The death of cleantech venture capital has been greatly exaggerated. Yes, there were a few massive failures in 2011, and of course it’s been difficult for a number of cleantech venture capitalists to raise funds. However, cleantech did not implode, and neither did venture capital.
On our recent Quarterly Investment Monitor webinar I predicted 2012 will be a record year not realizing this was a particularly bold claim. However, judging by the number of comments I have received from clients and colleagues, I am realizing this may be a contrarian view. Here’s my rationale:
1) Math – We tabulated just under $9 billion in global cleantech venture investments in 2011. Since 2005, cleantech venture investment has increased each year excepts for 2008 to 2009 when we experienced the mother of all economic crises. On average, cleantech venture investments have grown 26% per year since 2005. If we use this average rate to extrapolate, we will see $11.3 billion in 2012. That’s a pretty big step up from the current record year – 2008 which saw $9.5 billion.
2) I believe we will see a couple of rock-star IPO’s in 2012 and this will drive renewed enthusiasm in cleantech and specific subsectors. Top of my “likely” list is Silver Spring Networks driving a new wave of investment in all aspects of the grid. However, I think Enphase and Brightsource might breath new life into solar; Aspen Aerogels might strengthen our focus us on energy efficiency; or Elevance might continue to wake the world up to the massive opportunities in biochemical.
3) While fundraising has been very difficult for cleantech venture capitalists, there have been some bright spots. We tracked 8.8 billion raised for funds that have a full or partial cleantech focus in q4 2011, a 55% increase over our q4 2010 tally. Granted a number of these funds our Asia-focused, so these numbers might mask the fundraising challenges in Europe and North America. However, we have tracked strong fundraisings announcements from Khosla Ventures raising more than $1 billion and General Catalyst making progress towards their $500 million fund. Even Europe had an exciting q4 2011 announcement – Ecomobilité Ventures, a new 30 million investment vehicle created by Total, SNCF, Orange, and PSA Peugeot Citroën to focus on sustainable mobility.
4) Big companies are buying emerging cleantech players with established leadership position in specific subsegments. Last year, we tracked $41 billion in cleantech corporate M&A, up more than double from the prior year. I believe this trend will continue in 2012, and that transactions will increasingly carry “scarcity values” as top companies get acquired.
5) We will see a bunch more $100m+ financings, and those add up to big numbers quickly. This has more to do with weakness in the public markets resulting in a bunch of good private companies that still require tremendous amounts of cash. Cleantech investors will not let these companies fail, and a number of new funds (e.g. Silver Lake’s Kraftwerks $1.2 billion fund) are being launched to provide this growth capital.
So there you have it. Am I crazy? Perhaps. But I’ve always been an optimist who sees the glass as half full and I feel like we’re headed for a year that will be surprisingly strong in cleantech venture.
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