclose terms. Lehman Brothers Inc. helped assemble the round, with Sean Fitzgerald shepherding the deal on the private equity side in New York and Amy Smith in Menlo Park handling the investment banking side. Penzias said investors saw the round as an opportunity to extend the company's time frame for taking on new opportunities without pressure, even as revenue begins to ramp up in its initial partnerships. "This financing is enough for five years of development even without revenues," Penzias said. "People were throwing money at us, and the round was attractively priced enough for us to raise a large amount of capital." Konarka had legal work on closing the round from Edwin Miller of Sullivan & Worcester LLP in Boston. Mackenzie used in-house counsel.  Deal Video
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