Cleantech: Venture & PE Remain Active, But Winds Are Changing
October 10, 2014
Friday Morning Dealmakers Column
The Cleantech industry has gone through dramatic investment growth, starting in 2005 and peaking in 2011. Although new investments have recently declined, certain subsectors have come more into favor and investment activity has been focused on later-stage opportunities and less capital-intensive business models. In the first half of 2014, Agriculture & Food, Energy Efficiency and Transportation were the most active subsectors in terms of number of deals, while Transportation, Solar and Energy Efficiency had the largest capital flows into their respective sectors. Some of the largest U.S. investments in the first half ($100 million+) were Sun Capital’s acquisition of Aclara (Smart Grid), as well as other firms' growth equity investments in SunRun (Solar), Nutanix (Energy Efficiency) and View (Energy Efficiency). Investment activity with corporate or corporate venture continues to be active; over 70 deals in the U.S. had corporate participation in the first half of the year.
Companies requiring investment to build out manufacturing capacity to commercial scale remain unattractive, as a “death valley” continues to exist because of the capital intensity required, and the lack of project financing for opportunities that still have technology and/or manufacturing risk. To a certain extent, corporate investors have taken up some of the void left by the venture capital industry to help fund commercialization of proven technologies. Because of the sheer number of investments and capital committed during the boom of the Cleantech sector (combined with the lack of meaningful exits), financial investors have been more focused on continuing to fund existing portfolio companies versus making new investments. As emerging technologies in the sector continue to mature, we are seeing increased acquisition interest from the U.S., Asia and Europe.
Sources: PitchBook, company filings and press releases
By Shez Bandukwala, Managing Director and Group Head, Cleantech and Industrial Technology, KPMG Corporate Finance LLC, 312-665-1067, firstname.lastname@example.org
This article represents the views of the author only and does not necessarily represent the views of PitchBook.