The changing face of smartgrid VC

The VC figures tally that looked specifically at smart grid investment and M&A activity are out from Greentech Media and they confirm the general theory that has been circulating about cleantech VC in general and the smart grid in particular.

First, financing for capital (and debt) heavy startups is going away. Part of this is the difficulty of capital markets and the challenge of exiting. But I’d also argue that it has to do with where we are in the deployment cycle of smart meters and the fact that the hardware end of the smart grid is somewhat crowded and staked out with both traditional players and successful startups that have IPO’ed like Silver Spring Networks.

So who are the winners going forward? The usual suspects. Battery storage, demand side energy management and grid analytics. With the major exception of battery storage, these are all capital light propositions centered around leveraging software solutions to increase efficiency and thus allow utilities to spend less money on natural gas peaking power plants, which are costly.

Battery storage remains interesting as investment will still go to chemistries that could provide a stepwise improvement in energy density. Few of these startups will reach commercialization but the potential payoffs are so significant that I think we’ll still see these startups find funding over the next few years.

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Adam Lesser

Analyst Gigaom Research

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