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Investment Monitor: Q3 2016
Sponsored by:
CTG’s Monitor quarterly data review
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1: Headline Trends
2: Top Deals, M&A Highlights
3: Investors
4: Sectors Overview
Trend Spotlight
5: Deals : dollars discrepancies
6: Industrial biotech fundraising still works
7: Energy efficiency trends
Contents
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Section 1: 3Q 2016 headline figures
1a. Deal volume sliding but dollars improve
Despite the continuing slide in deal volume, 3Q16 saw the largest amount of dollars invested in cleantech companies since the start of 2011.
1b. Early-stage deal volume falling
Late-stage deals are holding steady, having recovered from a decline in 2015. Early-stage deals slide towards record low numbers.
1c. Average deal size increases
Overall average deal size continues to grow, mostly due to the increased average size of later-stage deals and a decline in early-stage deal volume.
1d. Geography California remains dominant cleantech location. Canadian states featuring in top 10 consistently. Asia Pacific takes over 1/5th of deal volume.
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1a. Deal volume still sliding as dollars invested improves
Dollars (left) and volume (right) of global cleantech venture capital deal activity
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1b. Early-stage deal volume still sliding after strong rebound
Deal volume comparison between early- and late-stage
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1c. Average deal size increases with strong late-stage average
Average round sizes in clean technology venture capital*
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Top geographies by deal volume
1d. Geographic distribution of venture deals in 3rd quarter
75.9%
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2a. Top venture deals Two storage companies make it into our top deals list as examples of the project finance momentum gathering in the sector. Indigo’s $100M raise continues industrial biotech’s feature in the list. Autonomous vehicle technology, drones, and Airbnb complete our list for 3Q16.
2b. Top Mobility Services deals
With the quantity of anomalous rounds happening in the Mobility Service space this table will highlight some of these deals separate from the top deals happening in other sectors. Interestingly, this entire list features deals from the Asia Pacific region.
2c. M&A deals The merger between SolarCity and Tesla will no doubt be seen as a 2016 M&A highlight. Beyond this, acquisitions from Ford and Verizon offer insight into their innovation strategy for the coming years. Global Cleantech 100 companies feature as acquirers, with Uber and Airware acquiring Otto Motors and Redbird respectively.
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Section 2: Top Deals, M&A Highlights
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2a. Top deals in third quarter
Description Round Size Investors Company
Peer to peer home rental reduces energy-intense hotel stays
$555M Growth Equity Google Capital, Technology Crossover Ventures
Designer and installer of solar PV systems for residential users
$313M Loan
Investec Bank, Silicon Valley Bank, ING, SunTrust Robinson Humphrey
Organizer of community solar financing projects
$220M Growth Equity Warburg Pincus, Core Innovation Capital, Obvious Ventures
Developer of energy storage systems in buildings to lower energy costs for consumers and provide load reduction to utilities
$200M Project Finance Macquarie Group
Developer of autonomous vehicle systems $180M Growth Equity Draper Fisher Jurvetson, Lux Capital
Developer of drones and software for capturing high quality, actionable data for industry
$150M Growth Equity Ford Motor Company, Baidu
Developer microbial plant nutrition products $100M Growth Equity Alaska Permanent Fund, Flagship Ventures
Developer of learning software and energy storage, helping businesses better manage electricity use and enhancing grid operations
$100M Project Finance Starwood Energy Group
Provider of cyber security products and services with applications on the smart grid
$100M Growth Equity
Blackstone Group, Insight Venture Partners, Khosla Ventures, Draper Fisher Jurvetson, Kohlberg Kravis Roberts
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2b. Top 3Q16 Mobility Services deals
Description Round Size Investors Company
Provider of internet services that connect consumers in an ecosystem spanning mobile, TV, VR, automotive and smart bicycles
$1.08B Growth Equity China Minsheng Bank, Yingda Capital, Legend Holdings
Developer of a new vehicle incorporating cutting-edge design and highly efficient performance
$1B Seed -
Provider of a mobile phone app for taxi reservations
$750M Growth Equity Softbank Group
Provider of an on-demand motorbike taxi service
$550M Growth Equity -
Provider of taxi hailing and ride-sharing services $120M Foxconn technology Group
Provider of an urban bicycle sharing platform $100M Didi Chuxing
(MoBike) Provider of a mobile app that allows users to rent bikes for short distance commutes
$100M Hillhouse Capital, Warburg Pincus, Sequoia Capital, Qiming Venture Partners
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As we encounter a constant flow of anomalous deals in the Mobility Services sector, we have here separated this sector’s top deals
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$2.6B $68M Institutional Venture Partners, Investcorp
Undisclosed $36M
Cisco Systems, GE Ventures, Simon Venture Group, Acuity Brands
$1.3B Undisclosed SoftTech VC, Haystack Fund, Maven Ventures
Undisclosed N/A -
$680M N/A -
Undisclosed $47.6M
Union Square Ventures, Accel Partners, Wellington Partners, Atomico, Felicis Ventures, Red Swan Ventures, Phenomen Ventures, Richard Branson, KDDI, 6 others…
$274.3M $15M Environmental Technologies Fund
Undisclosed $2.185M
New Enterprise Associates (NEA), KPCB, Accel Partners, MHS Capital Partners, New Cycle Capital
2c. Q3 2016 cleantech M&A highlights
Acquirer Target Venture Backers Deal Size/PIC
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$2.6B N/A – Public company
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3a. Corporate Participation
In a quarter that has seen an uptick in dollars invested, we have also recorded a record-breaking quarter for corporate participation, both in deal volume and dollar amount. 32% of deals exhibited corporate participation, compared to historical average of ~20%.
