Eye-popping late-stage rounds that went to a handful of smart grid companies from 2008 to 2010 have been replaced with smaller fundings, but VCs say that’s no reason to get down on the space. If big strategics keep helping VCs rack up billion-dollar exits, expect cash to keep flowing and growing into smart grid startups.
Mercom Capital Group published a downer of a report earlier this week saying investment in smart grid startups has been “anemic,” but acknowledging some big exits that must paint a rosy picture for entrepreneurs and investors. Seed and Series A deals accounted for a growing portion of VC money invested in the space—nearly a third last year, the report stated.
One VC who spoke with peHUB said that in 2011 his firm kept up approximately the same pace of investing in smart grid opportunities and that the capital-intensive nature of developing companies in the space limits how his firm, and likely others, spreads resources.
The Mercom report pointed out how VCs at GE, Kleiner Perkins Caufield & Byers, Emerald Technology Ventures and Intel Capital were active smart grid investors last year, but they weren’t alone on the big deals. iControl Networks took on more than $50 million in its Series D with investors including Cisco Systems, Charles River Ventures and Comcast Ventures chipping in, and Mississippi-based SmartSynch got funding for expansion to China and Silicon Valley.
Still more VCs packed into early- and mid-stage deals. Maryland based smart grid developer CURRENT packed on a $13 million round last year from investors including Goldman Sachs; energy management firm Grid2Home took on a second round of funding led by Granite Ventures, and Chicago-based Clean Urban Energy took on a Series A round from VC investors Battery Ventures and Rho. Smart meter data analysis firm Plotwatt, based in North Carolina, took on a seed round from Felicis Ventures last year as some of the smart grid underclassmen have hitched themselves to the biggest names in their businesses.
So who didn’t get VC money to develop smart grid tech in 2011? Well, for once, eMeter managed not to belly up to the trough, a rather impressive feat, given that the energy information management solutions firm has already packed in $70 million via four rounds from 2007 to 2010. It didn’t need a new round of funding by the end of 2011; eMeter was acquired by Siemens for terms that were not disclosed. Another big exit for 2011 was Landis+Gyr, the smart meter company that was bought by Toshiba in a $2.3 billion deal. CURRENT, which just packed on a new round, counts Landis+Gyr among its partners.
Trilliant, which tucked in an unspecified round in late ’10, having already taken on nearly $150 million, is another example of a bigger player that helped skew VC funding results up in prior years. With a deep client roster including traditional utility players, Trilliant, too, could easily wind up with a larger strategic, and generating another billion-dollar exit.
In fact, sources agreed, don’t expect smart grid funding to shrivel up. The cleantech sub-sector may have hit a low in 2011. But exits have generated attention.
“You’re going to see seed rounds and more early-stage stuff this year and next,” our VC source predicted.