Spent the entire day driving up and down Sand Hill Road today, catching up with west coast investors I hadn't seen in quite a while, and it was a pretty informative (and extremely long and tiring) day.
I'd been told by Brian Fan, the Senior Director of Research at the Cleantech Group (he pulls together all their deal tallies), that "the starting point on valuation right now is 50% of the valuation of the last round." Provocative stuff. However, I suspect that says more about the "Valley Valuation" inflation that had been happening in '07-'08 in a couple of high profile sectors, rather than a dramatic valuation reset across the board. Basically, that may be true in solar, and after all, solar is 40% of the dollars that went into cleantech in 2008, so it's easy (but probably wrong) to paint the entire sector with that brush.
That having been said, a 61 cents per dollar secondaries discount level is a sobering valuation statistic, even if it has selection bias.
But regardless of valuation, it's clear everyone expects to see a lot more high-profile startups that are completely resetting. In other words, doing a restart, raising a small round and considering it a Series A, crushing down the previous ownership (and often, tens of millions of dollars previously invested in the company), repositioning the company toward some kind of "Plan B". This will mean some good buying opportunities, but also is going to be a serious hiccup in the market, when even relatively healthy startups can't raise the money to keep moving forward and have to abandon their plans.
It was also clear that the downturn is affecting different investors in very different ways. Some were having to take a breather, just pulling back on their cleantech efforts (albeit unofficially, of course). Others are hungry and active and seeing lots of buying opportunities.
1H09 is starting to feel like quite a crucible period for the cleantech venture community and their investments.
Also notable: Everyone is now interested in some flavor of energy efficiency/ smart grid. And no one told me (as I'd occasionally been told before) that they were actively looking for more capital intensive opportunities.
Deal announcements since the last update:
Ze-Gen raised a $20mm Series B led by Oman-based Omaz Zawawi Establishment and including existing investors Flagship, VantagePoint and the Massachusetts Technology Development Corp.
Boston Power raised a $55mm Series D led by Foundation Asset Management and including existing investors Oak Investment Partners, Venrock, GGV Capital and Gabriel Venture Partners.
Zeachem raised a $34mm Series B co-led by Globespan Capital Partners and PrairieGold Venture Partners, with follow-on investments by MDV, Firelake and Valero Energy Corp.
Rob Day is a Partner with Black Coral Capital, based in Boston. He has been a cleantech private equity investor since 2004, and acts or has served as a Director, Observer and advisory board member to multiple companies in the energy tech and related sectors. Rob was a co-founder of the Renewable Energy Business Network (www.rebn.org), a non-profit organization which was acquired in 2009 by the Clean Economy Network. The views expressed on this blog are those of Rob, not necessarily the views of any of his colleagues and affiliated organizations. Contact Rob at .(JavaScript must be enabled to view this email address).
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