The cleantech sector is alive and well, with strong momentum leading into 2011, according to an analysis of investments in 2010, by the US market analysts Kachan & Co.
In 2010, a higher level of investment prompted a reduction in the size of funding rounds - and that’s a good thing. “Round sizes in cleantech in the last few quarters have dropped to almost their lowest level in recorded history,” said Dallas Kachan, Managing Partner. “And that’s good. More cleantech companies are now getting capital than in the days of the large, exclusionary government stimulus grants and loans that skewed investment towards larger deals.”
The average global cleantech venture deal size is now hovering around $12 million, according to data. This is still higher than average US round sizes in biotech ($8.7 million), medical devices ($7 million) and software ($5 million), according to the US National Venture Capital Association.
Early stage venture deals have returned in cleantech and there’s been a drop in the number of cleantech follow-on investment rounds aimed at keeping existing companies alive, and an increase in early stage deals with new companies. “Cleantech venture investors are getting on with business, and we predict this to continue throughout 2011,” said Kachan. “Some have been questioning the long term effectiveness of the venture model in cleantech, but that's clearly not stopping investors worldwide from putting innovation capital to work today.”
Exits and multiples are increasing
The number of cleantech initial public offerings and mergers and acquisitions are up in recent months. And the latest returns on selected cleantech IPOs are much more promising than only a quarter ago. “The last few months have seen an increased retail investor appetite for certain publicly traded cleantech companies,” notes Kachan.
The data show there were a record number of cleantech M&A deals in 2010, evidencing increasing corporate appetite for cleantech companies. Kachan expects this trend to continue in 2011.
Corporate investment growing
Multinationals are increasingly participating as clean technology investors, incubators and acquirers. “[Recently] Japanese companies including Sharp, Toshiba and Panasonic pledged to invest $4.5 billion in cleantech over the next 15 months,” notes Kachan. “With the largest companies worldwide sitting on more than $3 trillion in cash, the climate is right in 2011 for increased corporate multinational M&A, investment in and purchases from cleantech companies.”
The preliminary 2010 global cleantech venture investment total of $7.8 billion, can, and likely will, be easily eclipsed by corporate investment soon. General Electric alone plans to double spending on energy-related research and development, to $2 billion per year over the next five years.
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