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Planet-Profit Report, reporting on sustainable development in the Western United States.

The 2011 Cleantech investment wrap-up

It was a solid year

Clean technology industry investments remained solid in 2011, receiving $8.99 billion in venture capital. The investments represent an increase of 113 percent from 2010; a record high of venture capital investment. Since 2005, the clean tech industry has experienced a compounded annual growth rate (CAGR) of 26.1 percent for venture capital investment.

Mergers and acquisitions in clean tech also experienced strong growth in 2011. With an emphasis on acquisitions, they totaled $41.2 billion in 2011, up 253 percent from 2010. Since 2005, mergers and acquisitions in clean technology have a CAGR of 16.22 percent.

Like the rest of the IPO market, public offerings in clean technology struggled in 2011 with money raised down 58 percent from 2010 to $9.59 billion. Additionally, the total number of IPOs in 2011 dropped from 96 in 2010 to 51 in 2011, a slide of 47 percent.

Two key items to note are the overall investment model shift and migration to later stage investments.  The overall investment model has shifted from many deals with smaller dollars invested in prior years, to 2011 seeing larger investments in fewer deals. Additionally, a larger percent of investments, nearly two-thirds of the total number of investments in 2011, were made in Series B and later stages of a company.

The shift in investment strategies reflects the need to hedge market uncertainty induced by the ongoing lack of an energy policy in the United States, as well as the overall economic softness of the euro.

Cleantech Sectors

The 2011 venture capitalists pursued investments in energy efficiency (150 deals), solar (111 deals) and transportation (61 deals). When examined by the total dollars invested, the sector rankings shift to solar leading with $520 million, followed by transportation with $382 million, and energy efficiency with $378 million.

Geographical Breakdown

North America lead the way in clean tech venture capital raised in 2011 with $6.81 billion spread over 470 deals. This represents an increase of 31 percent in capital raised and a 25 percent increase in the number of deals over 2010.

California received 54 percent of the total funds ($3.69 billion), followed by Massachusetts at 8 percent ($542 million) and Colorado with 5 percent ($358 million).

Europe and Israel clean tech capital investments totaled $1.3 billion in 2011 across 172 deals. This is a 30 percent decline in capital raised and a 33 percent decline in the number of deals from 2010.

Asia Pacific raised $879 million in capital spread across 71 deals in 2011.

Mergers and Acquisitions (M&A)

There is an interesting phenomenon within the clean technology market that we should expect to continue throughout 2012. The vast majority of investments in these companies come from corporate venture investment groups. This implies that the investing firms are seeking one of two things with their investments:

1. The opportunity to expand into new markets
2. The opportunity to improve existing lines of business

In 2011, corporate investments logged 90 M&A deals while other investors logged 62 deals. As corporations continue to make larger investments in later stage companies, we should expect the second half of 2012 and early part of 2013 to be a banner period for acquisitions.

The clean technology industry is growing in spite of global economic sluggishness. There are multiple reasons for the growth based on the assumption that corporate investors are utilizing the technologies in-house as well as bringing them to market under a line of business, including:

1. Reducing the economic volatility of energy derived from carbon-based fuel sources;
2. Expansion into new markets, especially for traditional energy companies;
3. Business cost savings derived from implementing renewable energy; and
4. Hedging potentially punitive public policies associated with greenhouse gas emissions.

The clean technology industry is a growth market and is expected to continue to be throughout 2012 and 2013.

Thanks goes out to the Cleantech Group for its generous allowance of the use of its market research data. For more details, visit its website and plan to attend its upcoming 10^thannual Forum in San Francisco, March 26-28.  

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