Thursday, April 26, 2007

Q1 2007 numbers

Over the past week or so, many of the various groups who track venture capital investments put out their Q1 numbers. Below is a brief re-cap, for those interested. (For those interested in a discussion of the differences in the various approaches, see this previous posting)
  • As previously noted, the Cleantech Venture Network announced this week that Q1 totals for cleantech investing were $903mm across both North America and Europe, representing a 16.5% increase versus Q4 numbers and a whopping 42% increase on Q1 2006. In both regions, energy generation technologies were the largest category, with a little more than half of all capital going into that segment of the market.
  • Eric Wesoff's Venture Power newsletter reported $760mm of clean energy venture capital in Q1. Eric's always-insightful commentary notes that: "Q1 looked a bit like last year -- with a mix of investment sectors and a disproportionately high biofuel figure skewed by a few very large deals... [three of the deals] account for nearly half of the total. It is arguable that these deals don't qualify as VC investments despite the fact that they have VC investors -- they look more like project finance." Eric also notes that Venture Power has "joined forces" with Greentech Media, so "look for big changes in the coming weeks."
  • As provided by Dan Primack at PE Hub, the Moneytree (PWC/ NVCA/ Thomson Financial) survey for Q1 was also released. In the Industrial/Energy category they counted slightly more than $500mm of venture capital financings, a 20% increase on Q4, and a 75% increase on Q1 2006. This would make the category the fifth biggest category tracked, behind biotech, software, medical devices, and telecom. Across 44 tracked deals, the average deal size was higher than $11mm, which is an interesting contrast with the category's $6.2mm average deal size for 2005. 44 deals, however, is less than Q4's 50, and not that much higher than Q1 2006's 39. One useful feature of the Moneytree data is that they also track "first-sequence" financings (the first institutional investor money into a company). Among these first-time financings, Industrial/Energy was actually the third biggest category, at $176mm -- 13% higher than Q4 totals, but 145% higher than Q1 2006 totals. Intriguingly, the average deal size for these 19 earlier rounds was also quite high, at $9.3mm, versus 2005's average of $5.6mm. This suggests that while capacity deals may be inflating the sectoral totals as Eric descrbes, there may also be some significant additional rise in valuations...
  • E&Y and VentureOne also put out their quarterly survey results. Unfortunately for them, most cleantech still appears to be categorized as "Other" in their survey (really? still?). So we'll just leave it at noting that Q1 "Other" total investments were the highest for any quarter they've tracked since beginning in 2001. How much of that is cleantech is impossible to say... This press release seems to suggest that about 64% of the category total was in 10 "alternative energy" and 8 "environmental technology" deals. [4/26 update: Note additional info on this survey appended below]
  • We previously noted NEF's numbers here. They counted $2.2B total private equity financings into clean energy worldwide in Q1. That's 58% above Q1 2006 totals and 60% higher than Q4 2006. Helpfully, they note that the big totals were driven in large part by three major transactions: Silicium de Provence ($394mm) and Solyndra ($79mm) in solar, and Imperium Renewables ($113mm) in biofuels. Differentiating between VC and private equity, "early stage venture capital" was tracked at $303mm (23% higher than Q1 2006), with Series A and seed tracked at $80mm -- "almost double" Q1 2006, but around half of Q4 2006's $159mm. Interestingly, PIPEs grew sharply, at $446mm, about triple from a year ago. Also a little bit of a dampening in the IPO market, with $899mm raised in initial offerings.
[4/26 update: Received a very fast reply from Michelle Jeffers at Dow Jones VentureOne who reminded me that they do indeed break out cleantech venture capital in a separate set of reported numbers. In fact they are attempting to address the overlapping nature of clean technologies and other technologies via their methodology, something we've written about before on this site. So I wanted to post Michelle's email, since I hadn't done justice to the Dow Jones approach in the original column:

Hi Rob

Saw your post regarding our quarterly data.

I thought your parenthetical comments indicated that perhaps you thought we were not taking Cleantech investing seriously.

In fact we are extremely serious about our methodology and the recognition of the importance of cleantech investing and release an entirely separate report on cleantech investing with Ernst & Young on a regular basis, in addition to this quarterly data.

This quarterly report breaks down the rounds (and companies) into very specific single industries – in fact into approximately 140 different industry sub-segments, and from there even into even more subcodes. The companies we identified and made mention of in the press release in the cleantech field were in our Energy or Environmental segments, which, because they do not meet the exact criteria we set for IT, Business, Consumer and Retail products and services, or Healthcare, are considered an OTHER category. Of course, there are always judgments that must be made for the appropriate sorting when dealing with the volume of financings that we track.

That is why I want you to know that when we release our Cleantech data, we look at all companies throughout every industry from IT to Healthcare to Products and Services for aspects of cleantech in their business. I think you’ll find if you look at all our data releases that we take a very thoughtful and careful look at each venture-backed business—and we research them with direct primary contact with the companies themselves, to verify their financings and their business descriptions—before determining how they should be categorized, in our effort to provide the most accurate tracking of the venture capital industry.

... Thanks to Michelle for a very helpful and thoughtful reply. To see an example of the reporting she is referring to, see this write-up of their 2006 totals. rd]


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