| Record Year for US Cleantech Investments with $4.7 Billion Raised from Venture Capital in 2008|
February 3. 2008
Venture capital investments in cleantech reached record levels in 2008 with $4.7 billion raised in 186
financing rounds -- a 68% increase in annual capital invested and a 5%
increase in annual financing activity, according to an Ernst & Young LLP
analysis based on data from Dow Jones Venture Source. Cleantech companies
received $954 million from venture capitalists in Q4 2008, significantly
surpassing the $681 million invested in Q4 2007, but lagging behind the
record $1.7 billion invested in Q3 2008.
In 2008, the top four cleantech segments -- Electricity/Electricity
Generation, Alternative Fuels, Energy Efficiency and Energy Storage --
experienced strong growth compared to 2007. Energy/Electricity Generation
raised $2.7 billion in 2008, increasing 215%. The Alternative Fuels
segment grew 50% to $703 million. Energy Efficiency raised $427 million,
growing 6%, and Energy Storage raised $320 million, increasing 9%.
The amount of venture capital committed to cleantech in 2008 represents an
investment milestone. Since 2002, when US cleantech companies raised an
annual total of $234 million in venture capital, investment in the
cleantech market has increased at a compound annual growth rate of 65% to
reach the $4.7 billion invested in 2008. The annual number of cleantech
companies securing venture financing has also grown significantly. In
2002, 43 cleantech companies raised venture capital. In 2008, 171
cleantech companies raised venture capital.
"Investments made this past quarter suggest that investors are considering
industry drivers that will propel cleantech companies long after the
current financial crisis recedes," says Joseph Muscat, Americas Director
of Cleantech, Ernst & Young LLP. "Investors and corporate executives alike
continue to focus on growing operations to respond to opportunities
created by growth in global energy consumption, corporate climate change
initiatives, and governmental developments."
Led by solar companies, the Energy/Electricity Generation segment again
received the largest amount of VC investment with $539 million in Q4 2008,
representing 57% of total capital invested. Solar investments alone raised
$444 million in Q4. Three of the top five deals for all of Q4 were
California-based solar companies. The largest of these was completed by
Solyndra, a company that designs and manufactures photovoltaic systems in
Fremont, CA, that raised $219 million.
The Alternative Fuels segment attained the second largest investment in Q4
2008 with $236 million, representing 25% of total capital invested.
Biofuels raised the largest amount in this segment with $140 million. The
natural gas sub-segment raised $96 million. LUCA Technologies, a biotech
company that identifies new methods for creating natural gas in Golden,
CO, raised $76 million, the largest deal in the natural gas sub-segment
and the second largest deal overall in Q4.
Energy Efficiency was the third largest investment category, raising $68
million in Q4 2008, or 7% of total capital invested, driven by power and
efficiency management services. Ice Energy, a developer of energy storage
and refrigeration technologies in Windsor, CO, had the largest energy
efficiency deal, raising $33 million in a third round financing.
The 2008 results also reflect the continuing trend toward a larger
proportion of later stage investments as a substantial number of cleantech
companies, particularly in the solar sector, reach the pilot project and
commercialization stage of development. Later stage deals in 2008
accounted for 31% of the deals and 51% of the amount raised. In
comparison, later stage deals accounted for only 21% of deals and 34% of
amount raised in 2007.
In keeping with a trend observed in prior quarters, six of the 10 largest
deals in Q4 2008 included first-time participation by private equity
funds, illustrating how cleantech companies are pairing venture capital
with other funding sources as they move into the capital-intensive
Q4 2008 cleantech market drivers and related developments
The new Obama Administration's robust climate change agenda and economic
stimulus bill are generating optimism in the cleantech community and
contributing to the long-term drivers in the sector. One key policy
element is a commitment to invest $15 billion a year over the next decade
in renewable energy. If enacted, this proposal is expected to create five
million jobs, a majority of which will be in the cleantech market. The
renewable energy and energy efficiency industries already represent more
than 9 million jobs and $1 trillion in US revenues, according to a report
published by the American Solar Energy Society.
The economic stimulus bill currently under consideration by Congress also
contains a number of tax provisions designed to spur investments in
renewable energy, efficiency and other areas of cleantech. "The proposed
provisions, which will accelerate the ability to utilize production tax
credits, extend existing ones, and include an enhanced research and
development credit, will be just the beginning of a very active year for
climate change legislation," explained Steve Starbuck, Ernst & Young's
Americas Tax leader for Climate Change and Sustainability Services.
Corporations continue to look to cleantech as a source of innovation.
According to Ernst & Young's report, "Climate Change: The automotive
industry's 100-year storm," cleantech is a key enabler to the automotive
industry's response to climate change, a transformation that crosses the
sector's entire value stream. Additionally, Ernst & Young's Corporate
Venture Capital Survey 2008-09, revealed that 44% of respondent corporate
venturing programs intend to increase their cleantech investments in the next five years.
Alternative energy merger & acquisition activity also continues to support
market activity. Overall in 2008, there were 101 US deals tracked with
reported transactional values of $2.3 billion, according to J.S. Herold.
In Q4, 15 US deals took place with a total reported value of $399 million.
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 (LNG)Energy / Electricity
Generation - Gasification, tidal/wave, hydrogen, geothermal, solar,
wind, hydroEnergy Storage - Batteries, fuel cells, flywheelsEnergy
Efficiency - Energy efficiency products, power and efficiency management
services, industrial productsWater - Treatment processes, conservation &
monitoringEnvironment - Air, recycling, wasteIndustry Focused Products
and Services - Agriculture, construction, transportation, materials,
consumer productsAbout Ernst & Young's Strategic Growth Markets Network
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