VC NEW ENERGY SPENDING UP

Venture Capital Activity Update
Tom Burton and Steve Rafferty, July 1, 2010 (Mintz Levin/Clean Tech Quarterly)

"Clean tech venture capital financing continued its upward trend in the second quarter of 2010, with investments totaling over $2 billion worldwide for the second consecutive quarter…After the global financial crisis drove investment in the space down in 2009—$4.85 billion invested following a record $7.6 billion in 2008—venture capital appears to be flowing to clean tech companies at pre-crisis levels.

"…[V]enture capital investment data from the second quarter reveals important trends to watch…The first is that nearly a third of North American dollars were concentrated in three companies…Geographically, the lion’s share (67%) of North American investment was concentrated in California, followed well behind by Massachusetts at 8%."

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"…[T]here appears to be a resurgence of interest in the solar sector…[V]enture capitalists poured $811 million into the sector in the second quarter [after the first quarter’s $311 million]. Noteworthy deals…[were] BrightSource Energy’s $150 million Series D financing in May and Solyndra’s $175 million shortly before the quarter’s end.

"…[T]he case of Solyndra is also reflective of the continuation of a less welcome trend to watch in the second half of 2010: the uncertain state of the clean tech IPO market…Solyndra pulled its plans to go public in June…[O]nly two [companies] have followed through with their IPO plans…However, Tesla Motors’ successful $226 million initial public offering bucked the trend and we believe will be a harbinger…"

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"…[E]nergy efficiency proved to be the most popular sector for investment for the second consecutive quarter, with 31 funding rounds producing $147 million…[E]nergy efficiency remains an important sector to watch as investors seek less capital-intensive business models offering faster paths to profits. Funding for energy efficiency projects rose from $253 million in 39 deals in 2006 to $803 million in 93 deals in 2009. Expect this trend to continue into the second half of 2010 and beyond.

"The first half of 2010 appears to have marked the return to greener pastures for clean tech companies seeking venture capital investment (at least in California), while the much anticipated IPO market for clean tech is promising but still unclear."