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Venture capital firms poured $2.5 billion into green technology in the first quarter of 2011, the second-highest quarterly figure ever for the industry. But is the upswing a sign of renewed investor confidence, or a sign that VCs are stepping into the breach that might otherwise be filled by the public markets?
The first quarter’s $2.5 billion global green VC figure, compiled by Cleantech Group and reported by CNET, is the second-highest on record, topped only by the $3 billion raised in the third quarter of 2008, right before the global financial crisis and economic downturn began. It also marks an impressive upturn from the $1.68 billion in green VC cash raised in the fourth quarter of 2010 and the $1.97 billion reported the first quarter of last year.
At the same time, much of the first quarter’s venture capital investment was concentrated in larger deals for later-stage companies, many of them in the capital-intensive worlds of renewable energy and electric vehicles. Toward the end of 2010, Reuters reported a sharp decline in investing in early-stage cleantech companies because of the lack of returns for investors.
Are later stage greentech companies raising more money because they’re unable to successfully take to the public markets? Solyndra, the thin-film solar module maker had planned to go public last year and raise as much as $300 million, but canceled its IPO to instead raise $175 million by selling convertible promissory notes to existing investors. And this February, Solyndra announced it had secured a $75 million credit facility from existing investors, as it seeks to drive down its manufacturing costs (that $75 million isn’t included in the first quarter’s VC investment total).
In February, Miasole raised $106 million of a planned $125 million Series F round to ramp-up of production of its high-efficiency CIGS solar panels, now on order for project partners including Wal-Mart and Juwi Solar. Likewise, BrightSource Energy, which has a $1.3 billion federal loan guarantee in hand to build the world’s largest solar thermal plant in California, raised $201 million in the first quarter, bringing its total private equity raised to $530 million. Both of those solar companies have been rumored to be seeking IPOs in 2011, though they haven’t commented publicly on the matter.
The same trend can be seen in the green transportation sector, where companies trying to scale up mass production of electric vehicles are turning to follow-on investment rounds. Fisker Automotive, maker of the high-end Karma plug-in hybrid sports car, raised $150 million in the first quarter as it pushed forward with its plan to refurbish a Delaware factory to turn out its lower-cost “Project Nina” plug-in sedan. Kleiner Perkins partner Ray Lane has said that Fisker will seek an IPO, but it will want the Karma to be on the road and plans for revenues in place before that happens.
However IPOs are back in a big way for Internet companies and other sectors of VC investing. In addition a few greentech companies like algae maker Solazyme and car sharing company Zipcar are still planning on testing the public markets soon.
Let’s not forget the big IPOs that did come off in the first quarter. China’s Sinovel Wind held a 9.46 billion yuan ($1.4 billion) public offering on the Shanghai Stock Exchange, clocking in as the quarter’s biggest greentech IPO. And in the U.S., Khosla-backed biomass-to-isobutanol startup Gevo raised $95.7 million in its Feb. 9 debut, and has seen its share price climb steadily since then.
Also, not every cleantech investment in the first quarter fit the late-stage format. There were a fair share of early-stage investments as well. Here are a few: Stanford spinout C3Nano raised a $3.2 million Series A round to develop nanomaterials for cheaper, more durable solar panel and viewscreen coatings; RelayRides, raised a little over $5 million to boost its peer-to-peer car sharing plans; grid management software startup Grid2Home raised $2.6 million of a planned $3.1 million round.
Image courtesy of Solidstate via Creative Commons license.