July 30, 2009

Cleantech VC investment: how big the rebound?

[digg=http://digg.com/business_finance/Cleantech_VC_investment_how_big_the_rebound]Yesterday Ernst & Young published a report on cleantech VC investment that is creating some buzz online. As a follow-up to my previous post, I want to put this report into perspective by comparing it to the VentureSource and PwC/NVCA Q2 reports.

The key findings of the E&Y report are:

US venture capital (VC) investment in cleantech companies in Q2 2009 reached $572 million, an increase of 73% in terms of capital, with 48 financing rounds, a 100% increase in number of transactions compared to Q1 2009. [...] Compared to Q2 08, the second-highest quarter for cleantech investment on record, the Q2 09 results were 59% and 16% below those record levels in terms of capital and number of transactions respectively.

The PwC MoneyTree report was positive but not to the same extent:

The Clean Technology sector, which crosses traditional MoneyTree industries and comprises alternative energy, pollution and recycling, power supplies and conservation, saw a 15 percent increase in dollars over the first quarter with $274 million going into 42 deals. The number of deals completed in the second quarter remained flat compared to the first quarter. These investment levels remain a fraction of the dollars invested in Clean Tech in 2007 and 2008.

Finally, the VentureSource report is clearly negative:

Investment in the renewable energy sector, which makes up the backbone of the industry-spanning “cleantech” category, fell substantially with just $221 million invested in 16 deals in the quarter, a 75% decline from the $897 million invested in 30 similar deals in the same quarter last year.

What is surprising is that the Ernst & Young LLP analysis is based on data from Dow Jones VentureSource. Apart from the differences in the definition of the categories, what can explain these discrepancies?

Note: this article was crossposted on Seeking Alpha.

July 27, 2009

Venture Capital trends: sorting through Q2 2009 statistics

Everybody agrees that the venture capital industry is going through it’s worst fundraising time since 2003, but the statistics regarding deal investing vary. Let’s see if we can sort through conflicting Q2 2009 statistics.

VentureSource and PwC/NVCA, two top references to track VC investing, published their Q2 reports on US VC investing earlier this week. According to VentureSource, Q2 saw 595 deals for a total of $5.27B. According to PwC/NVCA, Q2 saw 612 deals for a total of $3.7B. While the number of deals is similar, the amounts are clearly different. By studying the reports further what we can however see that they agree on the key trends:

After several quarters of decline, investing rebounds in Q2 2009
In spite of the improvement, investing is still down to the levels of 2005
Healthcare is the strongest industry, online services is the weakest
Geographically, Washington State seems to be going strong

The key trends above can give us a solid understanding about the current state of the VC industry but we still have to be cautious. Unlike funding, which is in the hands of the limited partners, investing depends on the VC firms and the available deals. It is also worth noting that everywhere else around the world the rebound did not happen yet. VC investing actually saw a decline of 63% in Q2. We will probably have to wait until 2010 for that rebound to happen.

Note: this article was crossposted on Seeking Alpha on 7/24/09.