3b. Top cleantech investors by deal volume
KPCB is our top investor in 3Q16, in a quarter that saw more than 50 investors closing 2 or more deals.
3c. Record number of corporate Investors, recovering VCs
As mentioned in our 1H16 Innovation Monitor, VCs are showing signs of returning. Corporate investors break the 100 count for the first time in a single quarter.
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Section 3: Investors
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3a. Record quarter for corporate participation
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Dollars invested and deal volume for venture deals exhibiting corporate participation
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3b. Top investors in 3Q16
Deals Corporate
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4 Agrivida, Mode, Ambiq Micro, Farmers Business Networks
Airbnb, Turo, Desktop Metal, Optoro, Farmers Edge, Airware, Uber, VoloAgri, Beyond Meat, ChargePoint, Enlighted, INRIX, Proterra
3 Blue Prairie, Good Eggs, Ripple Foods Back to the Roots, Mycotechnology, Beyond Meat
3 Carbon, Farmers Business Network, Ripple Foods
Orbital Insight, Luxe, Impossible Foods, Helium Systems, Granular, Flexport, Uber, Airware
3 ZoomCar India, Velodyne LiDAR, Civil Maps -
3 Mobike, Carbon, ZoomCar India Go-Jek, Dada, Shuttle, PlanGrid, Ola, Orbital Insights, Lifx, Carbon, AcousticEye, Prudent Energy, Airbnb
3 Symbio Fcell, Heliatek, kWh Analytics Advanced Microgrid Solutions, Street Light Data, Sigfox, Tendril, Redbird
3 DarkVision, Axine Water Technologies, Polystyvert
Hortau, Eigen Innovation, Librestream, Bit Stew Systems, GaN Systems, Resson Aerospace, Solaris Geothermal, Neurio
Illustrative Portfolio Companies
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3c. VCs continue return and record quarter for corporates
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Count of active investors in cleantech venture deals by investor type
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4a. Top sectors % change, share of deal volume
With large mobility services deals excluded, transportation falls behind agriculture & food, and energy efficiency, in deal volume. Energy storage continues to increase its share of deal volume
4b. Top sectors % change, share of dollars invested
Despite the removal of mobility services deals, the transportation sector is taking an increasing share of dollars invested. Energy efficiency share increased in line with the deal volume rebound. Other traditionally strong sectors continue to increase their share of dollars invested.
4c. Non-transport sector shares of dollars invested in 3Q16
With transportation’s lion’s share excluded, solar, agriculture & food, and energy efficiency, once again dominate cleantech sectors.
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Section 4: Sectors overview
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4a. Sector shares of cleantech venture capital (deals)
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Percentage share of total deal volume by sector over time
Energy efficiency is recovering from a significant dip in 2015, as transportation and agriculture & food continue slide from first half.
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4b. Sector shares of cleantech venture capital (dollars)
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Percentage share of total dollars invested by sector over time*
• Transportation is still taking a large share of venture capital dollars, even when excluding deals >$350 million.
• Traditionally strong cleantech sectors all showing improved share compared to 2015. • Energy storage, despite a breakout year for project finance, is on track for a dip in VC dollars in
2016.
