We can only hope that Sec. Paulson is studying up on his Akerlof information theory
(hence the title of this post, lame pun alert), before going on his big bad-debt buying spree.
While the financial markets were in turmoil this past week, however, the news for cleantech VC was looking much brighter. Early tallies of cleantech venture capital showed that the third quarter was another banner quarter for venture capital in the sector.
The Venture Power Report from GTM
counted $2.8B in greentech venture capital in the quarter (if it's like last quarter, this covers North America, Europe, Israel and Australia), the biggest quarter ever tracked by the GTM analyst, Eric Wesoff. A few big solar deals certainly inflated that top-line number (solar was $1.5B of the total), but tellingly Wesoff counted 95 deals in the quarter, versus 74 deals in Q2
Beyond the overall trend of sectoral growth, there's some evidence of increased interest in energy efficiency/ smart grid and geothermal. But really, this was a quarter driven by solar, with more than a quarter of the deals and more than HALF of the dollars tracked by Wesoff. The average solar deal size in the quarter was $61M, if you can believe it.
The Cleantech Group's numbers were a bit different
, at 158 deals totaling $2.6B across a different geography: North America, Europe, China and India. We'll have to wait for the details to see what drives the differences, but regardless, both surveys saw a big increase over Q2 in terms of both number of deals and dollars.
The Cleantech Group's U.S. tally at $1.75B (up from $1.49B in Q2) is especially notable in light of the news earlier in the week that U.S. VC totals were overall down to $5.7B from $7.6B in Q2, according to VentureXpert
. So all of a sudden, cleantech really is propping up the venture capital market in the U.S.
Here's the problem: The overall financial turmoil means that exits of all kinds have dried up. The IPO window is currently glued shut. And M&A exits overall are also way down
I think the consensus among VCs is that overall the sector has a lot of long-term growth potential, but right now any cleantech companies that were primed for (if not outright needing) an IPO or trade sale exit are hurting. As we saw during the summer, if things calm down in the overall market, cleantech is likely to lead the charge of exits once the IPO and M&A windows re-open. But for now, there are some big solar, energy storage and biofuels companies with big cash burn biting their fingernails and cheering on the bailout in hopes of stabilization, if not an upturn. Being early stage, with longer investment horizons, looks a lot better than late stage right now, is one implication...
One other major good piece of news was that the much-anticipated clean energy incentives re-ups were included as part of the "sweeteners" that got the bailout through the House
. This should particularly help solar, but also geothermal, wind power, biodiesel and EVs.
All in all, a good week in the news, and a good Q3, for cleantech VC. But everyone's rooting for some economic stabilization, if not recovery, over the rest of the year...