And what are the three hottest technologies? Smart grid, algae (advanced biofuels), and, surprise surprise, thin-film solar.
Venture capital investment in clean tech has been soaring in recent years because of high energy prices along with the growing concern and growing action on global warming. You might think that VC investment would be hurt by the financial downturn, as credit freezes up and capital markets lose money. But in fact VC investment is aimed at payoffs in the three- to five-year time frame and beyond.
People who understand that oil prices are inevitably going up in the medium-term (assuming we don’t end up in a global depression) and that U.S. action on climate change is inevitable no matter who wins the election, then medium-term clean tech investments become a very good place to park your money right now. And that’s just what a new report from the Cleantech Group finds:
… cleantech venture investments in North America, Europe, China and India total[ed] $2.6 billion across 158 companies, an all-time record quarter. The previous record quarter was 2Q08, which saw $2.2 billion in cleantech venture investments.
The 3Q08 total is a 37 percent increase over the same period a year ago, and 17 percent increase over 2Q08. Cleantech venture investments through 3Q08 now total $6.6 billion, exceeding the full-year 2007 total of $6.0 billion.
“Cleantech venture investing has continued to show strong growth despite the unprecedented turmoil in the credit markets during the quarter,” said Michael Goguen, Managing Partner, Sequoia Capital and co-chair of the North American advisory board of the Cleantech Group’s Cleantech Network, the largest global network of cleantech investors and companies. “In the coming quarters, we could foresee large scale cleantech projects having to work harder to get financed. However, the capital efficient, early-stage companies addressing the inefficiencies of existing markets should see continued venture financings.”
Precisely. The good news for project financing is that it finally looks like we are going to get the renewable energy tax credits extended. Investing in early-stage companies now is analogous to getting your MBA or going to grad school during a tough job market. It’s a good way to ride out tough times. Here is where the hot money is going:
* SMART GRID: Smart grid companies raised a record $202 million in 3Q08, led by Gridpoint, which raised $120 million, Trilliant at $40 million, BPL Global at $23 million, and Eka Systems at $18.5 million. By comparison, over the past 10 quarters, smart grid companies raised slightly under $30 million per quarter.
* ALGAE: Following a record 2Q08 which saw $84 million in investments in algae, 3Q08 saw over $95 million in investments. Sapphire Energy raised at least another $50 million while Solazyme raised over $45 million.
* THIN-FILM SOLAR: Thin-film startups raised a staggering $620 million in investments in 3Q08. CIGS (copper-indium-gallium-selenide) startups raised the most capital, including SoloPower at $200 million, OptiSolar at $78 million, and Miasole at $35 million, while German CIS (copper-indium-sulfide) provider Sulfurcell Solartechnik raised $134 million. AVA Solar, a competitor to First Solar in the cadmium telluride space, raised $104 million, while UK-based G24 Innovations raised $30 million for its flexible organic dye thin film technology.
“The impending production of electric vehicles by major manufacturers, which will require utility companies to improve the electrical grid to manage plug-in vehicles, has spurred investment in smart grid companies,” said Brian Fan, Senior Director of Research for the Cleantech Group. Fan added, “We have seen the arms race in thin-film solar reach new heights, and now we are seeing it in the algae sector, as investors funnel ever-increasing amounts of capital to companies that have not yet successfully scaled up commercial production. Investors are doubling down to maximize the probability that their portfolio companies can keep up with competition and become winners in their respective markets.”
The amount invested in European companies was the highest ever recorded for a single quarter. European companies (including Israel) received $742 million in 46 disclosed financing rounds, or 28 percent of the global total. Sectors in Europe which advanced this quarter include thin-film solar and wind.
U.S. companies received a record $1.75 billion in 77 financing rounds, accounting for 67 percent of the global total. California-based companies received approximately 42 percent of cleantech investments, with a record $1.1 billion in 35 investments. Canadian companies received $49 million in six investments.
CHINA and INDIA
Chinese companies raised $111 million in venture capital across seven rounds, accounting for approximately 4 percent of the global total. The largest single investment was in Feida PV Co., Ltd., which produces solar cells and modules. Investments in solar companies accounted for more than half of the investments made in China.
Indian companies raised $6.3 million in venture investments across two rounds, accounting for approximately 0.2 percent of the total. The only disclosed deal in India this quarter was raised by Attero Recycling, an e-waste management and recycling company.
This is all very good news for those of us who believe in serious climate action. While much bigger federal investment in clean tech R&D can’t hurt, what we are most in need of now is what we are in fact seeing — larger investment in companies with technologies that that hold the promise of scaling up big-time in the five-year time frame.