*Excludes Mobility Service deals and deals >$350M
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4c. Non-transport sector shares of dollars invested
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Sector shares of cleantech venture capital dollars in 3Q16 (Transportation excluded):
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5a. Discrepancy between deal volumes and dollars in key sectors
Higher deal counts but low total investment observed in agriculture & food, advanced materials, and energy efficiency. A simple analysis of average round sizes at the growth stage does not fully explain the trend, so we turn to the full deal list for further clues.
5b. Identifying causes with illustrative 3Q16 deals
Sectors with lower dollar totals exhibit deals for hardware and hard-science businesses. Seemingly conservative investors often set out more frequent developmental milestones for such portfolio companies, so watch for further fundraising from these companies with months, not years between rounds.
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Section 5: Trend spotlight – deals : dollars discrepancies
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5a. Discrepancy between deal volumes and dollars in key sectors
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3Q16 deal volumes and dollars invested (left); average round sizes (right)*
Notable discrepancy between deal volumes and dollar totals in the efficiency, materials, and ag/food categories in the third quarter. A general trend of smaller average growth rounds is observed, but does not give a complete explanation. Causes might include equity efficiency of owners, depressed valuations, capital-light business models, lower capital needs, or conservative investors.
* Excludes outlier deals >$100M; Deal volumes include rounds with undisclosed amounts
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Transportation
Buoyed by ten deals in the $20M-$100M range (and six outlier deals larger than that), including: Ofo & Mobike in Chinese urban bike sharing, Flexport & Transfix in freight logistics, Quanergy in autonomous vehicles, and Protean Electric in electric vehicles:
Agriculture & Food
Notwithstanding a high avgerage growth round size at $19m and seven deals in that $20M-$100M range, the bulk of the growth deal list is sub-$15M, with several conservatively-sized rounds for hardware, biotech, or livestock businesses:
Advanced Materials
Growth deal list dominated by companies founded 10+ years ago that are being conservatively funded due to slow-growth nature of hard-science development in nanomaterials, catalysts, organosilicon, and superconductors:
Energy Efficiency
Despite three-quarters of the sector’s deals going to growth-stage companies, twelve of the quarter’s 19 Series B+ deals were <$10M. Similar to the trend in the agriculture sector, several seem to comprise of hardware-based technologies:
Solar
Like efficiency, three-quarters of the sector’s deals were Series B or later. However, eight of those 15 growth rounds were for hardware or service businesses in the $10M-$50M range (not to mention Mosaic’s large $220M round, excluded from our analysis):
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5b. Identifying causes with illustrative 3Q16 deals
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6a. Venture investments in industrial biotech over the past 6 years
Venture investment has been on the decline with traditional fuels businesses having proven difficult to scale. Appears to be averaging around 10 deals and $124M per quarter (3-year average).
6b. Where industrial biotech fundraising is still seeing success
Today, successful fundraising in the sector is conducted by companies with platform-based technologies that span across multiple industries, including agricultural, chemicals, and food & nutrition.
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Section 6: Trend spotlight – industrial biotech
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6a. Industrial biotech dollars and deals on the decline
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• Continuous decline in venture capital investment in industrial biotech over the past 3 years. • Average deal dollar and volume between 2014-2016YTD is at $124m and 10 deals, respectively,
compared to an average of $264m and 22 deals between 2010-2013. Gone are the heydays of megadeals for industrial biotech companies – particularly those that were targeting biofuels – due to a number of factors (i.e. slow commercialization progress, drop in global oil prices, etc.). Nevertheless, a number of companies are still attracting funding, as they have pivoted and/or completely shifted their technology application(s) and target market(s).
Dollars (left) and volume (right) of global venture capital investment in industrial biotech
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Company Founded Timing Amount Investors Notes
2009
3Q16 $9M North Bridge Venture Partners, Agustin Coppel
Company has paused on the development of renewable fuels, but instead commercializing on its biochar product and targeting applications in agricultural soil, landscape maintenance, and water conservation. 1Q16 $9.2M North Bridge Venture Partners
2006 4Q15 $92M Undisclosed
Company has experienced multiple instances of turmoil over the course of its development, including multiple CEO turnovers. It is now focusing on the agricultural markets for high value aquaculture and animal feed ingredients.
2013
4Q16 $130M Softbank Group led the round and joined by many existing investors
Leveraging data science and automation, company’s platform technology can apply to multiple industries, such as agricultural, chemicals, and healthcare. The 4Q16 megadeal demonstrates investors’ confidence in company’s technology and its growth potential.
