Report: Smart Grid VC Funding Stepping Out of Its Rut?

The fourth quarter of 2013 saw a spike in venture capital funding in the smart grid space. But in at least one sense, it was too little, too late: For the first time, China overtook the U.S. as the biggest spender on smart-grid technologies.

In 2013 overall, VC funding for smart grid companies totaled $405 million across 63 deals, down slightly from 2012’s total of $434 million for 40 deals, but up from 2011, when VCs contributed $377 million for 50 deals, according to a new report from Mercom.

There was a major spike in VC funding in the final quarter of 2013, which took in $148 million in 31 deals. Almost half the Smart Grid deals in 2013 were made in the fourth quarter, says Mercom.

Bloomberg New Energy Finance added that while total smart grid investment was on the decline in the U.S., it was up in China, which spent $4.3 billion on its smart grid industry in 2013, compared with $3.6 billion in the U.S., down 33 percent from the year before, in large part because various stimulus-funded projects were wrapping up last year, BNEF explained, adding that China today has more than twice as many smart meters installed compared to the total number of households in the U.S.

This disparity is likely to only grow in coming years, adds BNEF, even as China now faces a slowdown in meter installations, because the 5-to-ten-year meter-replacement cycle means that another major waves of installations is likely to start in 2017. BNEF also calls Europe “smart grid’s sleeping giant,” pointing out that the region has installed only 55 million smart meters, a number that’s expected to rise sharply to 180 million by 2020.

Among venture capital investors specifically, the smart-grid category of home/building automation & energy management was the most popular draw: that slice of the smart-grid space attracted almost half of all VC funding for 2013, with $190 million in 24 deals, Mercom reported. The other two categories, grid optimization and demand-response companies, raised $51 million in six deals and $50 million in eight deals, respectively.

To note, the Cleantech Group reported that $387 million was invested in 55 smart grid venture capital deals in 2013, down in both dollars and deal count from $419 million for 57 deals in 2012, but up from the $323 million invested in 56 deals in 2011.

The biggest deals in the home/building space in 2013 involved Nest Labs, the home automation company that raised $80 million from Google Ventures and Venrock; and Enlighted, a company that uses sensors and analytics to control lighting, temperature and energy consumption in buildings, which raised $20 million from RockPort Capital, DFJ JAIC, Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, and Intel Capital.

According to the Mercom report, the top Smart Grid venture investors in 2013 included RockPort Capital Partners, with four deals, followed by Khosla Ventures, Kleiner Perkins Caufield & Byers and Navitas Capital, with three deals each.

Indeed, innovation in the “connected home” is a top area to watch on the consumer side, particularly among companies that already have access to people’s homes, such as cable companies, telecoms and security companies, said Raj Prabhu, Mercom’s CEO and co-founder. He explained that customer acquisition in this space is very costly, so companies with products already in the home are at an advantage. In other words, VCs can likely expect more product innovation and deals in this area.

M&A

Prabhu added that M&A will likely continue to be active in the smart grid sector in the near future. In 2013, there were 16 M&A transactions, only five of which disclosed their dollar value. The 2013 top disclosed transaction, by far, was the $5.2 billion acquisition of Invensys by Schneider Electric in the fourth quarter, followed by the $107 million acquisition of JouleX by Cisco in the third quarter and the $11 million acquisition of Consert by Toshiba.

Just last week, U.S. based demand response powerhouse EnerNOC announced that it acquired European demand response company Entelios.

Smart Grid corporate funding (both debt and equity) was $579 million in 2013, up from $506 million in 2012. And there were three Smart Grid IPOs in 2013: Silver Springs, Control4 and Ideal Power.

Top Smart Grid Venture Capital Fundings in 2013

Nest Labs (U.S.) raised $80 million from Google Ventures and Venrock.

Utilidata (U.S.), a supplier of voltage optimization products for the electric grid, raised $20.5 million in Series B funding from Formation 8 Partners, Saudi Aramco Energy Ventures, Braemar Energy Ventures, and American Electric Power.

Space-Time Insight (U.S.), a provider of geospatial and information visualization software that transforms real-time disparate data into intuitive visual displays that businesses can use to make informed decisions, raised $20 million in Series C Funding from Zouk Capital, Opus Capital Ventures, EnerTech Capital, and Novus Energy Partners.

Enlighted (U.S.), a company that uses sensors and analytics to control lighting, temperature and energy consumption in buildings, raised $20 million in Series C Funding from RockPort Capital, DFJ JAIC, Kleiner Perkins Caufield & Byers, Draper Fisher Jurvetson, and Intel Capital.

GreenWave Reality (U.S.), a home energy management company, raised $19 million in Series B funding from The Westly Group and Craton Equity Partners.

On-Ramp Wireless (U.S.) raised $15 million in Series C funding on July 17 from Enbridge, Third Wave Ventures and Energy Technology Ventures.  So far, the developer of wireless solutions for energy automation in the M2M market has raised over $75 million in venture capital and won a $2 million grant from the DOE.

Cylance (U.S.), a provider of cyber security products for the infrastructure industry, raised $15 million in Series A funding from Khosla Ventures and Fairhaven Capital in a Series A round. And the company just raised an additional $20 million in Series B funding on Feb. 20 from Blackstone, Khosla Ventures, Fairhaven Capital, and a group of private investors.

Sentient Energy (U.S.), a developer of advanced grid monitoring solutions that consist of modular intelligent monitoring devices and software applications, raised $15 million in an undisclosed round from Foundation Capital.

C3 Energy (U.S.), a software-as-a-service data analysis platform, raised $15 million in Series A funding.

Optimum Energy (U.S.) raised $12.2 million in a round led by new investor Navitas Capital (backed by a venture capital advisory relationship with Johnson Controls); the round also included existing investor Columbia Pacific Capital Management and Edison Energy.

Utility Funding (UK) raised $11.3 million from Foresight Group

Varentec (U.S.) raised $8 million in Series B funding from Bill Gates and Khosla Ventures on Sept. 25.  The company, which develops power management and monitoring solutions for the electric grid, has received $16 million in venture funding to date and previously secured funding from the U.S. DOE.

Bidgely (U.S.) raised $5 million in Series B funding from Khosla Ventures. Founded in 2011, it develops analytics that can itemize home energy usage data to the appliance level without using any plug-level monitors. It has received a total of $8 million in venture funding to date.

Xtreme Power (U.S.) raised $5.8 million in debt funding by a group of investors, including SAIL Capital Partners, Bessemer Venture Partners, Dow Chemical, Fluor, Dominion Power, Spring Ventures, BP, and Posco.

Smarter Grid Solutions (UK) raised $4.8 million from Scottish Equity Partners, Scottish Investment Bank and the University of Strathclyde.

WaterSmart Software (U.S.) raised $4.5 million in Series A funding from Physic Ventures, Draper Fisher Jurvetson, Apsara Capital and The Westly Group. The company develops software that helps water utilities make it easier for customers to conserve water and save money.  It also won the cleanweb SXSW Eco award for innovation in the fields of energy, design, technology and sustainability.

Ecolibrium Energy (India) received $1.6 million in Seed funding from Infuse Ventures and International Finance Corporation.

Integrated Energy Management Solutions raised $1 million.

 

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