Coming out of last week's Cleantech Venture Forum, it's pretty clear that cleantech (and relatedly energy tech, which is not a 100% overlap, as regular readers of this site will understand) is fast becoming a mainstream investment area for VCs, in part driven by LPs' interest.
In terms of energy technology investing, Rodrigo Prudencio of Nth Power was kind enough recently to share some of the data that his firm is tracking. As part of a recent presentation he gave at Rice University, Rodrigo showed how US energy technology VC investments are at $1.7B so far in 2006 -- compare this with $0.9B for all of 2005, or with the $500mm expected this year in VC investments in Web2.0.
That the energy technology sector (and cleantech in general) is a booming investment area is well understood, but what was really fascinating was Rodrigo's breakdown of the numbers by subsector, which showed that some subsectors are getting a lot more investor interest than others.
Within Distributed Energy Technology, for example (btw, this subsector was 28% of the total), investments in fuel cells and solar dominated the subsector, while other technology areas such as new engine technologies and hydrogen generation were small or nonexistent in the data. This means that solar tech has received more than 10% of all energy technology VC investments so far this year. Interestingly, while investments in fuel cell technology have been generally flat or dropping over the past year, battery-related investments have been growing very quickly. For those who argue that batteries and fuel cells are competing technologies, this is interesting data.
Even more interestingly, in the Fuels subsector, ethanol-related VC investments have received more than $400mm, or just about one quarter of all energy tech investments. Some (including yours truly) would argue that much of this hasn't really been venture capital investment, but has instead been project finance and/or mezz financing that happened to include VCs in the mix. But the more important comparison is with other fuels-related investment areas -- biodiesel, fuels-related biotech, and new drive train technologies have collectively received less than $100mm so far this year. Such investments clearly are not receiving the same level of attention in the rush to invest in ethanol-related opportunities.
Encouraging to those who have been proponents of technology-enabled energy efficiency technology is the fact that 21% of energy tech investments this year were directed to Energy Intelligence, and of that, the vast majority has been directed to IT & software, end-use management, and sensors. This is good validation that such scalable technologies are primed for rapid market adoption -- or at least that investors think so. Such investments have more than doubled over the past two years.
Thanks to Rodrigo for sharing this very interesting look. As Rodrigo points out, there's a lot of deals concentration in certain technologies, and "the opportunity is to find neglected but valuable subsectors." Amen, and especially true for those investors with a broader cleantech mandate as well.
And it's all strong validation of the increasing interest in these industries, and in the cleantech investment thesis in general. Further such indications can be found in this article in PE Week, which points out that a lot of former IT/etc. venture investors are now looking to expand their efforts in the sector. Oftentimes because LPs are asking for it to happen.
Source : CleanTech Investing
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