VC funding is up $63 million this quarter from $126 million to $189 million. The total number of deals however went down to 19 from the 26
VC Funding for Solar
Raj Prabhu | Mercom Capital Group
Please tell us a bit about Mercom Capital Group and the Q2 2013 Solar Funding and M&A Report?
Mercom Capital Group is a global communications and consulting firm focused exclusively on clean energy and financial communications. Through a unique blend of research, market intelligence and effective communication services, we give our clients the edge they need to succeed in today's competitive marketplace. We have in-depth knowledge of cleantech marketplaces which is shown in products like our Quarterly Clean Energy Funding and M&A Reports, which are comprehensive high-quality reports that deliver superior insight, market trends and analysis. The solar report, like our wind and smart grid reports, helps bring clarity to professionals in the current financial landscape across those industries. It contains quarter-over-quarter information on market activity displayed in easy-to-digest charts, graphs and tables, as well as data-driven analysis and comprehensive lists of VC funding deals, investors, debt deals, project fundings, corporate M&A and project acquisitions- the whole nine yards.
What does the Solar Global VC funding look like in Q2?
Global VC funding for solar in Q2 2013 totaled $189 million, up from $126 million raised last quarter. Twenty seven investors participated in funding rounds in Q2, but no one was involved in more than one deal. Even with the growth in installations and stabilizing module prices, venture investments in solar remains depressed as technology companies have continued to struggle. That said, investments into solar technology companies haven’t completely dried up. We continue to see small venture investment rounds going to several niche technology companies instead of the large deals that were typical for thin film, CSP and CPV companies which we were accustomed to seeing before.
In a continuing trend, solar downstream companies received most of the VC funding in the second quarter with $128 million, a reflection of today’s market conditions.
Compare and contrast VC funding in Q1 to Q2. Is there a slump and was it anticipated?
VC funding is up $63 million this quarter from $126 million to $189 million. The total number of deals however went down to 19 from the 26 Mercom tracked in Q1 2013. The two biggest VC deals, one for approximately $69 million and the other for $42 million took up a big chunk of the total.
The funding has remained relatively low from Q1 to Q2, but I don’t think anyone was surprised to see that trend continue.
Comparing by technology:
- Solar downstream climbed to $128 million in nine deals in Q2 2013 from $75 million in eight deals in Q1 2013.
- PV raised $25 million in two deals in Q2 2013, up from $3 million in four deals in Q1 2013.
- Thin film companies received $13 million in two deals in Q2 2013 compared to $25 million in six deals in Q1 2013.
- CPV raised $2 million in one deal in Q2 2013 compared to $300,000 in one deal in Q1 2013.
- CSP raised $6 million in two deals in Q2 2013, down from $16 million in two deals in Q1 2013.
- BOS raised $13 million in one deal in Q2 2013, up from $7 million in three deals in Q1 2013.
- Service provider companies received $2 million in two deals this quarter compared to $500,000 in two deals last quarter.
Which technology has received the most VC funding this quarter?
In a continuing trend, solar downstream companies received most of the VC funding in the second quarter with $128 million. This category includes third party lease firms, which have been very popular among investors for the past several quarters.
What has contributed to Solar downstream’s success?
Between 2010 and 2012, most of the VC funding went into thin film technology, and to a smaller extent, CSP and CPV technologies. Years of oversupply and a severe drop in c-Si prices have driven many of these thin film companies bankrupt, and many have also been acquired at fire sale prices. The rapid fall in panel prices has boosted installations, which has benefitted downstream companies, especially third party lease companies. What makes them so attractive is that they remove the barrier of the high upfront capital cost of solar systems for residential and commercial projects.
What else does your report encompass?
In addition to quarter-over-quarter information on VC funding deals, investors, large-scale project funding deals, debt and other funding deals, and mergers and acquisitions, Mercom’s solar reports also include information on new cleantech and solar funds, IPOs, bankruptcies, restructurings and downsizings, plus a special section dedicated to Chinese banks and debt issued to Chinese solar companies. The report also contains comprehensive transaction lists of all announced Q2 VC funding and investors, debt funding and investors, equity financings, and private placement and rights issues, as well as project funding deals and all M&A and project acquisitions.
Based on your experience what do you think we will see for the rest of the year?
The outlook for the solar sector is showing signs of improvement as module prices stabilize and demand increases. Even in a challenging year, there were about 31 GW of global solar installations in 2012, a growth rate of 13 percent over the previous year. We are forecasting global installations to be in the 38 GW range in 2013, a healthy growth rate of about 23 percent - not bad for a sector that is supposed to be struggling. Though most manufacturers are still struggling, module prices have stabilized somewhat, and have already seen a 10 percent rise this year.
What are the long term prospects for the continued funding of the Solar Industry and what needs to happen to keep the ball rolling?
As the solar market matures, money will continue to go downstream similar to the wind sector. New technologies and innovation will continue to receive funding if these technologies help decrease costs or increase efficiencies. However, big deals will become rare as VCs today are more risk-averse due to past failures. I don’t expect VCs to continue to invest hundreds of millions of dollars to try to get companies into the manufacturing phase. Technology companies that are trying to get to commercialization and manufacturing are better off taking in strategic investors/partners that have the financial strength and low cost manufacturing expertise to help take them to the next level.
Raj Prabhu is CEO and co-founder of Mercom Capital Group and he also heads the Research and Consulting division. In his capacity as a strategic advisor, Raj has helped businesses succeed in markets worldwide. Raj regularly publishes market and opinion pieces in leading publications worldwide and is constantly sought for his opinion in major trade and financial publications globally.
With over 15 years of management and consulting experience covering a variety of industries, including clean energy, semiconductor, healthcare IT and hospitality, many Mercom clients have come to rely on his strategic counsel and direction. He has assisted clients with acquisitions, mergers, business plan development and implementation, establishing business operations in emerging markets, C-level recruiting, board selection, and fundraising. Raj also served as an advisor for a private investment bank.
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