Mercom: Smart Grid Venture Capital Funding Grows 30% in Q3

In Q3, Smart Grid venture capital funding totaled $65 million in 12 deals versus $50 million in 10 deals in Q2, according to Mercom Capital’s latest smart grid funding report. Venture funding in the sector has remained flat at around these levels over the last eight quarters, with the exception of Q3 2012 when $238 million was raised, according to the report.

There were 21 different venture capital investors that participated in deals this quarter, with Khosla Ventures participating in numerous smart grid fundings.

Home and building automation companies received the most funding with $36 million in seven deals followed by grid optimization companies with $20 million in one deal, according to the report.

Total corporate smart grid funding in the quarter totaled $129 million, which includes home automation and control systems provider Control 4’s $64 million IPO on August 4.  Control 4 has previously attracted north of $50 million in venture capital from investors including Foundation Capital, Cisco and GSV Capital Corp.

Innovation in the “connected home” is a top area to watch for on the consumer side, particularly among companies who already have access to people’s homes, such as cable companies, telecoms and security companies, Mercom’s CEO and Co-Founder Raj Prabhu tells CleanTechIQ. Customer acquisition in this space is very costly, so companies with products already in the home are at a big advantage, he added. So, VC’s can expect more product innovation and deals in this area.

There were four smart grid M&A transactions in Q3. Only one transaction, Schneider Electric’s acquisition of Invensys for $5.2 billion, was disclosed.

Mercom’s CEO also predicts a robust M&A market for the smart grid sector going forward. The most active firms, according to Prabhu, have been ABB and Schneider Electric, which have made six smart grid acquisitions since 2010, with GE and Siemens having made five acquisitions each. EnerNOC has acquired four companies while Alstom, Itron and Toshiba Corporation have acquired three companies each. Ameresco, Capgemini, Cisco, Eaton, ESCO Technologies, Honeywell, Leviton, McWane Technology, Navigation Capital Partners, and Tendril have made two acquisitions each over that same time frame.

The top smart grid venture deals this quarter include:

  • Varentec raised $8M 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, as received $16 million in venture funding to date and previously secured funding from the U.S. DOE.
  • Space-Time Insight raised $20M in Series C funding on Sept. 11 from Zouk Capital, Opus Capital Ventures, EnerTech Capital and Novus Energy Partners. The company, which provides geospatial and information visualization software, has raised $42 million in venture capital to date.
  • WaterSmart Software raised $4.5M in Series A funding on August 27 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 won the cleanweb SXSW Eco award this month for innovation in the fields of energy, design, technology and sustainability.
  • Bidgely raised $5M in Series B funding from Khosla Ventures on July 24.  Founded in 2011, it develops analytics that can itemize home energy usage data to the appliance level without using any plug-level monitors. Its received $8 million in venture funding to date.
  • On-Ramp Wireless raised $15M 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 $75M in venture capital and won a $2 million grant from the DOE.

To download the executive summary of the Mercom Capital report, click here

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