By John Addison (12/10/09)
Investments Grow for Electric Cars, Energy Storage, Smart Grid
More venture capital will be invested in innovative greentech firms and more IPOs will happen in 2010 predict some of the world’s smartest venture capitalists and investment bankers at the Venture Summit Silicon Valley. In most circles, greentech is called cleantech, but with the 2009 IPO of A123 leading to a billion dollar valuation, venture capitalists are seeing green.
Cleantech encompasses the growing array of technology, services, and corporations that provide for a future with lower greenhouse gas emissions: energy efficiency, renewable energy, electric cars, smart grids, pure water, and even next generation building materials.
Continued investment is needed to bring us the next generation of batteries, solid state lighting, smart grid components, electric cars, lighter and stronger materials, and solar power so efficient that it makes no sense to build another coal power plant. Greentech is now 25 percent of venture capital investment reported Eric Wesoff, Senior Analyst, Greentech Media. Greentech has become the third major area of investing for the venture capital community that has focused on information technology and life sciences.
2010 IPO and M&A Growth
Forty IPOs of venture-backed firms were predicted for 2010, up from less than ten in 2009. More importantly, 600 venture-backed firms are likely to be purchased in 2010 through mergers and acquisitions (M&A) by large companies eager to expand their total offerings. The AlwaysOn Venture Summit included top private equity executives from Google, Qualcomm, Motorola, and dozens of companies with a history of acquisition. Hallways and lunch tables overflowed with investors, entrepreneurs, and corporate giants pitching, listening, and networking.
The severity of the recent recession has left brilliant ideas unfunded, lithium battery plants delayed, and gigawatts of renewable energy plants without project financing. Innovators at early stages depend of private equity. Venture capitalist raise billions in funds from large university endowments and pension plans who in turn suffered lost billions in the stock market and real estate downturn. Successful 2010 IPOs plus M&A will generate cash for VCs and bring new endowment and pension funds.
Lithium battery maker A123 Systems is a poster-child of cleantech IPO success. This year it raised $391 million with an IPO priced higher than expected. A123 has never made money, only had $68 million of revenue last year, and will have less than $90 million revenue this year. Its stock still trades above the offering price with over a billion in market capitalization, even though Chrysler cancelled electric vehicle plans that include A123 batteries. Investors continue to be optimistic about A123 in markets like power tools, grid storage, and automotive.
A123 CFO Mike Rubin explained that the IPO provided important credibility with the battery maker’s major customers. It also gives A123 a strong balance sheet and the ability to fund more R&D and weather difficulties.
Yes, government funding and loans are also critical to American leadership in cleantech. Headquartered in Massachusetts and founded in 2001, A123 was funded initially with a $100,000 grant from the U.S. Department of Energy.
In 2010, it may be IPO offerings like Tesla or Silver Springs Networks that get cleantech investors excited. Stay tuned.