The Cleantech Group hosted its annual gala in Washington D.C. yesterday to reward the top-100 private companies. The ceremony marks one of the most difficult years for the cleantech sector. I talked to Richard Yougman, Managing Director for Europe and Asia at the Cleantech Group, and reviewed the big trends this year.
The Cleantech Group has one of the most advanced tools, the I3 platform, to track M&A and VC investment deals in cleantech. It regroups diverse sectors such as renewable energy, transportation, water, etc. "Energy efficiency is getting stronger and stronger in the portfolio" stated Richard Youngman, "Paybacks are relatively fast". Here are my top-5 picks for cleantech companies that have not been acquired or gone IPO. Energy efficiency is well represented with three of the top spots.
- OPower (energy efficiency). Its software solution only provides a couple of percent of energy saving but is highly scalable. The Silicon Valley company is working with most utilities in North America and it enjoys strong brand recognition, including a collaboration with Facebook on social networks
- Harvest Power (recycling and waste). The company originally from Canada has an innovative business model that takes organic materials and creates value by producing renewable energy, soils, fertilizers, etc. Technology has been demonstrated and the company has multiple offices across North America to address a large potential market.
- NovaLED (energy efficiency). The French-German company out of Dresden produces organic light emitting diodes (OLED). Novaled’s technology is mostly known for display applications (flat screens, etc.) but the market for energy-saving lighting is growing. With Samsung and BASF as top customers, NovaLED filed for IPO but is waiting better market climate to go through with its exit plan.
- Transphorm (energy efficiency). It has a very promising chip based on patented technology that removes 90% of losses in AC-DC power conversion. The Santa Barbara based company relies on world class Gallium Nitride materials and has attracted top-tier financial backing, in the US and in Japan.
- Miartech (smart grid). The chinese company is having some success where many others failed: use power line systems to exchange information. Their chip designs enables power line communications. Most smart grid deployments in North America uses cellula communications
That is right: no solar company in the top 5. Solar shines by its absence. Investments in that sector used to make the bulk of the list but consolidation has been brutal in that field. Just yesterday a past top-100 company, MiaSole, was acquired by a Chinese company for a low valuation. They represent only 12% of the top-100 list, closely followed by bio-fuels and bio-chemicals (11%), water and watewater (11%), smart grid (10%), and energy storage (10%). Transportation only represents 6%, mostly due to the delays in EV deployment.
The world of solar is changing. The North American market continues to grow but the manufacturers have lost the battle to chinese vendors. Most of the innovation in the US is now in materials and in software. It is very hard to enter the solar manufacturing market now. As a result thin-film private companies have pretty much disapeared as well as concentrated photo-voltaics. Downstream services and balance of systems remain two strong areas (picture below - courtesy of Cleantech Group) despite overall fall of solar companies.
Energy efficiency makes the bulk of my top-5 picks, with three out of five companies. Energy efficiency is the most active sector with 23% of the top-100 list. However, it represents very different fields, from novel semiconductor transistors to reduce power conevrsion losses (Transphorm) to marketing and billing analytics to change customer patterns (OPower). Actually, a reasonnable question is whether the term "cleantech" still makes sense.
Richard Yougman acknowledges that a number of VC's have been burnt in North America. Andreesen Horrowitz did a cleantech deal this year but did not want to call it "cleantech". The feeling is different in Asia and in Europe. Richard reckons that the investments thesis, however you call it, is still very attractive and will continue. "It is about resources efficiency" stated Richard.
Yesterday was also a big day for the Cleantech Group that merged with GreenOrder, an environment consulting group to diversify its offering and reach with offices now in New York City, San Francisco and London. Both LRN, parent company of Green Order, and Cleantech Group declined to comment on the amount of the transaction.
The merge of a green consulting company and a cleantech analyst firm is a sign of times. The number of cleantech deals are going down and the term "cleantech" may not survived in financial circles. Industry sectors will continue to face stricter environmental reglementations and seek technology innovation to increase efficiency. But they will likely use a terminology that is specific to their vertical.
M&A has provided most of the exits this year with Enphase Energy the only company on the top-100 list last year to go IPO in North America. Europe and China have led acquisitions in cleantech according to the Cleantech Group report. Those regions have not been burnt as much by the investment crunch.
In Europe, the energy multinationals lead the show. In particular Siemens led two of three acquisitions of companies in the top-100 list. In Asia, manufacturing conglomerates invest in low cost production. In that environment, entrepreneurs have to tune their business model to compete. Hence, the focus on downstream in solar in the US. Clean Power Finance and Solar City are growing for instance.
Here is the full list of the Global Cleantech Top-100 companies. Most of the companies come from the US with a majority from California. The eco-system to start companies in California remains unparalleled. However, cleantech is clearly a global play with the increaing importance of emerging markets and the strategic role of multi-nationals in later financing rounds and exits.