Corporate giants push into clean-tech venture investing

Clean-tech investing shoots up in the second quarter, boosted by high energy prices, environmental concerns, and growing corporate activity in the clean-tech sector.

Buoyed by long-term trends, venture investing in clean-tech companies hit a record last quarter as the participation of corporate giants began to make a more pronounced impact.

Ernst & Young on Monday published a report based on data from Dow Jones VentureOne which shows that clean-tech venture investing shot up to $961.7 million in the second quarter.

That's a 41 percent increase from the first quarter of this year and an 83 percent jump compared to the second quarter last year.

Clean tech, or green tech, is one of the most active--or some argue overheated --areas in venture investing, which was down 8 percent overall, according to the study.

The big numbers lie in the nature of energy-related investments.

There were three deals over $100 million in the quarter, including three solar investments: solar thermal power plant makers eSolar and BrightSource, as well as SunEdison, which does financing and installation of large solar arrays.

Energy efficiency was another strong category at $188 million in the second quarter. Companies that do efficiency products like LED lighting and smart grids tend to be less capital-intensive than biofuels, which was down 44 percent from the previous quarter, the study's authors said.

An interesting data point from the numbers is that later-stage deals accounted for 39 percent of the transactions. That means there were fewer seed fundings , a sign that start-ups are beginning to move closer to commercialization.

Meanwhile, the Dow Jones VentureOne study notes the growing presence of large corporations among the venture capitalists and start-ups.

"Strategic investments," where a large corporation partners with a smaller firm, are becoming more common.

An incumbent fuel company can invest in a biofuels start-up, for example, to get access to the technology and diversify its fuels mix. In another example, utility Duke Energy purchased a wind power developer.

The report notes that companies like Shell, Chevron, Danisco, Genencor, and DuPont have committed large sums of money to clean tech as part of their corporate strategies or to hedge against rising energy prices.

"In a challenging market, investment in the clean-tech sector remains strong because these companies provide cross-sector solutions to economic and environmental challenges," Joseph Muscat, Americas Director of Cleantech and Venture Capital, Ernst & Young, said a statement.

 

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