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Cleantech Venture Backed M&A Exits? Well, Yes, Sort of . . .

When people ask me, are investors making money in cleantech, I tell them yes, but not by whom or in what you thought they were.

Most of the analyses of cleantech exits do not differentiate for venture backed companies.  So we conducted our own study.

In the last 10 years, Cleantech.org’s Cleantech Venture Backed M&A Exit Study shows a grand total of 27 venture backed cleantech deals > $50 mm.

All in all, very tough returns.   A number of 8 to 10 figure fortunes made, just laregly not by the investors spending the 9 and 10 figure investments.

19 where we had data on both exit values and venture capital invested, 8 where we had revenue estimates.

We found a 2.78x Median Exit Value Multiple on Venture Capital Invested

– Those exit numbers include the founders and management’s shares, so average returns to investors would be somewhat lower.

We found a 2.2x Median Exit Value Multiple on Revenues.

$13 Billion in total M&A exit value.  Not bad, until you realize that’s over 10 years where cleantech has seen tens of billions in investment, and we used a pretty broad definition of “venture backed”.  To get there we included Toshiba’s Landys+Gyr, Total’s Sunpower, EDP’s Horizon and ABB’s Ventyx deals.  Those are the top 5 deals by value, and represent 60% of the $13 Billion.  None were backed by investors you would normally think of as cleantech venture capital powerhouses (Bayard Capital, Cypress Semiconductor, Zilkha and Goldman Sachs, Vista Energy).  Three of them included prior acquisitions themselves.

Excluding those and looking at only the transactions where we had both valuation and exit data we found and even weaker $3.8 Billion on $1.8 Billion in venture capital, 2.1x.

Most surprising, if you looked at the list of investors in these Nifty 27 exits, you’d have heard of very few of them.  This is truly not your father’s venture capital sector.

The exits have a surprisingly low tech flavor, and were carried by renewable energy project developers, ESCOs, and smart grid, and solar balance of system manufacturers.

If we had limited this to Silicon Valley venture investors in high tech deals, well, you’d have wondered if M&A were a four letter word.

Interesting, isn’t it?  Contact me at dikeman@janecapital.com with any questions or if you’ve got deal data you’d like to see included.

The Seminal List of Authoritative Cleantech Definitions

It dawned on me after I MC’ed the Cleantech Open Gala Awards Ceremony two weeks ago (congrats again the to winners!), that there were now some 5.6 mm listings on google for the term cleantech, and while virtually every data provider or leading market analysis firm in the sector had tried to define cleantech, no one had ever tried to reconcile the different definitions.  And since after Cleantech.com and Wikipedia, the next two websites are mine, I ought to be the one to kick it off.  Especially since I wrote the first mini-history essay on cleantech in 2007.

So in conjunction with our new Cleantechblog.com facebook fan page, here is the first seminal list of definitions of cleantech.  Send us new ones in the comments.

Here’s our official Cleantech.org definition of cleantech, slightly revised from 2007:  Cleantech (noun) KLEEN TEK  is the generally accepted umbrella term referring to a variety of products and services, investment asset classes, technologies, government policies, and business sectors which encompass some combination of clean energy, environmentally friendly, and sustainable or green attributes; Synonyms/AKAs: clean tech, clean technology, greentech, green tech, energy & environmental technology


“What is Cleantech?” the first mini history of cleantech I wrote in 2007, published on Google’s Knol and Cleantech Blog and CNET, at the time tried to lay out in brief of how the term cleantech or clean tech came to be defined, and why some firms still used greentech to refer to their investing strategy.

“Cleantech, also referred to as clean technology, and often used interchangeably with the term greentech, has emerged as an umbrella term encompassing the investment asset class, technology, and business sectors which include clean energy, environmental, and sustainable or green, products and services. . . .

The term has historically been differentiated from various definitions of green business, sustainability, or triple bottom line industries by its origins in the venture capital investment community, and has grown to define a business sector that includes significant and high growth industries such as solar, wind, water purification, and biofuels.”

No definition of cleantech should start without first reading the Cleantech.com current definition, as they really get credit for popularizing the term, or more accurately, the Cleantech Group cofounders, Keith Raab and Nick Parker do.

“Clean technology, or “cleantech,” should not be confused with the terms environmental technology or “green tech” popularized in the 1970s and 80s. Cleantech is new technology and related business models that offer competitive returns for investors and customers while providing solutions to global challenges.

While greentech, or envirotech, has represented “end-of-pipe” technology of the past (for instance, smokestack scrubbers) with limited opportunity for attractive returns, cleantech addresses the roots of ecological problems with new science, emphasizing natural approaches such as biomimicry and biology. Greentech has traditionally only represented small, regulatory-driven markets. Cleantech is driven by productivity-based purchasing, and therefore enjoys broader market economics, with greater financial upside and sustainability.

