Energy tech funding trends: ICOs challenge traditional VC, solar attracts most investments in renewable energy, and leads the number of exits.
Funding Trends in 2016: Summary
Before looking at the recent trends in renewable energy funding, it is worth looking at what’s been the case a year ago, in 2016.
On the one hand, 2016 has been a peak year for energy startup funding for almost a decade. According to VentureScanner.com, who track 752 Energy Technology companies in 12 categories across 46 countries, with a total of $48 Billion in funding, 2016 has the most funding to day, at over $12B. 2013 comes in at second with around $4B in funding.
On the other hand, capital markets have been tough for renewable energy in 2016.
According to a recent report by Frankfurt School of Finance & Management, in total, clean energy companies raised $6.3 billion on global public markets that year. That’s a 53% decline from the level of 2015 and 60% down on 2014. IPO environment was relatively more favourable, with an increase by 12% to $2.6 billion of funds raised. However, as researcher carefully note, this is almost entirely due to Innology’s fantastic debut on the stock market, where it raised $2.2 billion. Overall, wind energy outperforms solar in terms of fundraising, with $4.2 billion versus $1.7, respectively.
The decline of private equity and venture capital investment in renewables is less dramatic: 4% down in 2016, achieving $3.3 billion, which is less than a third of its peak in 2008, but 46% above the recent low, in 2013. Here solar attracted most of the investment, having capturing more than two thirds of the total. The US remained the centre of worldwide VC/PE investment in renewables, at $2.3 billion, representing a fall of 2% but still more than two-thirds of the total investment. Investment in Europe doubled to $516 million, and that in the Other Asia-Pacific region jumped almost 28-fold to $55 million from a low base.
Venture capital is usually considered as the most viable alternative to capital markets for young and techy companies. However, due to the relative decline of both stock market and VC opportunities witnessed in 2016, blockchain funding becomes more attractive for energy tech companies. According to Coindesk, token sales challenge the traditional venture capital investments for blockchain projects. In 2016, ICOs absorbed 46% of funding for blockchain-based startups.
According to CBInsights, over the past four quarters, 28% of total early-stage blockchain funding dollars came from ICOs, and the figure is growing. In Q1’17, 37% of all blockchain funding (not just early-stage) came via ICOs.
What’s going on now?
While it is still too early to judge, 2017 has been more favourable for renewable energy funding, and especially solar.
First, 2016 was rich in exits, both by means of an acquisition and IPO. With its 17 acquisitions and 1 IPO, 2017 is followed by 2015 with its 11 and 6 exits in both respective categories.
According to VentureScanner.com data, solar energy was leading the renewable energy sector with 18 acquisitions and 18 IPOs. Energy infrastructure companies were running up with 24 acquisitions and 8 IPOs.
This comparatively large number of exits suggests that solar is becoming more established, and, as a result, more profitable. So:
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