Preliminary figures now available suggest a strong finish to 2010 cleantech investment globally as
the second highest year on record.
While good news, there are even more interesting datapoints within
the latest figures that illustrate a sector alive and well, with
strong momentum leading into 2011, according to cleantech analysis
firm Kachan & Co.
More Cleantech Investment Deals Drive Reduction in the Round Size
There’s been a recovery in cleantech investment round size from
unusually large rounds in recent quarters. As a result, in the last
few months of 2010, investors worldwide began putting smaller amounts
of money into more cleantech companies than ever before.
"Round sizes in cleantech in the last few quarters have dropped to
almost their lowest level in recorded history," said Kachan Managing
Partner Dallas Kachan. "And that’s good. More cleantech companies are
now getting capital than in the days of the large, exclusionary
government stimulus grants and loans that skewed investment last year
towards larger deals."
The average global cleantech venture deal size in recent quarters is
now hovering around $12 million, according to data. This is still higher
than average U.S. round sizes in biotech ($8.7M), medical devices
($7M) and software ($5M), according to the U.S. National Venture
Capital Association–which shows the relative capital intensity of
clean technology investments.
Early Stage Cleantech Deals Renew Focus on Innovation
As noted in December, early stage venture deals have returned in cleantech; there’s been
a drop in the number of cleantech follow-on investment rounds aimed
at keeping existing companies alive, and an increase in early stage
deals with new companies.
"Cleantech venture investors are getting on with business, and we
predict this to continue throughout 2011," said Kachan. "Some have
been questioning the long term effectiveness of the venture model in
cleantech, but that’s clearly not stopping investors worldwide from
putting innovation capital to work today."
Cleantech Exits and Multiples, Are Increaseing
The number of global cleantech IPOs and mergers and acquisitions
(M&A) are up in recent months. And the latest returns on selected
cleantech IPOs are much more promising than only a quarter ago.
"The last few months have seen an increased retail investor appetite
for certain publicly traded cleantech companies," noted Kachan. "For
instance, Tesla (Nasdaq: TSLA) is up. Shares of drop-in biofuel company Amyris (Nasdaq: AMRS) have
more than doubled. Rare earth companies have more than tripled. If
this trend continues, early investors in these and other companies
could indeed make the 10x multiples sought by their LPs. Public
cleantech returns didn’t look this promising only a few months ago."
Data shows there were a record number of cleantech M&A deals in 2010,
evidencing increasing corporate appetite for cleantech companies.
Kachan & Co. expects this trend to continue in 2011.
Increasing Role of Corporations
Large global multinationals are increasingly participating as clean
technology investors, incubators and acquirers.
"Two weeks ago, Japanese companies including Sharp (6753.T), Toshiba (6502.T) and
Panasonic (NYSE: PC) pledged to invest $4.5 billion in cleantech over the next
15 months," noted Kachan. “South Korean companies Samsung and LG
Group pledge billions more. With the largest companies worldwide
sitting on more than $3 trillion in cash, the climate is right in
2011 for increased corporate multinational M&A, investment in and
purchases from cleantech companies.”
The preliminary 2010 global cleantech venture investment total of
$7.8 billion, can, and likely will, be easily eclipsed by corporate
investment soon. General Electric (NYSE: GE) alone plans to double spending on
energy-related research and development (R&D) to $2 billion per year
over the next five years. Corporations have become the source of
cleantech capital to pay closest attention to going forward,
according to Kachan & Co.
The Figures
Cleantech Group™, providers of leading global market research, events and advisory services for the cleantech industry, today released preliminary 4Q 2010 results for clean technology venture investments in North America, Europe, China and India, totaling $7.8 billion across 715 deals.
Cleantech venture investment totalled $7.8 billion in 2010, up by 28% compared to 2009 ($6.1 billion), according to preliminary figures released by the Cleantech Group.
That total makes 2010 the second highest year for investment after 2008 ($8.8 billion). The number of deals was 715, a new annual record, ahead of the previous high (624 deals) recorded in 2009.
Venture investment in 4Q10 totaled $1.61 billion, down by 17% from 3Q10 ($1.95 billion) and the second consecutive quarterly decline. There were 180 deals, the same number as in 3Q10.
"The strong increase in clean technology venture activity in 2010 was also paralleled by record activity in the IPO and M&A markets,” said Sheeraz Haji, CEO of Cleantech Group. "We believe continued growth in Asia and the ongoing push for resource efficiency will make 2011 a record year for cleantech innovation financing.”
Venture Investment By Technology Sector
The top clean technology sector for venture investment in 2010 was Solar, which accounted for 24% ($1.83 billion) of the total, followed by Transportation (17%, $1.35 billion) and Energy Efficiency (14%, $1.05 billion). Measured by number of deals Energy Efficiency was the most popular sector (21% share, 151 deals) followed by Solar (16% share, 117 deals).
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