Green IT Overview, Q2 2010

1Executive Summary

In the second quarter of 2010, greentech startups scored record venture capital and increased spending despite a weak economy. VCs wagered $2.02 billion in greentech, up 43 percent from the same period a year ago, though down slightly from the first quarter, according to the Cleantech Group. Greentech had a record first half of the quarter, with $4.04 billion invested — up 65 percent over the same period a year earlier and higher than the previous peak of 2008.

Compared to the first quarter of 2010, however, investment deals dropped from 192 to 140, indicating the greentech field has narrowed from the go-go days of 2008. The drop was most pronounced in North America, which saw deals decline from 128 in the first quarter to 76 in the second. Meanwhile, China accounted for most of the greentech IPOs of the quarter, with 12 offerings that raised $1.73 billion, including the quarter’s biggest, the $300 million IPO of battery maker Zhejiang Narada Power Source on the Shenzhen Stock Exchange.

U.S. corporate investors — among them Intel Capital, GE Capital, Shell, French power company Alstom and agribusiness giant Cargill — poured a record $5.1 billion into greentech in the first half of 2010, a 325 percent increase from a year ago. In May and June, General Motors launched a $100 million fund for new transportation technologies. Samsung, meanwhile, said it would spend $20 billion in solar cells, battery cells and LEDs, and General Electric announced a $10 billion increase in R&D spending on its Ecoimagination products and services. Increases by Samsung and GE established the companies as major players among public and private investors.

Federal economic stimulus led the U.S. Department of Energy to boost greentech funding to $1.75 billion in the second quarter — the most in a single quarter. This accelerated the disbursement of funds to a total of $4.85 billion at the end of June, according to Mercom Capital Group.

VC activity also reflected a weak IPO market as greentech companies retreated to private investors rather than risk public offerings. According to Bloomberg New Energy Finance, several of the 19 greentech IPO plans — worth $9.6 billion as of April 2010 — were put on hold in the second quarter. Heavily capitalized thin-film tubular solar-panel maker Solyndra opted to raise $175 million from current investors rather than face the markets. Wind turbine maker Goldwind canceled its IPO plans. Challenges aside, 19 greentech IPOs raised $2.31 billion in the second quarter. Electric luxury carmaker Tesla Motors raised $226 million, the largest venture-backed IPO of the quarter, according to the National Venture Capital Association and Thomson Reuters.

Solar power retained its lead in greentech venture financing, according to Cleantech Group, bringing in $811 million in 26 deals, led by investments in Solyndra, solarthermal startup BrightSource and concentrating solar startup Amonix. Biofuels ranked second, with $302 million from 18 deals. Among those deals was the $105 million raised by IPO hopeful Amyris Biotechnologies. Smart grid companies also raised significant capital ($256 million from 11 deals). Energy-efficiency companies — makers of LEDs, HVAC systems, building materials and IT equipment — landed $147 million in 31 deals, the Cleantech Group reported.

Global investment for clean energy asset financing fell to $28.9 billion in the second quarter, down 2.1 percent from the previous quarter and down 3.7 percent from a year ago, according to Bloomberg New Energy Finance. The decline was driven largely by economic troubles in Europe. The U.S., further along in a still-feeble recovery, saw financing increase to $4.9 billion, up from $3.5 billion in the previous quarter and $4.3 billion in the second quarter of 2009. But it was China that underscored its rising might in the greentech industry, with $11.5 billion in green energy financing in the first quarter, up a commanding 76 percent from the same quarter last year.

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