VC investment in clean-tech rebounds to $1.2 billion

London, 2 July: Venture capital (VC) investment in clean technologies (clean-tech) rebounded to $1.2 billion in the second quarter of 2009, according to the Cleantech Group, but investment levels stayed well below the highs of 2007-08.

Preliminary second quarter figures show investment is up 12% on the first quarter’s $1.07 billion, but down 44% from the same period a year ago. This upturn follows two consecutive quarters of plummeting investment, as VC investment in clean-tech dropped in the wake of the global economic crisis, said the Cleantech Group, a network of investors, entrepreneurs and service providers.

VC companies invested in 94 clean-tech companies across North America, Europe, China and India, with an average round size of $12.9 million, up slightly from $12.3 million in the first quarter.

Richard Youngman, managing director for Europe and Israel at the group, told Environmental Finance that the rebound indicates “a stabilising of the environment” as VC investors are “adjusting to the economic conditions of 2009”.

Mergers and acquisitions of clean-tech firms were also up, the Cleantech Group said, with 138 transactions. Financial details were disclosed for 40 transactions, totalling $12.2 billion. This is up 291% from the first quarter, which saw 123 transactions, with 23 disclosed totalling $3.1 billion. There were two clean-tech initial public offerings, the group said, down from four in the first quarter: China Metal Recycling raised $186 million when it listed on the Hong Kong Futures Exchange, and Duoyuan Global Water raised $88 million when it listed on the New York Stock Exchange.

Transportation clean-tech firms took the biggest chunk of VC investment, with vehicles scooping $236 million. San Diego-based fuel-efficient car start-up V-Vehicle has raised $100 million to date from Kleiner Perkins, Caufield & Byers and T. Boone Pickens, while Fisker Automotive landed $85 million to develop and manufacture its plug-in hybrid car from Eco-Drive Partners and Kleiner Perkins.

Biofuels firms saw the second biggest inflow of VC money, including renewable oil producer Solazyme, which raised $57 million.

Youngman said that VC confidence in transport and vehicle firms may have been boosted by the troubles experienced by major car manufacturers in the US, because of the recession. “There is, in some senses, opportunity in a way that people didn’t necessarily feel three or four years ago,” he said, as room opens up for newcomers.

But VC investment in solar firms fell to $114 million, from $346 million in the first quarter, which was already a significant drop from previous highs, the group said. In the third quarter of 2008, venture capitalists invested more than $1.2 billion in solar, more than the total investment in clean-tech in this quarter. The Cleantech Group put this down to VC firms looking for more capital-efficient investments.

It is not all bad news for solar, however. Scott Smith, US leader of consultancy Deloitte’s clean-tech practice, said: “While venture investment in solar is down dramatically, utility investment in clean-tech is up. Solar thermal was the leading energy source procured through power purchase agreements in the first half of 2009.”

North American companies raised roughly two-thirds of the total second quarter VC investment, according to the Cleantech Group. European and Israeli companies raised 21%, Indian companies raised 11% and Chinese companies raised 1%. Deals in India jumped 167% to $131 million in seven rounds, from $54 million in three rounds in the first quarter.

Kleiner Perkins was the most active VC investor this quarter, funding five companies.