As Henny Penny cried, "The sky
is falling, the sky is falling."
And to look at the latest report on quarterly
cleantech venture investment released last week by Cleantech Group, one might
think the same is true for this sector.
"Measured by
dollars invested, cleantech venture investment fell 14 percent compared to the
previous quarter ($1.88 billion) and was off 25 percent from 2Q11 ($2.15
billion),” according to the Cleantech Group. “The number of deals recorded in
2Q12 was 155, compared to 197 in 1Q12. The tally may rise again once all
investors have reported all deals."
But does it really mean the sky is
falling?
“Despite headwinds
facing the sector and global economic instability, we continue to observe top
tier funds such as Khosla Ventures, Kleiner Perkins, NEA, and others actively
investing into cleantech,” said Cleantech Group CEO Sheeraz Haji in a press
release.
“While some may be ducking ‘cleantech’ as a label in North America," Haji noted, "growth in technologies addressing resource and energy challenges remains strong
and both corporate and investor interest remains high.”
"The dip in cleantech venture capital this year is not
unexpected," Dallas Kachan of Kachan & Co., wrote in an email to me
last week. "We forecasted a decrease in cleantech VC in 2012 due to a
tightening in the investor fundraising climate, waning policy support in the
developed world, perennial concerns about IRRs in cleantech and macro-economic turbulence
and other factors.”
Another factor may be that investors
who were dabbling in cleantech the past
couple of years have fled the sector, which may have artificially inflated the
numbers in previously quarters and years.
I've also been
hearing from several investors and entrepreneurs with whom I speak to
regularly, that there's still an overall belt-tightening in the investor world.
Other investors may not be
convinced the sector will thrive without a carbon price, which we won't see any
time before the November election -- if then!
The news isn't all grim, however, and venture capital is not the only money in the sector.
The news isn't all grim, however, and venture capital is not the only money in the sector.
Increasingly, big companies are
filling the gap from the venture community and those firms that are in it for
the long haul are making follow-on investments.
"The largest companies in the
world are buying their way into clean technology markets," Kachan noted in
the same email exchange, "supplementing
the role of traditional private equity and evidencing a maturation of the
cleantech sector. A decrease in venture is being made up for by a rise in
corporate involvement in cleantech."
Still, there has been
a shakeout in cleantech companies as subsidies get pulled and follow-on money ceases its flow.
"A lot of
cleantech startups have been getting shaken out and will continue to do
so," wrote Rob Day in his excellent take on the Cleantech Group findings.
Day also noted some
positive news, however, that Limited Partners (LPs) "finally appear to be
slowly getting back into the habit of funding cleantech venture capital
firms. So I think we'll see a pickup in deal flow in the second half of the
year. But probably not enough to forestall the ongoing shakeout."
As Day and others have
noted, deal counts may be more indicative than dollars when it comes to judging
the overall health of investing in the sector.
The top two
sub-sectors in terms of deal counts in the Cleantech Group report? Energy
efficiency and water.