US venture capital investment in cleantech companies in Q3 2010 fell to USD575.6m in 53 financing rounds, a 55 per cent decrease in capital and a 22 per cent decrease in deals compared to Q3 2009, according to an Ernst & Young analysis based on data from Dow Jones VentureSource.
These results come amidst a quarter of significant corporate engagement with the cleantech sector.
"This quarter reflects the ongoing volatility in cleantech investment that we have observed over the past two years, depending on the presence of the very large transactions we see in cleantech," says Jay Spencer, Ernst & Young’s Americas cleantech director. "However, a number factors point to the continuing strength in the US cleantech sector, including growth in energy efficiency investments and corporate involvement throughout multiple industries – from utilities to technology to consumer products."
Later stage venture financings continued to drive US cleantech investment. There was USD407m invested in 25 later stage deals, which accounted for 48 per cent of deal activity and 70 per cent of capital invested. The industry products and services segment saw the greatest number of later stage rounds, with nine transactions raising USD99.5m.
The energy efficiency segment attracted the most financing activity with 17 deals raising USD161.7m, increases of 21 per cent and six per cent, respectively. The largest deal in this segment was closed by Smooth-Stone, a developer of low-power data centre chips based in Texas, which raised USD48m. Large corporate investments in energy efficiency technology also shaped Q3 ’10 investment trends. GE announced plans to invest USD432m over the next four years to research, design, and manufacture energy efficient refrigerators in the US.
While deal activity in the energy/electricity generation segment grew 27 per cent to 14 rounds, capital invested fell 39 per cent to USD203.9m as investors focused on smaller, earlier-stage deals, including two seed round, two first rounds and five second round deals. Solar companies represented the majority of investments in this segment, with ten deals raising a total of USD150.1m. The largest deal of the entire quarter was a USD65m third-round later stage deal by Solaria, a California developer of solar photovoltaic solutions.
Other cleantech segments had a challenging quarter. Investment in the industrial products segment fell 72 per cent in terms of capital to USD116.9m and 50 per cent in term of financing rounds to 12. The alternative fuels segment raised USD50.5m in three deals.
Approximately 23 per cent of the VC cleantech deals in Q3 ’10 included participation by corporate investors, including BASF Venture Capital, Intel Capital and General Motors Venture Group, which all did two deals apiece. Corporate investor participation increased from 15 per cent in Q3’09. Another indicator of corporate interest in cleantech was GE’s announcement of a USD200m smart grid fund along with Emerald Technology Ventures, Foundation Capital, Kleiner Perkins Caufield & Byers, and Rockport Capital.
US mergers and acquisitions activity in Q3 ’10 was reflective of the corporate engagement in cleantech investment. Nine deals closed, of which the disclosed amounts totaled approximately USD1.9bn, according to IHS Herold. These deals include the acquisition by Nebraska-based ethanol producer Green Plains Renewable Energy of Global Ethanol for USD166.4m.
Two cleantech initial public offerings took place in the US during Q3’10, according to Bloomberg New Energy Finance: Ameresco, an energy efficiency and renewable energy company, raised USD87m; and biofuels developer Amyris Biotechnologies raised USD84.8 m. Companies that have announced or filed for IPOs during the quarter include Gevo, SemiLEDs, Molycorp, and PetroAlgae.
