US venture capital (VC) investment in cleantech companies increased by 8% to $3.98 billion in 2010 from $3.7 billion in 2009 and deal total increased by 7% to 278, according to an Ernst & Young LLP analysis based on data from Dow Jones VentureSource. VC investment in cleantech in Q4 2010 reached $979 million with 72 financing rounds. VC investment in cleantech in Q4 2010 reached $979 million with 72 financing rounds, flat in terms of deals and down 14% in terms of capital invested compared to Q4 2009.
“In comparison to the early days of cleantech, the 2010 US VC investment results reflect a turning point in the industry due to improving credit and capital markets, the deployment of stimulus spending and increasing corporate cleantech adoption,” said Jay Spencer, Ernst & Young LLP’s Americas Cleantech Director.
Solar investments shape annual growth
The Energy/Electricity Generation segment raised $1.32 billion in 2010, the most VC funding for the year, which was largely attributed to investments in follow-on solar deals and a second generation of solar companies. Investments in solar in 2010 increased by 77% to $1.58 billion. In Q4 2010 solar investments reached $279.17, an increase of 129% compared to the same period last year. The largest deal for all of Q4 2010 was completed by Abound Solar, a Fort Collins-based provider of photovoltaic modules, which raised $111.18 million. Another notable deal in this segment: a solar cell developer, SoloPower Inc. of San Jose, CA, raised $51.57 million.
Industry products and services lead annual growth
The Industry Products and Services segment completed 2010 with a 179% quarter on quarter growth and a 79% year on year increase due to significant investments in the transportation and materials segments, as well cleantech developments for the consumer products and construction industries. The segment raised $1.24 billion through a total of 80 deals in 2010 and $355.84 million in the fourth quarter, including two of the largest deals in Q4 2010: Elevance Renewable Sciences Inc., of Bolingbrook, IL, a provider of specialty chemicals derived from natural oils, raised $100 million and SAGE Electrochromics Inc. of Fairbault, MN, a provider of electrochromic smart window products, raised $80 million. Investments in electric vehicles (EV) and charging stations generated 56% ($695.17 million) of investment in this category in 2010 due to large deals completed by three EV manufacturers: Better Place, Fisker Automotive; and Coda Automotive, Inc.
“Electric vehicles are bringing the strands of cleantech together as companies begin to address opportunities that will arise from the growth of the new consumer and commercial markets. These companies are from industries such as: utilities, big box retailers, rental car and battery storage,” continued Spencer. For example, Panasonic recently announced a $30 million investment in electric vehicle company, Telsa Motors.
Energy Efficiency segment experienced slight drop in 2010
VC investment in the Energy Efficiency segment dropped 9% from 2009 to 2010, to $688.99 million through 68 deals. In Q4 2010, 17 deals were completed in the segment, attracting $196.63 million, a 41% decrease from Q4 2009. The largest Energy Efficiency deal in Q4 2010 was closed by OPOWER, Inc., of Arlington, VA, an energy consumption technology provider, which raised $50 million.
Growing seed round financing
In addition to sub-sector trends, 2010 US cleantech investment was marked by a resurgence of seed round investment. Seed rounds accounted for a large number of deals, 18, for 2010, a 125% increase in comparison to eight seed round deals in 2009. The share of investment dollars going to second rounds increased from 18% in 2009 to 26% in 2010. Later stage deals received $2.37 billion or 62% of the money invested in this period.
Capital markets and government momentum
Growth in the US cleantech market in 2010 was further evidenced by three venture-backed cleantech IPOs –- compared to one in 2009. These 2010 deals were completed by Amyris, Tesla Motors and Codexis, Inc.
Additionally, in Q4 2010, 17 US M&A transactions, valued at $358.5 million, were completed, according to IHS Herold. The largest transactions of that group were in the renewable space. United Technologies acquired Clipper Windpower for $221.6 million and Atlantic Power Corp. acquired Cadillac Renewable Energy, LLC for $77 million. On the corporate side, Exelon Corp. revealed plans to invest nearly $5 billion through 2015 on clean energy and efficiency projects.
At the federal government level, the $858 billion tax-cut bill recently signed by President Obama will extend grants for renewable energy projects for a year, a potential boost for developers seeking financing. California legislators further set the stage for significant cleantech investment and adoption. The state’s regulators approved a rule that would require utilities to get a third of their power from renewable sources by 2020, the most ambitious standard in the US.
Regional breakdown for 2010
The western US, lead by California, continued to dominate national cleantech investment in 2010. The Mountain Region, Pacific Northwest and California collectively completed 154 deals equaling $2.76 billion in 2010. The North east, Mid-Atlantic and South east regions of the US jointly secured 74 deals, which amounted to $625.79 million.
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Note to editors:
Ernst & Young uses the following definitions to classify the cleantech industry and its sub-sectors:
Clean technology encompasses a diverse range of innovative products and services that optimize the use of natural resources or reduce the negative environmental impact of their use while creating value by lowering costs, improving efficiency, or providing superior performance.
- Alternative Fuels – Biofuels, natural gas
- Energy / Electricity Generation – Gasification, tidal/wave, hydrogen, geothermal, solar, wind, hydro
- Energy Storage – Batteries, fuel cells, flywheels
- Energy Efficiency – Energy efficiency products, power and efficiency management services, industrial products
- Water – Treatment processes, conservation & monitoring
- Environment – Air, recycling, waste
- Industry Focused Products and Services – Agriculture, construction, transportation, materials, consumer products
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