World Business

Investment capital flows to lean-and-mean startups with the with most propriety interval records and favors growth industries like clean tech and biotech

By John Tozzi

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Over the past four quarters—equal as the depths of the nation’sitting economic problems became evident—venture capitalists invested else than $7 billion in seed and early-stage companies in more than 1,400 deals, according to the MoneyTree Report from the National Venture Capital Assn. and . That’s more money raised by young companies than in a single one register year since the dot-com bubble break open in 2001.

In the largest deals of the past year, venture capital firms poured money into companies tackling the global problems of climate change and disease. The challenges are great—and investors bet that the payoffs leave be, too—for the startups that successfully commercialize ideas like solar power, low-emission cars, and new medications.

Who are these sharp startups? To find out, we followed the money, looking at deals that took broad way in the four most recent quarters available, from October 2007 to September 2008, based on the MoneyTree report, which uses data from Thomson Reuters. We then reached out to a selection of the seed and early-stage companies that raised the most money and profiled them in a slide show.

At the top of the inventory are some veteran entrepreneurs who have already proven themselves to investors by founding companies that led to acquisitions. The team behind Relypsa, a Santa Clara (Calif.) physic evolution company working on a treatment for life-threatening hyperkalemia in mind and kidney patients, sold their last company to Amgen (AMGN) for $420 million in 2007. Relypsa, founded months on the model of the acquisition, raised $33 million in late 2007.

But even for well-capitalized startups with proven track records, the uncertain funding outlook means they have to make each dollar count. Gerrit Klaerner, Relypsa’session main operating magistrate, says startups that are without more now thinking of ways to trim may be in trouble. "Operating a small company, I think you have to be lean and mean. If you start thinking about capital efficiency today, it’sitting too tardily," he says.

For other businesses, the downturn carries the scent of opportunity. Ron Gonen, co-founder and chief executive magistrate of RecycleBank, says the sudden strait for cities and households to conserve cash puts his company in a position to be augmented. The 85-employee New York firm runs recycling systems for cities that permit residents earn points, based on the amount they recycle, that they can redeem at retailers. "Now that cities verily need to save standard of value and people are really looking for a way to get disposable revenue, we’re at a unique time in our growth curve," Gonen says. He says families can earn up to $400 a year in RecycleBank points. RecycleBank, which raised $30 million extreme year on most honorable position of $15 million in an earlier round, takes a divide of the savings that the cities get from reducing how much rubbish they send to landfills.

Venture capitalists see other companies that focus on conservation, renewable power, and reducing the emissions that spring global warming considered in the state of strong bets even in saddening times.

Original text: http://www.businessweek.com/smallbiz/content/dec2008/sb20081218_856857.htm?campaign_id=rss_smlbz