US VC Investment in Cleantech Reaches $1.14 Billion in Q1 2011, a 54% Increase From Q1 2010

BOSTON, May 2, 2011 /PRNewswire/ -- US venture capital (VC) investment in cleantech companies increased by 54% to $1.14 billion in Q1 2011 from $743.3 million in Q1 2010, despite a 13% decrease in deals year on year from 79 to 69, according to an Ernst & Young LLP analysis based on data from Dow Jones VentureSource.  The top 10 deals in Q1 2011 totaled $683.1 million, 60% of the total raised for the quarter and two deals accounted for 18% of the total dollars raised.

"The US cleantech market experienced continuing momentum –- both from a venture capital perspective and among the larger investment community.  The second generation of solar companies and larger, later stage rounds dominated VC investor interest in Q1," said Jay Spencer, Ernst & Young LLP's Americas Cleantech Director.  

Energy/Electricity Generation segment leads with solar

The Energy / Electricity Generation segment, led by strong solar investments, raised $450.3 million through 16 deals in Q1 2011. The solar sub-segment accounted for 32% of the total dollars raised for the quarter with $362.7 million, a 162% gain from Q1 2010. Specifically, MiaSole, a Northern California manufacturer of copper indium gallium selenide thin-film photovoltaic solar panels, was the largest deal of the quarter. The company raised $106 million in a later-stage round of financing, 24% of total dollars in Q1 2011. Alta Devices, a Northern California company that focuses on improving the production economics of high efficiency solar PV applications, had the fourth largest deal of the quarter with $72 million third round financing.

Large investments also bolstered the Energy Storage segment to be the second largest in terms of dollars in Q1 2011. The segment is up 671% year on year after raising $262.4 million through 10 deals. Battery companies drew in $121 million of this investment compared to $8 million in Q1 2010, a 1405% increase, while Fuel cell companies attracted $106 million in Q1 2011, a 308% increase year on year. Two deals accounted for 64% of the dollars raised in the Energy Storage segment overall, including Bloom Energy, a California provider of fuel cell-based power generators, which raised $100 million.

In Q1 2011, the Industry Focused Products and Services segment ranked third with respect to total amount raised. It attracted $161.86 million, a 27% decrease from the $221 million raised in Q1 10.  The largest deal in this segment was completed by Myriant Technologies, a Massachusetts developer of biocatalyst technologies for conversion of renewable feedstocks that raised $60 million.

The Alternative fuels segment, led by biofuel companies, raised $160 million, 14% of the total dollars raised in Q1 2011. Finally, the Energy Efficiency sector raised $95 million in Q1 2011, down 49% from the $187 million raised in Q1 2010.

VCs favor later-stage companies

Companies generating revenue raised $596.4 million, 52% of the total dollars invested in Q1 2011, up from just 34% in the same period last year. Later stage rounds accounted for 28 deals and $721.6 million, representing 67% of the total quarterly investment compared to 57% in Q1 2010. However, first round investment also increased by 77% to $146.1 million compared to $82.7 million in Q1 2010.

Regional highlights

In Q1 2011, California accounted for 56% of the total dollars funded with $637.2 million, up 41% year on year. Northern California attracted 79% of dollars raised throughout California. This quarter was also strong for investment in the Southeast and the New England regions. Companies in the Southeast garnered $150.2 million, a 6159% from Q1 2010, and New England area companies attracted $174.23 million, a 193% increase compared to Q1 2010.

Corporate engagement

Ernst & Young's recent Global corporate cleantech adoption survey illustrated the evolution of corporate investments from cost cutting and operational efficiency mechanisms to revenue generation initiatives. This trend was evident in US corporate cleantech investment in early in 2011. For example, GE, ConocoPhilips, and NRG formed Energy Technology Ventures, a joint venture that will invest $300 million in early-stage energy technology companies over four years. GE also spent $520 million to acquire energy efficient equipment provider Lineage Power. Additionally, Schneider Electric acquired a US-based energy procurement and sustainability services company Summit Energy Services Inc. for $268 million.

The focus on solar was also reflected in corporate investment in Q1 2011. New corporate engagements in this segment included California-based Innovalight and Taiwan-based Motech's partnership to develop solar cells using silicon ink. Additionally, Citigroup and SolarCity set up a $40 million fund for solar power projects.

Capital market activity

Two cleantech IPOs were filed in early 2011, according to Bloomberg New Energy Finance: California-based biofuel producer Solazyme Inc. filed its $100 million IPO in March 2011 and Gevo Inc., Colorado-based biofuels producer, raised US$107 million through its February 2011 IPO.

In terms of other capital market activity, 15 US M&A cleantech deals with a value of $206 million were completed in Q1 2011, according to IHS Herold. The largest deal by LDK Solar Co., Ltd. was the acquisition of a 70% stake in Solar Power, Inc. for $ 29 million. Additionally, US Geothermal secured $ 96.8 million in debt financing and $39.2 million in equity financing for the development of the 35MW Neal Hot Springs Project.

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Note to editors:

Ernst & Young uses the following definitions to classify the cleantech industry and its sub-sectors:

Clean technology encompasses a diverse range of innovative products and services that optimize the use of natural resources or reduce the negative environmental impact of their use while creating value by lowering costs, improving efficiency, or providing superior performance.

• Alternative Fuels – Biofuels, natural gas
• Energy / Electricity Generation - Gasification, tidal/wave, hydrogen, geothermal, solar, wind, hydro
• Energy Storage - Batteries, fuel cells, flywheels
• Energy Efficiency - Energy efficiency products, power and efficiency management services, industrial products
• Water - Treatment processes, conservation & monitoring
• Environment - Air, recycling, waste
• Industry Focused Products and Services - Agriculture, construction, transportation, materials, consumer products

SOURCE Ernst & Young LLP