First look at Q4: What happened??
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The first of the year-end cleantech VC deal and dollar tallies has come out, with GTM’s Eric Wesoff releasing his always-useful quarterly review. Eric has a pretty good write-up on his results, so I won’t go over it all here, but I wanted to highlight a few specific things that struck me:
1. While Eric’s blog posting talks about 2009 overall numbers, I’m frankly a bit taken aback to see that his totals for Q4 venture dollars were down at $817M, way down from Q3′s $1.9B and even lower than Q1′s $864M, which was supposed to be the low point, right? What happened? Has there been a quiet train wreck in cleantech venture capital?
Well, it’s still a bit early to draw too many conclusions. A number of Q4 deals that happened may not have been revealed quite yet as the Reg D filings have their deadline today. And so by putting out his total today, Eric’s obviously missed those, to be included in later updates. Perhaps there are more dollars out there left to be found.
But not THAT many. Clearly the dollar amounts took a big step back in Q4. What about the deal amounts? They dropped, too. From 117 in Q3 to 82 in Q4. Again, this tally may increase in later updates. But it’s still a pretty healthy drop. However, it is NOT as big a drop as we saw in Q1, when Eric counted only 65 deals.
So what appears to have happened is that the size of deals went way down, at least in Eric’s tally (to be confirmed when we review other tallies later). From a mean round size of over $16M, down to a mean round size of less than $10M in Q4.
Remember what we’ve seen again and again in the tallies: That the dollar amounts are driven by big later-stage deals, as much as by the number of deals (I remain amazed that journalists often ignore this basic fact and draw conclusions based only on dollar totals). So did big later-stage deals dry up? Or did later stage deals just get smaller?
Based upon what I’m seeing in the marketplace, I’m wondering if a bunch of the growth-stage companies that would have normally raised money in 2H09 instead pushed such financings into 2010 — by either running leaner, or taking in smaller bridges or round extensions. With the funding environment still very unfriendly to startups, but more macroeconomic optimism out there for 2010, it would be tempting to entrepreneurs and their backers to push off a new fundraising for a half a year or more, in hopes of suffering less dilution (ie: getting a higher valuation) as the sector rebounds. I’ve seen a lot of anecdotal evidence of this happening.
If so, it’s a risky strategy, however. Because not everyone is convinced the 2010 economy will see a really strong rebound. And even if things pick up in the overall economy, venture dollars could lag because so many investment funds remain tapped out and need to raise their next funds themselves. Perhaps 2010 will see the return of high valuations. But perhaps not. So it’s a bit of a gamble to wait.
2. Q4 was once again a big month for solar.
Eric counted 24 venture rounds into solar companies. Compare that with 9 rounds into biofuels, or 5 rounds into his Smart Grid, EE and DR category. Or two rounds into water tech.
Not much more to say about that.
We’ll write up Q4 a bit more when more tallies come out. Until then, thanks to Eric for sharing these first results!
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