Here are a few trends to keep an eye on in the cleantech space as 2014 heats up:
1. Increasingly, cleantech venture investors are favoring later-stage companies.
A report published in September by Next 10, a nonpartisan research firm focused on California, found that in that state, investment in what it calls “development and growth” cleantech companies slipped 44 percent between the second half of 2012 and the first half of 2013. But financing for those companies in the later “deployment” stage shrunk only 3 percent during the period.
Another report, released in October by CB Insights, lent further credence to the trend, finding that seed and Series-A funding accounted for only a quarter of cleantech deals and a third of funding to the space in the third quarter of 2013.
2. In a related trend, cleantech industry observers are pointing to the growing role corporate investors are commanding in cleantech.
The same Next 10 report cited above also pointed out that in California cleantech deals in 2012, $1.45 billion of the total $2.6 billion of cleantech VC investment included corporate investors. In 2009, 84 VC investors took stakes in Californian cleantech companies, along with 14 corporate investors. In 2013, the numbers were 60 and 20, respectively.
Johnson Controls is among the corporations contributing to the nationwide trend. In August, the Wall Street Journal reported that the conglomerate had made its first semi-direct investment in a startup when it took a stake in Optimum Energy, in a deal that also involved a venture capital firm.
Corporate investors are expected to fill the “Series A gap” being left by institutional cleantech venture capitalists.
3. Energy efficiency is getting its day in the sun.
Bloomberg New Energy Finance revealed when it released its 2013 funding figures for the cleantech industry that energy efficiency was one of the few sectors that saw investment increase last year, with total investment increasing to $34.6 billion from $32.7 billion.
Several cleantech investors have indicated that they’re eager to help drive that trend. On January 22, Joule Assets launched a private equity vehicle called the Joule Energy Reduction Assets Fund (ERA Fund), set on investing in energy efficiency and demand-response markets around the world, according to the firm’s website. The day prior, The Wall Street Journal noted that clean energy finance firm Kilowatt Financial had closed a $100 million debt facility from Citi that would be financing residential energy efficiency loans. The week before that, SDCL, the London-based consultant and financial firm, announced a $200 million Chinese energy efficiency fund, which it said would help bring energy efficiency technology from the U.K. to China, reports Deal Radar. And just days before that, the Asian Venture Capital Journal said that Swiss green investment firm SUSI Partners closed its energy efficiency fund with €65 million under management, exceeding expectations of a €50 million top-off.
4. Several firms are releasing their exclusive focus on cleantech and expanding their scope to the much broader “sustainability” space—while others are turning away from cleantech altogether.
The Wall Street Journal announced last summer that Mohr Davidow Ventures would be edging away from life sciences and industrial clean technology and moving exclusively into information technology. In October, the WSJ said the XSeed Capital would be doing the same.
But some firms were keen to keep one foot in cleantech while expanding their focus to account for a much broader category: sustainability. The Guardian reported in early January that The Westly Group, which had invested in Tesla Motors and a range of other cleantech companies, was more recently taking a stake in Revolution Foods, which specializes in healthy school lunches. DBL Investors was taking similar action, the Guardian added, moving into organic food and recycled packaging ventures. Kleiner Perkins, too, exhibited this behavior in 2013, admitting that a singular focus on cleantech hadn’t been the smartest tack, says Gigaom. The firm’s new buzzword in describing its investment philosophy is “sustainability.”
VantagePoint Venture Partners, Hudson Clean Energy Partners, and Draper Fisher Jurvetson have all taken similar steps.
Fundraising:
The Wall Street Journal reported on October 11 that New York-based ff Venture Capital, an investor in biotech firm NovaSynthetix, planned to take advantage of new rules permitting it to advertise its offering as it finishes raising its third fund. The WSJ article added that the firm could thereby become one of the first in “a revolution in venture capital fundraising.”
On October 10, Reuters reported that private equity firm DuSable Capital Management hoped to raise as much as $1 billion for its first fund. The firm focused on global energy and infrastructure investments, and was co-founded by Frank White Jr., national vice chair of President Obama’s 2012 re-election campaign.
Tough fundraising:
Other firms had a harder time scaring up funds. CalCEF Clean Energy Angel Fund announced in early October that it had tabled fundraising plans for its second fund, pointing to a choppy cleantech market.
On September 25, The Wall Street Journal reported that SAIL Capital, too, had given up on plans to raise a new venture fund built around cleantech opportunities in Canada. The firm had planned to do this through a joint venture with Stifel Financial Corp., but Managing Director Walter Schindler said Stifel had not fulfilled its promised to raise up to $100 million for the fund.
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People Moves
The directors of the American Council on Renewable Energy (ACORE) announced on January 10 that Michael Brower, Interim President and CEO of the organization since last summer, had been named President and CEO, according to ACORE’s website.
Matthew Nordan, an energy investor at venture firm Venrock, left the firm this month to launch a clean energy project development company focused on China called MNL Partners. Matt Trevithick, another of Venrock’s investors in the energy space, left at the same time.
In December, Tim Woodward had left energy technology venture capital firm Nth Power to become Managing Director at Prelude Ventures.
On November 21, BrightSource Energy announced in a press release that its directors had tapped David Ramm, previously the board’s Executive Chairman, for the CEO role.
A couple of days before, on November 19, Proterra Inc. said it had hired as CFO Dave Rich—most recently CFO at Toyota Boshoku America—and Bill Fay, from Clever Devices, as VP of sales.
Also on November 19, Oxford Photovoltaics announced that Dr. David Fyfe would become its new Chairman. Fyfe previously led Cambridge Display Technology (a Cambridge University spinoff) and ran a research laboratory for the British Steel Corporation.
On November 13, Opower announced that Carol M. Browner, former director of the White House Office of Energy and Climate Change Policy and former administrator of the U.S. Environmental Protection Agency, had joined its advisory board.
In November, Jon Wellinghoff made the move to the energy law practice at Stoel Rives upon leaving his chair position at the Federal Energy Regulatory Commission.
GridPoint tapped a new CEO on October 17, according to a company press release. Former Berkshire Hathaway executive Todd Raba took the reins of the energy management firm.