It's time once again to look back on what I'd predicted would happen this past year in the world of cleantech investing. And the year went largely as expected -- which wasn't great. Not horrible, but not much of a recovery year either.
1. 2014 will be a slight "up year" for both deal counts and dollars, in terms of U.S. cleantech venture deals.
This one is yet to be determined as we await Q4 tallies. But this will likely be slightly off. According to PWC's Cleantech MoneyTree report, dollar amounts through Q3 were indeed slightly up in 2014 compared to the previous year. But deal counts appear to have been a bit down. Perhaps a boost of dealflow in Q4 will make up the difference, but so far this looks like a prediction deserving only partial credit.
Still, the reasoning behind expecting 2014 to look a lot like 2013 held pretty true: there was a bit of investor interest returning to the sector, but with LPs remaining largely on the sidelines, not a lot of new capital was available to be deployed. (More on limited partners in the next prediction.)
2. 2014 will show signs of a rebound in cleantech private equity LP activities.
As I noted when writing this last year, it's a tough stat to track. But I suggested there's appetite for "scarcity innovation" out there among sovereign wealth funds, corporates, and family offices, even if mainstream pension funds and such are still sidelined. And I think we did see signs of such interest and a slightly better fundraising environment, even if the floodgates indeed didn't open up. We did see more sovereign wealth fund direct investment into the sector. And we saw a few successful fundraising efforts this year (see DBL, for example, as well as some others I know about but that haven't announced yet).
I'm not sure I would call this a "rebound," though. So again, only partial credit.
3. We will start seeing even the most stalwart defenders of "cleantech" migrating away from the phrase.
This prediction definitely came true. May have to change the name of this column soon, just to keep up with all the ways people out there are now describing what they do that used to be called "cleantech."
4. 2014 will be "the year of large-format electricity storage," but...
I would say this one also came true. From big funding rounds to Giga factories to utility programs to commercialized products to examples of people basically saying they need storage to continuesolarpower roll-outs (although I strongly disagree that storage is required), in 2014, energy storage was crowned the "next big thing." It's really the one capital-intensive subsector within cleantech that still sees a lot of momentum right now among investors and large corporate players.
Like I said at the time, I expected a great year for the storage market in 2014, but beyond that, I'm holding my breath. And there were definitely some early signs of a looming shakeout, even amid the positivity.
5. This will be a significant up year for exits, both IPOs and M&A.
Specifically, I predicted that 1) disclosed (not total) VC-backed cleantech M&A would go up more than a third, to get above 40; 2) disclosed value of those deals would grow above $8 billion; and 3) IPOs of VC/PE backed companies in cleantech sectors would go back above twenty, and total raised proceeds will go above $3 billion.
Unfortunately, this prediction was proven wrong. And it's a bit puzzling. The factors I identified at the time held true -- the IPO window was open, the stock market did well, and there are a number of big and growing cleantech startups that seem well-positioned. And we definitely saw some big relevant exits, with OPower, Vivent, and Nest headlining. But it's hard to say this was a "significant up year" for exits. And what data there is seems to suggest it was a pretty flat year. At least Spring 2014 was a good period for IPOs, there was that.
I think part of the problem is that the IPO benchmarks keep shifting, so that even as companies grow the "finish line" recedes in front of them. And on the M&A side, outside of Silicon Valley the major buyers continue to bottom-feed, for the most part.
6. Some Democrats in the U.S. Senate will get vocal about climate policy, but nothing significant will result in 2014.
OK, this was a layup.
7. Meanwhile, the decentralized solar boom will continue.
8. The lessons learned in financing distributed solar will be applied to energy efficiency project finance, which will see a breakthrough year.
Was it a "breakthrough year" for energy efficiency project finance? That's a judgment call. Certainly the market itself has exploded, but we haven't yet seen any widely acclaimed SolarCity of energy efficiency. I think those are out there (and I have my favorites, of course!), but to date, we haven't seen the mad rush of Wall Street dollars into energy efficiency that I expected to see by now. So let's call it another partial credit.
9. The "Big Four" sectors in cleantech venture capital will total less than 50 percent of tracked venture dollars.
Again, we haven't seen the final tally for the year, but PWC's data suggests this one was wrong. Areas like food and agriculture, as well as water, continue to get more investor interest. But the dollars are still flowing into solar, efficiency, transportation (and yes, still a bit into biochem and biofuels) for follow-on rounds, which continue to dominate the venture dollar totals. So this prediction was likely wrong.
10. I'm soon going to owe some joke-bet money to my Seattle-based friends at Powerit Solutions.
Well, I was right about the Seahawks being unstoppable last year. But I was wrong about the Patriots being the other side of the Super Bowl matchup. So no joke bet ensued. But there's certainly a good chance of it happening this year!
And as I always say about these yearly predictions: never wrong, but often early.