VC funding solar decreases, but number of deals rising

In its ‘Solar funding and M&A, Q1 2012 report’, Mercom Capital Group, llc states that VC funding in the first three months of the year amounted to US$329 million, down from $511 million in Q4 2011, and $658 million in Q1 2011. Despite the falling financial figure, the actual number of deals has increased, however, from 29 and 25 in Q4 and Q1 2011, respectively, to 34.

As Raj Prabhu, managing partner at Mercom Capital Group noted, "While VC’s interest in the solar sector remains strong, their appetite for risk appears to be lower as the average VC funding round amount in Q1 was $10 million, compared to $18 million in 2011."

The U.S., meanwhile, was identified as the leading country for VC investments (22 deals, worth $268 million), followed by the U.K. (two deals worth $12 million), France (two deals worth $2 million), and Belgium (one deal worth $7 million), Canada (one deal worth $7.5 million), China (one deal worth $8 million), Germany (one deal worth $13 million), India (one deal worth $10 million), Ireland (one deal worth $1 million), Israel (one deal worth $0.8 million) and Spain (one deal, amount undisclosed).

Prabhu believes solar investors will remain cautious throughout the year, due to the well-publicized problems of overcapacity, policy changes and lower feed-in tariffs.

VC deals

A total of 11 new cleantech and solar-focused investment funds were announced in Q1 2012, which amounted to an impressive $5.7 billion. "A significant positive event for the solar sector in Q1 was the Initial Public Offering (IPO) of the microinverter company Enphase Energy, which raised $62 million as part of its offering," commented Mercom.

Overall, it found that five funding deals accounted for around 60 percent of the funding announced. The table below details the transactions.

Company

Country

Funding type

Amount (US$M)

Investors

SolarCity

U.S.

Undisclosed

81

Silver Lake Kraftwerk, Valor Equity Partners, DBL Investors, Shea Ventures, Nicholas J. Pritzker, partner at Tao Ventures, Elon Musk SolarCity chairman

MiaSolé

U.S.

Undisclosed

55

VantagePoint Capital Partners, Kleiner Perkins Caufield & Byers, Bessemer Venture Partners, Firelake Capital Management, Passport Capital

Nanosolar

U.S.

Undisclosed

20

Mohr Davidow Ventures, OnPoint Technologies, aeris CAPITAL

Solar Junction

U.S.

Series D

19.2

New Enterprise Associates, Advanced Technology Ventures, Draper Fisher Jurvetson, IQE

AQT Solar

U.S.

Series B

18.7

Undisclosed

(Source: Mercom Capital Group)

CIGS on top

Looking at VC funding by technology, both thin film and downstream companies attracted the lion’s share, having each reaped $118 million. "Maintaining last year’s trend, with half a billion dollars raised in 2011, CIGS companies continued to receive the most amount of VC funding as a technology group," continued Mercom.

The company believes that CIGS is seen as "one of the last few areas in solar with the ‘promise’ to compete for market share. With large amounts already invested and no near-term exit strategies, investors don’t seem to want to walk away as these companies enter commercialization phase and start shipping products. It will be a telling year for CIGS companies."

Meanwhile, photovoltaics companies attracted $39 million worth of VC funding in Q1 2012, while concentrating photovoltaics (CPV) received $33 million and solar thermal, $21 million. "Surprisingly", balance of system companies attracted no funding (see graphic above), despite the fact that cost reduction is now focused on this area, following the price reductions of photovoltaic modules.

Large-scale financing

Compared to the $1.8 billion in Q1 and $1.9 billion in Q4 2011, Q1 2012 saw just $1.5 billion invested into large-scale project funding. Again, while the amount decreased, the actual number of deals rose to 22, up from 11 in Q1 2011, and 19 in Q4 2011.

Of the 22 projects announced in the first three months of this year, 17 worth $539 million were for photovoltaic endeavors. CPV accounted for $720 million and thin film for $258 million.

Company

Country

Funding type

Amount ($M)

Investors

SolMex Energy (Four 50MW CPV Projects)

Mexico

Debt (200 MW)

720

FINEXIM

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