2Q15 $44M
Data Collective, AME Cloud Ventures, Draper Fisher Jurvetson (DFJ), Max Levchin, Innovation Endeavors, Obvious Ventures, True Ventures, Two Sigma Ventures
2008 1Q15 $11M Total Focusing specifically on the upstream of the value
chain on feedstock, which allows the company to target not only fuels, but also areas such as chemicals and materials. 3Q16 $31M Bill Gates, Total
6b. Where industrial biotech fundraising is still seeing success
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Despite the decline in overall venture capital investment in the sector, there are a number of large financings for companies that have pivoted away from a fuel business to other industrial applications. Namely, agricultural, chemical, and food & nutrition markets are common. In addition, newly formed companies are shying away from an integrated business model, and instead are focusing on either a specific point within the value chain, or anchoring themselves as platform technology providers.
Illustrative venture capital funding raised (since 2015) in industrial biotech
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7a. Deal volume has dropped since 2014
With investors finding opportunities in transportation and agriculture & food sectors, the energy efficiency sector is generally behind its five-year trend.
7b. Pace and size of fundraising
Time in between fundraising events has shrunk at all stages. Meanwhile, average round sizes do not match this trend.
7c. Hardware vs software Investment in software is on track to out-strip hardware by end of year for the first time. Size of early-stage rounds in both hardware and software is up, while Series B+ rounds are down.
7d. Smart home deals & developments from 3Q16
Of particular note is investment and product development by tech giants like Google and Amazon in creating smart home platforms.
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Section 7: Trend spotlight – Energy Efficiency
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7a. Deal volume has dropped since 2010-14 peaks
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Efficiency venturing with <500m total-paid-in-capital; $ Millions (left), deal volume (right)
• 2016 deal volume may rebound from 2015 (a 5-year low), but not to 2010-14 average levels of 112 early stage and 109 late stage deals per year, and third quarter was weak
• Even with 40% fewer deals than the 2010-14 average, 2016 early stage investment is on pace to match 2010-2014 average at ~$250MM
• 2016 late stage investment amounts are projected at $1.0B, short of even 2015 and 25% below 2010-14 average of $1.3B
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7b. Pace and size of fundraising
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• The time between rounds has dropped at all stages.
• While the Series A to Series B gap started out significantly shorter than others, it has remained relatively steady while others have fallen.
• The transition from product demonstration to broad deployment may be a lingering challenge.
• Within investment rounds, the average round size has not exhibited a concrete trend.
• Series B rounds appear to have fallen slightly, but this bears further monitoring.
• With the time from seed round to Series A dropping off and the average round size staying steady, early stage companies seem to be exhibiting higher burn rates.
Average round size
Months between rounds
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7c. Hardware vs software
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• EE hardware has historically attracted more investment than software, but has dropped off steadily since 2011.
• However, software is on pace to bring in more investment than hardware in 2016.
Has the investment in hardware and the deployment of sensors laid a path for software to build upon, in that hardware has collected datasets for software to optimize?
• Software and hardware companies exhibit similar characteristics in terms of funding requirements.
• The issue of whether this is a product development, opex, or sales/marketing question is one to monitor as the software world continues to mature.
Hardware vs. Software investment
Average round size
$0
$5
$10
$15
$20
$25
2011 2012 2013 2014 2015 2016
Mill
ions
Seed-SW Seed-HW Series A-SW
Series A-HW Series B-SW Series B-HW
$0
$100
$200
$300
$400
$500
$600
$700
2010 2011 2012 2013 2014 2015 2016YTD
Mill
ions
SW HW
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7d. Interesting smart home deals & developments from 3Q16
Description Round Size Investors Company
Developer of wi-fi enabled smart thermostats for residential and commercial applications.
$35M Amazon Alexa Fund, Thomvest Ventures, Relay Ventures
Provider of a home energy monitoring device for calories, footsteps, miles per gallon, budgets, and rewards points
$14M
Shell Technology Ventures, Capricorn Investment Group, Prelude Ventures, Charles River Ventures, Energy Impact Partners, Bolt
Offers a single, self-installable, hardware that tracks which devices are being used, when and for how long
$3M Cleantech Invest, EQT Partners, Swedish Energy Agency, KIC InnoEnergy
Launched Google Home N/A N/A
With Amazon and Google making investments into the smart home (along with Apple), operating standards may consolidate in the near term. Such consolidation may remove an element of uncertainty that software
developers currently face, accelerating investment and growth.
