Tuesday, November 1, 2011

Cleantech Investment Shifts in Q3 2011

Across the world, governments hit hard by recession are scaling back their subsidies for clean energy. This ephemeral funding and its influence over modern energy markets is causing concern among cleantech investors.

For casual observers, doubts about clean energy seemed to be confirmed this fall when solar panel maker Solyndra filed for bankruptcy after bringing in over $1 billion in venture capital and $528 million in government loans.  This was unwanted news for the sector in a year of low-confidence for investors and declining investments in cleantech start-ups.

Still, there were bright spots in the cleantech investment picture for the third quarter of 2011, even if the Solyndra bankruptcy added to the jitters of venture capitalists wary of returns from new technologies or basic research.

The result?  Investments in cleantech have been slowly picking up steam after a slow 2010, energy storage investments led the sector in Q3, and investments in technologies that conserve energy or manage its use are coming on strong.

Q3 Results

According to a new report by the Cleantech Group, cleantech venture investments rose in the last quarter despite market volatility and the collapse of Solyndra.

"While financing remains constrained, it's still growing," says Sheeraz Haji, CEO of Cleantech Group. "Energy Storage emerged as our top sector, indicating continued strong interest in advanced technologies for grid-storage as well as for electric vehicles."

$2.23 billion in capital investments across 189 clean tech deals were made across the globe in Q3, a 12% increase from the last quarter, and a 23% in the same quarter last year.

North America was still the leader in terms of capital investments with $1.69 billion raised across 128 deals, followed a distant second, surprisingly, by the UK with $184 million raised in 23 deals. India's clean tech companies raised $165 million in 16 deals and China came in fourth with $138 million invested in 15 deals.

Distribution of Investments in Q3

Energy storage investments topped other cleantech sectors in amount invested ($514 million), followed by solar ($350 million) and energy efficiency ($223 million).  Energy efficiency saw more deals than other sectors, with 34 funding rounds, ahead of solar (33 deals) and energy storage (19 deals).  As for regional distribution, Asia Pacific ($303 million across 21 deals) passed Europe & Israel ($230 million) for the number two spot behind North America ($1.69 billion across 128 deals).

Both the IPO and M&A market were a bit slower in 3Q 2011 compared to the first half of the year. China was home of the most cleantech IPOs, with 11 of the 14 IPOs in 3Q.

North America accounted for 76 percent of the total amount invested, Asia Pacific for 14 percent and Europe & Israel for 10 percent.

North American companies raised $1.69 billion, up 17 percent from 2Q11 and up 59 percent from the same period a year ago. The 128 deals disclosed marked a record high for cleantech VC rounds in North America.  California led the way with $654 million investment (39 percent share), followed by Massachusetts ($176 million, 10 percent) and New Mexico (175 million, 10 percent). Canada saw a drop in terms of VC funding with $33 million invested across 8 deals.

Trends Emerging

Despite concerns, investments rose in the last quarter in the cleantech sector despite market volatility and the collapse of Solyndra.  Meanwhile the software sector enjoyed its strongest quarter in almost 10 years.

What does this mean for entrepreneurs and investors?  Cleantech investment is not yet entering the decline that many have predicted.  Yet in this uncertain investment environment, money is moving to safer bets.

Big winners currently are software companies that are applying their technology to the energy industry.  According to the New York Times, this year venture capitalists are on track to invest more this year than in 2010 or 2009 in start-ups that make software and other technologies that conserve energy or manage its use.


  1. This is a fascinating set of figures! I don't know too much about the amounts of VC invested in general and would be curious about what percentage of total VC investing the 1.69 bn invested last qtr in the US is. It makes sense to me that people are investing in storage as that has appeared as one of the big roadblocks to the uptick of intermittant renewable energy sources like solar and wind. I also wonder what the measured outcomes of each dollar invested in each country is? Do the dollars invested in China produce more tonnes of carbon saved?

  2. Great post on a complicated subject. It is exciting to think that recessions are often times of the greatest innovation, and as consumers, we are well-positioned to drive the innovations of the next several decades. It seems job creation is a buzz word these days, so I am wondering what clean tech and storage innovations mean for new, well-paying jobs? Furthermore, is there an educational learning curve to be overcome?

  3. Great info. Steve. Renowned venture capital investor Nancy Floyd said similar things to a recent meeting of the Northwest Energy Angels’ members. Floyd started Nth Power in 2003 to focus on cleantech investing. Some of her key points:
     Now is the time to invest in solar, despite the recent demise of Solyndra. The average cost of installing solar per watt fell almost by half, between 2000 and 2010, from $9 to $4.85.
     Global capital investment in cleantech jumped from $6.5 billion to $131.6 billion during the same decade, now representing nearly 25 percent of all VC investment.
     While the United States has the world’s most developed ecosystem for innovation, the U.S. lags third in cleantech investing internationally, behind China and Germany.
     Only 59 percent of the American public believed in 2010 that climate change and global warming is proved by science, a dramatic drop from 79 percent in 2006.*
     The lack of a federal energy and climate policy threatens a “green economy” in the United States. States are filling this void when it comes to policy, with California leading the way.
     Successful investments are in companies that don’t rely on government incentives or rebates.