When people ask me if investors are making money in cleantech, I tell them yes, but I don't mention which type of investors or the sector.
Most of the analyses of cleantech exits do not differentiate for venture-backed companies. So we conducted our own study.
In the last ten years, Cleantech.org’s Cleantech Venture-Backed M&A Exit Study shows a grand total of 27 venture-backed cleantech deals greater than $50 million.
All in all, very tough returns. A number of eight- to ten-figure fortunes made, just largely not by the investors spending the nine- and ten-figure investments.
We had data on both exit values and venture capital invested for 19 firms and revenue estimates for eight. We found a 2.78X Median Exit Value Multiple on venture capital invested. Those exit numbers include the founders' and management’s shares, so average returns to investors would be somewhat lower. We found a 2.2X Median Exit Value Multiple on Revenues.
There was $13 billion in total M&A exit value.
Not bad, until you realize that’s over a span of ten years where cleantech has seen tens of billions in investment, and we used a pretty broad definition of “venture-backed.” To get there, we included Toshiba’s Landys+Gyr, Total’s SunPower, EDP’s Horizon, and ABB’s Ventyx deals. Those are the top deals by value, and they represent 60 percent of the $13 billion. None were backed by investors you would normally think of as cleantech venture capital powerhouses (Bayard Capital, Cypress Semiconductor, Zilkha and Goldman Sachs, Vista Energy). Three of them included prior acquisitions themselves.
Excluding those and looking at only the transactions where we had both valuation and exit data, we found an even weaker $3.8 billion on $1.8 billion in venture capital, amounting to a 2.1X multiple.
Most surprising, if you looked at the list of investors in these nifty 27 exits, you’d have heard of very few of them. This is truly not your father’s venture capital sector.
The exits have a surprisingly low-tech flavor, and were carried by renewable energy project developers, ESCOs, and smart grid and solar balance-of-system manufacturers.
If we had limited this to Silicon Valley venture investors in high-tech deals, well, you’d have wondered if M&A were a four letter word.
Interesting, isn’t it?