Cleantech represents a diverse range of products, services, and processes, all intended to:

  • Provide superior performance at lower costs, while
  • Greatly reducing or eliminating negative ecological impact, at the same time as
  • Improving the productive and responsible use of natural resources”

They’ve also long maintained a taxonomy of cleantech, currently with 11 categories:

“Energy Generation
* Wind
* Solar
* Hydro/Marine
* Biofuels
* Geothermal
* Other

Energy Storage
* Fuel Cells
* Advanced Batteries
* Hybrid Systems

Energy Infrastructure
* Management
* Transmission

Energy Efficiency
* Lighting
* Buildings
* Glass
* Other

Transportation
* Vehicles
* Logistics
* Structures
* Fuels

Water & Wastewater
* Water Treatment
* Water Conservation
* Wastewater Treatment

Air & Environment
* Cleanup/Safety
* Emissions Control
* Monitoring/Compliance
* Trading & Offsets

Materials
* Nano
* Bio
* Chemical
* Other

Manufacturing/Industrial
* Advanced Packaging
* Monitoring & Control
* Smart Production

Agriculture
* Natural Pesticides
* Land Management
* Aquaculture

Recycling & Waste
* Recycling
* Waste Treatment”

CleanEdge Original 2001 Definition of Clean Tech

However, while the Cleantech Group does not lay credit to coining the term (nobody really does), the first original report on Clean Tech was by CleanEdge in 2001.

With Ron Pernick, Clint Wilder, and Joel Makower behind it, Clean Tech: Profits and Potential laid out a four leaf clover of clean technology was around Clean Transportation, Clean Energy, Clean Materials, and Clean Water.  And the reports original forecasts, while a bit understated looking back, were quite prescient.  Except perhaps for the bits about fuel cells and microturbines, but we won’t hold that against them!

But then no definition list would be complete without Wikipedia’s cleantech article (not the we trust it!)

Cleantech is a term used to describe products or services that improve operational performance, productivity, or efficiency while reducing costs, inputs, energy consumption, waste, or pollution. Its origin is the increased consumer, regulatory and industry interest in clean forms of energy generation—specifically, perhaps, the rise in awareness of global warming, climate change and the impact on the natural environment from the burning of fossil fuels. The term cleantech is often associated with venture capital funds.”


And more recently, Dallas Kachan, cleantech analyst and former editor of Cleantech.com, and before that Inside Greentech, published a new cleantech taxonomy on our Cleantech Blog. Arguing that the old taxonomy’s had gotten long in the tooth, Kachan & Co highlight a 3 level taxonomy with 8 top level categories:

  • Renewable Energy Generation
  • Energy Storage
  • Energy Efficiency
  • Green Building
  • Transportation
  • Air & Environment
  • Clean Industry
  • Water
  • Agriculture

A few other definitions are worth noting:

Matt Marshall in Venture Beat commented a couple of years back on Dow Jones Venture One’s definition of cleantech, which defined as:

“Because of the significant level of attention being focused on cleantech, VentureOne’s research department adopted a strict methodology for categorizing potential companies in this new industry. They were defined as companies that directly enable the efficient use of natural resources and reduce the ecological impact of production. Areas of focus include energy, water, agriculture, transportation, and manufacturing where the technology creates less waste or toxicity. The impact of cleantech can be either to provide superior performance at lower costs or to limit the amount of resources needed while maintaining comparable productivity levels.”

And of course that means that Thompson Reuters and the National Venture Capital Association jumped into the game in 2008:

“To enable more precise reporting on clean technology companies, Thomson Reuters has newly implemented a specific “clean technology” flag for the portfolio company database. Using the definition that clean technology investment focuses on innovations which conserve energy and resources, protect the environment, or eliminate harmful waste, transactions are coded by the data team and reviewed by the QA team for whether they meet the clean tech criteria. VentureXpert is the official database of the NVCA.”

And NRDC with E2 published their version in 2004 when arguing for a California Cleantech Cluster

“Cleantech as a distinct industry is still in its formative years. The industry encompasses a broad range of products and services, from alternative energy generation to wastewater treatment to environmentally friendly consumer products. Although some of these industries are very different, all share a common thread: They use new, innovative technology to create products and services that compete favorably on price and performance, while reducing mankind’s impact on the environment.”

In conclusion, aka, Let me explain. No, there is too much. Let me sum up

  • Damn, there are a lot of lists.  Why doesn’t someone do an analysis on them?
  • We are still waiting for Greentech Media and Michael Kanellos, and the Gartner Group to weigh in, not to mention Rob Day, the original Cleantech Investing blogger.
  • We have green washing in the green sector, but cleantech is a very inclusive sector, which means so far there’s still no sign of cleantech washing hawks, or even a first definition of cleantech washing (maybe I’ll write that next).
  • It is worth noting with some humor how many of these definitions try to shoe-horn in the notion of “and it’s cheaper, too!”.  I figure that  falls into the category of if you have to say it is, then it probably isn’t, but since half of these definitions include input from venture capitalists trying to justify why they’re investing in policy driven investments, a historic no-no in VC-land.
  • Note how the last three definitions build on concepts from the earlier ones.

But the real question is, just because you think you’re cleantech, are you actually cleantech – across EVERY definition?