Friday, March 09, 2007

Cleantech investing this week -- CleanEdge/ Nth Power survey

  • Extremely pleased to share this announcement (self-promotion alert): Waste-to-ethanol producer Earthanol has announced a $7.1mm Series A round, including a total commitment of $2mm from @Ventures alongside other investors Nth Power, Sail Venture Partners, and Calvert Funds. The company focuses on technologies for the production of ethanol from alternative feedstocks to corn.
  • Algal biotech developer Solazyme has raised an $8mm+ Series B, plus $2mm of debt, according to VentureWire. The Roda Group led the financing, and Harris & Harris contributed $500k of the round (with other undisclosed investors also involved). The company's technologies have applications in biofuels and other areas.
  • CIGS PV developer SoloPower was revealed by VentureWire on Monday (here's a good article from as well) to have raised a $10mm round of financing from Crosslink Capital, Firsthand Capital Management and individual investors. According to the very informative VWire column, the company's differentiated approach is to use electroplating of the thin film layers rather than sputtering. The company also claims that NREL testing has demonstrated an efficiency of greater than 10%...
  • Atraverda, a Wales-based developer of biopolar lead acid batteries using advanced ceramics, raised a $12mm Series A round of financing (note: pdf), with participation by EnerTech Capital, OnPoint, Sagentia Group, Scottish Equity Partners and Wales Fund Managers. The Energy Blog did a very good job of explaining the company's technology in this column from a while back. [3/25 update: Fixed the previous error in spelling of the company's name, apologies]
  • CleanEdge and Nth Power released their 2007 survey of clean energy markets and venture investments this week. The market survey tallies clean energy markets in 2006 at $55B, and they forecast growth to $227B by 2016. The big three three techs (wind, biofuels, and solar) are all sized at $15-20B, with CAGRs of 13-16% over the period in question. Fuel cells and hydrogen techs are expected to grow more quickly, but off of a smaller base ($1.4B in 2006, "primarily for research contracts and demonstration and test units), reaching $15B in ten years. Good coverage and discussion of the report can be found here, here and here.
  • Interestingly, for those tracking the numbers, Nth Power's tally of energy tech investments in 2006 showed more than a doubling from the previous year, up to nearly $2.5B for year. That represented, by their total, almost 10% of total venture investments across all sectors (and note that it doesn't include non-energy clean technologies). They counted ~$800mm into biofuels, and almost $500mm into "energy intelligence" (ie: efficiency techs), along with $264mm into solar. There's also some fascinating details about the data, and the following section should be especially highlighted (apologies for it being so long, but it was all worth noting), which go directly to some of the issues we've talked about before on this site (and which Rodrigo and I have discussed before, so thanks and kudos, R!):

Although the number of companies that received VC investments grew from 84 to 140, the average deal size in 2006 took a more dramatic leap, to $17 million, up from $11 million a year earlier. The 2006 average was slightly higher than the 2000 record of $16.8 million per deal.

Should investors be concerned about an energy-tech bubble? Probably not. Aside from a few known deals where valuation was played to the company’s advantage or where some near-term liquidity could be reasonably expected, it appears that investors in the energy-tech category remained realistic about valuations. Our venture data shows that the median deal size grew only slightly from $6.5 million in 2005 to $8 million per deal in 2006. This is consistent with recent data from the overall venture capital markets showing that later-stage deals are showing some valuation inflation, but that early-stage deal valuations have remained flat.

Probably the most curious trend in 2006 was the willingness of early-stage investors to write checks to fund the build-out of ethanol, biodiesel and solar production. While some of these deals had elements of technology development, most were pure infrastructure. Investors poured more than $1 billion into steel, cable, and concrete rather than into intellectual property.

The implication may be that returns for all but the earliest of investors in some of these deals (particularly biofuels) are not likely to be in line with typical early-stage venture investing. Large capital raises typically leave companies with high post-investment valuations that, in theory, come with a lower exit-value expectation, albeit with accompanying lower risk. This kind of risk/reward scenario is appropriate for some investors, but typically not venture capital.

So in other words, a lot of the massive influx of investment dollars has gone to a few late-stage infrastructure-funding deals. I would add that Rodrigo has elsewhere described these infrastructure-related financings as "capacity deals", which seems like a useful phrase (which we will henceforth steal, thanks much), and that it's instructive to note that often these deals include many non-venture players (ie: hedge funds, etc.).
  • In another interesting survey, Jefferies released the results of a questionnaire given to participants in the recent Cleantech Venture Forum. Unsurprisingly, the participants held bullish views about the overall prospects of sectoral growth. Surprisingly, 40% of the participants indicated that they expect solar to be the biggest contributor of global renewable energy supplies by 2020. It's a fascinating result, but a bit hard to believe, given that solar is currently about .039% of global energy supplies, wind is .064%, and hydro is 2.2% (2004 numbers, from this source pdf). According to one Jefferies team member, this would require solar to grow at a 30%+ CAGR over the entirety of the next 13 years. Note the CleanEdge data from above... Seems a bit optimistic. But these are optimistic times.
  • Cleantech investors in the news: James Kim has joined CMEA Ventures as they expand their energy and materials efforts... The Cleantech Group (d/b/a the Cleantech Venture Network) is launching another new service, an executive search offering, to be led by Ray Fortney. Another strong move by the Group to expand their capabilities and build on their cleantech sectoral expertise (you may be reading this column on their website, e.g.).
Other questions from the week: Will the next phase of manufacturing of clean technologies be driven out of the bay area?... "Are America's capitalist titans really going green?"... Is wave energy ready for prime time?... Should we read anything into the fact that the recent DOE grants for biofuels were double those for solar?... Can the importance of this commitment -- especially for the emergence of markets for carbon-related financial instruments -- be overstated?... Finally, what list of questions would be complete without asking, "Is clean tech a bubble?"


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