Solar Tech: Still A Magnet for VCs

Solar companies continued to be the biggest draw for venture capitalists in 2010 despite grumblings by some investors and analysts that say the solar sector hasn’t received strong returns yet and relies too much on government subsidies.

It wasn’t so long ago when VCs vowed they were going to be extra prudent about making solar investments (this was around the time of the financial market collapse in late 2008). And they predicted the days of big solar deals exemplified by rounds raised by the likes of Nanosolar were over.

It’s true that we haven’t seen another $300 million round, like the one that turned heads for Nanosolar. But large rounds for solar still existed in 2010 nevertheless, and that goes to show not only that solar continues to be a capital intensive enterprise, but also that investors aren’t shy about putting money in companies if the companies are drawing a lot of buzz. Some of the VC attention has come in from the solar companies’ abilities to secure large government funding for huge factory or power generation projects.

In 2010, solar attracted the most venture capital worldwide (as it did in 2009), according to preliminary numbers released by Cleantech Group last Friday. Solar companies raised $1.83 billion in 2010, accounting for 24 percent of the pie. Transportation followed with $1.35 billion (17 percent), and energy efficiency took the third place with $1.05 billion (14 percent).

But look at the amounts that made up the high-profiled deals of 2010: Solyndra raised $175 million to continue its factory expansion plan in California; BrightSource Energy raised $150 million as it was getting ready to build its first, 392MW solar thermal farm in California’s desert; and Abound Solar raised $110 million to build a new factory in Indiana and expand an existing one in Colorado.

We might see more similar, large deals this year. The three companies have either closed a loan guarantee or received a loan guarantee commitment from the federal government. The government still has more money to fund loan guarantees for renewable energy projects.

Giant deals stand out, of course, but smaller deals are more of a norm. Last week, we reported on the $51 million raised by SoloPower and the $4.5 million closed by Sopogy in what the solar company hopes will be a $30 million round.

Overall, the cleantech world saw a big jump in venture capital investments in 2010. Companies in North America, Europe, China and India raked in about $7.8 billion in 715 deals, the Cleantech Group said. In 2009, $6.1 billion materialized for 624 deals.

North American companies gobbled up $5.28 billion, or 68 percent of the global investments. In 2009, North American companies took in $3.65 billion. The number of North American deals also went up to 391 in 2010 from 317 in 2009.

For more research related to smart grid check out GigaOM Pro (subscription required):

Photo courtesy of Steve Jurvetson