Good Energies Backs Control Valve Maker Microstaq

Microstaq Inc., a maker of a chip-controlled valve for air conditioners and other appliances, raised $12.5 million in Series B financing, to expand sales and marketing of its product.

Good Energies led the investment, which included returning backers Yaletown Venture Partners and Polygon Group. The company has raised $22.5 million to date. This is not a tranched round.

"The company has a strong management team in place that we felt could deliver getting its energy efficiency technology to the market," said Sean Petersen of Good Energies. He added that Microstaq's product would be cheaper and should gain wide adoption.

Microstaq's chip can control the opening of valves in tiny increments, thus decreasing the energy needed for unnecessarily large fluid flow in devices heating, ventilation and air-conditioning systems. The valve could also work with other equipment like variable-speed compressors.

In addition, future applications may include remote monitoring of the appliance's performance, as the chip that can process information would already be inside.

Microstaq, based in Austin, Texas, has shipped some of its valves for testing to major HVAC appliance makers. But the process of incorporating the valve into new products would be relatively lengthy.

"Existing valves are mechanical, dumb and static. This is dynamic," said Greg Kats, a managing director at Good Energies and head of its green buildings group, adding "there is a huge addressable market."

But it seems the company, founded in 2000, will have to raise awareness of its product.

"To our knowledge [chip-based macro flow control valves are] not something that's in use in our members' equipment right now. We don't know anything about this yet," said Francis J. Dietz, vice president of public affairs at the Air-Conditioning, Heating, and Refrigeration Institute, a trade group.

Microstaq's valves are much smaller in size than the currently used mechanical ones. While that means that the appliances using the valves could also be made smaller, there are adjustments that would have to be made to other parts inside the appliances to incorporate the Microstaq valve.

The valves would have to be designed into new models and are not made for retrofitting existing appliances. Microstaq is a fabless producer, and contracts with semiconductor companies for manufacturing. It has partnered with Freescale Semiconductor.

Petersen said that incorporating Microstaq's product will decrease manufacturing costs.

Overall, Good Energies sees a lot of potential in green buildings. The company expects to primarily make deals for privately held companies as it hasn't seen significant public plays in the sector yet.

Good Energies is likely to invest between $25 million and $100 million into the space next year.

"This year the industry is at about $20 billion and it's doubling every year," said Kats. "And we don't see that changing even with the recent economic downturn and with the collapse of residential construction. The rate of growth in green buildings hasn't slowed at all." he said.