Viewing posts tagged "Vc"

Venture Capital Lights Up Solar in Q3

We reported earlier this week on the resurgence of venture capital investment in greentech. We broke it out sector-by-sector in this post. The graph above breaks it down year-by-year and looks at the recovery quarter by quarter

The chart below is another example of some of the work done in the Greentech Innovations Report – where we carefully track every VC deal in greentech as well as report on a different renewable energy topic every issue.

Investors channeled $575 million into 29 solar VC deals in the third quarter.  The investments spanned the solar sector and ranged from the fanciful (solar in space from SolarEn) to the sublime.  Notable in this data is the number of small investments - early stage VC investing is not dead.  Also notable are the 11 European and Asian investments, a larger than typical proportion.  European VC is alive and well.  The largest deal, Solyndra's $198 million, was a requisite piece of funding for Solyndra in order to garner their $535 million federal loan guarantee. 

Does the VC model still work in big solar? Can massively-funded VC startups like Nanosolar ($500M in VC) and Solyndra ($800M+ in VC) provide a reasonable multiple for their investors?  Or are the less capital intensive solar plays like SunRun or Enphase more suitable to the VC investor?  The next few quarters should give us some answers.

VC in Greentech Back With a Vengeance

They're back.

After a weak first quarter that had everyone grinding their teeth and a modestly improved second quarter, venture capital investment in green technologies roared back with $1.9 billion invested in 112 deals in the third quarter of 2009. That's up from $836 million in 59 deals in the first quarter of 2009 and $1.2 billion in 85 deals in the solid second quarter.

Solar power was once again the leading investment segment at more than $575 million in 29 deals followed closely by biofuels, biomass, and gasification deals at $512 million in 17 deals. As forecast by GTM Research – investment in Smart Grid, Energy Storage and Automotive is gaining momentum.

Q3 VC Investment in Greentech

Driven by the optimism of a recovering economy, plentiful government funding for renewable energy and a recent successful Greentech IPO in battery maker A123 – venture firms have returned to investing in all stages across all greentech sectors. 


Notable and sizeable deals included:

• Solyndra’s $198 million VC investment from Argonaut Private Equity, et al. for its Fremont, Calif.-based thin-film solar firm
• Synthetic Genomic’s $300 million multi-year commitment from Exxon for the development of algae-based biofuels
• eMeter’s $32 million investment from Sequoia Capital and Foundation Capital for smart grid management software
• Tesla Motor’s $82.5 million round from Fjord Capital and Daimler Motors for Tesla’s groundbreaking electric vehicle
• Serious Materials’ $60 million round from Mesirow Capital et al. for green building materials

Some of the most active VC investors in greentech this quarter included NEA, CMEA, Khosla Ventures, Kleiner Perkins and Foundation Capital.  


In addition to the sheer magnitude of investment (this quarter’s $1.9 billion is close to reaching the investment levels of pre-recession 2008) there is a marked trend of a return to early stage deals with more than 35 Series A and seed rounds this quarter.


 Also remarkable was the increasingly global nature of greentech investment this quarter. More than 35 deals came from outside the United States with plentiful deals from the U.K. and France.

Steve Vassallo, Venture Partner at Foundation Capital, sums it up: "It's nice to see that we've hit an inflection point across all segments of cleantech.  With the economic recovery well on its way, combined with imminent carbon legislation and the acceleration of energy efficiency and renewable portfolio standards, I expect we're going to see a surge of cleantech IPOs.  Several of our cleantech portfolio companies – from SunRun to SilverSpring – are about to close their biggest quarters on record.  No doubt, there's good reason to be optimistic."

Details on every deal in the third quarter can be found in the Greentech Innovations Report.

Snapshot of 2009 Greentech VC, M&A and IPOs

VC investment in Greentech is thriving. After a soft first quarter brought on by recession and low investor confidence, VC in Greentech has been creeping up steadily. 

Greentech VC in 2009

Q1 2009                        $836  million in 59 deals
Q2 2009                        $1.234 billion in 85 deals
Q3 2009 (to date)          $923 million in 83 deals (to date)

Q2 was 50 percent more than in the first quarter, and the third quarter should exceed the second quarter – a nice trend. That said, rising investment in greentech is not exactly an indicator of the health of the industry. We need more startup revenue, more M&A, and more IPOs – and that's starting.

Some of the biggest VC deals this year have been:

Suniva                       $75M for high efficiency solar
Powerspan                 $50M for CO2 capture technology for coal-fired electric power plants.
Imperative Energy      $43M for large scale renewable energy from biomass
eMeter                       $32M for smart grid management software

(I don't believe we can count Synthetic Genomic's $300 million big algae investment from Exxon as VC).

Greentech M&A in 2009

We've seen some M&A trends, highlighted by:

• Ongoing consolidation in the solar integrator and installer market
• Rising consolidation and land grabs in the carbon dashboard and utlity carbon monitoring field
• Vertical integration in solar – Bosch's acquisition binge created a vertically integrated entity from Ersol, Aleo and Johanna Solar

Greentech IPOs

Plenty of chatter but the only SEC IPO registration looking like it might launch in 2009 is A123 Systems, the developer and manufacturer of advanced, rechargeable lithium ion batteries.  A123’s product line ranges from 3.6 watts per hour batteries for portable power applications to larger 65 watts per hour batteries for electric vehicles. The company is also developing multi-megawatt battery systems for utilities that can provide electric grid services including standby reserve capacity and frequency regulation.

It is reasonable to expect the A123 IPO to come to market in the fourth quarter of this year – reasonable given A123’s revenue, the government and industry focus on smart grid, and the pent up demand for a greentech IPO.

A123's long-threatened IPO has the potential to draw the market’s attention to the energy storage sector. The IPO will also give us a glimpse on how investment banks and institutional investors like underwriters Morgan Stanley, Goldman Sachs and Lazard Capital Markets will value energy storage firms.

A successful public offering could open the floodgates to more greentech IPOs and usher in the dawn of a finance-rich greentech era. Other Greentech IPO candidates would include Silver Spring Networks, Tesla Motors, Nanosolar and Solyndra.

Every Greentech VC and M&A deal, every month – logged in the Greentech Innovations Report.

Smart Grid Finance Rundown: VCs and Congress Rock the Grid

VC Doesn’t Scale

VC Investment in Greentech 2005–2009

There are a lot of voices of late sounding the death knell for venture capital. The New York Times dusts this meme off every few years. One just has to have a good memory and ignore the nattering nabobs of negativity. They’re usually wrong.

Fred Wilson of Union Square Ventures has a different take. Wilson has crunched some numbers and claims that “VC doesn’t scale.”  He has determined that: “You cannot invest $25 billion per year and generate the kinds of returns investors seek from the asset class,” and that, “The number that the asset class can take on each year is around $15 billion to $17 billion. It's interesting to note that the industry raised $4.3 billion in the first quarter of 2009. That's a good thing. If we can keep it to that level, or less for a while, then we may be able to downsize and get returns back on track.”

Fred is right.

There has also been a sky is falling mentality in the greentech investment sector.  The bubble has burst, project finance money is gone forever, the end is nigh, etc.  These folks are wrong as well. 

Unsurprisingly, first quarter greentech investing was down. That makes sense if you’ve been paying attention to current events. But second quarter investment in greentech is already showing signs of a rebound and has gotten off to a roaring start with about $500 million in greentech VC invested in April alone.

Renewable energy, green and cleantech, ecologically sustainable technology and investment is at the beginning of a 20-year boom and there are going to be ups and downs along the way. Get used to it.