You may have noticed we changed the website recently. Good opportunity to write a blog to explain in more detail! Pangaea's been focused on advanced materials venture capital since its first fund launched. Every investment we've made since 2003 has been exclusively in advanced materials. However, the way we look at the sectors has evolved over time. For our third fund, launched in 2011, we had five different areas of interest, three of which were in energy (generation, storage and efficiency), with the other two being sustainable materials / processes and environmental. Now, four years into that fund, we can look at most of its portfolio (we still have dry powder to do a few more deals this year) and see most of the investments have been in the non-energy areas. Indeed, most of our deal flow has come from the non-energy sectors.
That is not to say that energy is out of focus. We have made several investments there (such as Cnano and Envia) and continue to look at its subsectors with interest. However, we clearly do not look at the world of advanced materials opportunities the same way we did in 2011, let alone in 2001 when we started investing.
Pangaea is now looking at advanced materials across four overlapping areas, viewing the opportunities here as a continuum, rather than a series of silos. Each represents markets in the billions of dollars.
Energy was 30% of our 2014 dealflow, covering both conventional energy (oil and gas) and sustainable energy (solar, fuel cells, etc.). We had a nice exit with Boulder Ionics in 2014, which had developed breakthrough electrolytes for batteries and capacitors. We see lots of interesting targets for investment; for example, grid storage is an area we see coming to commercial maturity in the next few years.
A far "sexier" category than energy, electronics was one-fifth of our 2014 dealflow. Although we didn't put such an overt emphasis on it to begin with, three of our Fund III companies have products driven by wide band gap semiconductor technologies. For Fund IV, we are sharpening our activity in electronics with areas of interest that include wearables and other mobile devices, displays, and products driven by breakthrough semiconductor innovations.
Seemingly a "new" area for Pangaea, it may surprise you to know that we have been active in this area since 2003. Our investment in Semprus scored a superior exit for our Fund II when Teleflex purchased it for use in catheters and other health applications. Recently, it has been a very large area of investment, including our agriculture investments (Vestaron and NewLeaf) as well as Redlen, a leader in medical imaging. Water is also interesting, though it has proven a difficult market for venture-backed materials companies, but we think there could be outsized returns for companies that can play further along the value chain. Health-related advanced materials breakthroughs are needed to address several global mega-trends, such as rising population, aging population, and urbanization. However, we still have no plans to play in pharma, even though that is obviously a health application of chemistry and material science. We'll stick to our areas of expertise.
Although we don't position ourselves as a pure cleantech investor, this is the most obviously "cleantech" of the categories, focusing on sustainable materials and sustainable processes. It clearly maps to one of our Fund II categories, providing a third of our 2014 dealflow. Our investments in green chemistry (Calysta) or building materials (Switch) are good examples, but there are fast-moving newer technology areas of increasing interest. Additive manufacturing (including 3D printing) can be a far more material-efficient manufacturing process, as well as enabling products that would have been prohibitively expensive or impossible using conventional processes. We continue to diligence new technologies and markets that can result in a more sustainable society.
As illustrated in the graphic, most of the opportunities lie in the overlap of 2 or more of these categories. Our smart windows company, Switch Materials, actually would map right into the middle, impacting all of energy, electronics, health and sustainability. And of course, the interests of our many multinational Strategic Limited Partners also play across the overlap of these multibillion-dollar markets.
We think this refined strategy, an evolution of our paradigm, gives Pangaea better coverage of the opportunities in our exciting space. We are excited to be investing in companies that use advanced materials to make our world better!