Private companies play a crucial role in the clean energy industry, usually as a technology incubator, strategic partner, or competitors for the current public listed companies. This month Goldman Sachs Global Clean Energy Team has published a detailed reports analyzed the results of its recent research and conversation with a group of investors and venture capital firms in San Francisco/Menlo Park area. Since the information access of private companies is relatively limited for general public, I view it would be good if I can summarize Goldman’s key VC meeting takeaways in this study and share to the all the clean energy enthusiasts. Here are the ket takeaways.
1. Large corporations expressing increased level of strategic interest in clean energy.
A. New growth opportunities and a diversified business mix.
Companies such as Google, Walmart, P&G, Ikea, Conoca, NRG, and GE has started the strategic action either in the renewable project development or supply chain renewable sourcing management, or renewable technology development.
B. Investing in early-stage companies as a form of outsourced R&D.
Since in many field of the clean energy sub-category, the main technology has not been standardized yet, therefore, many companies view the establishment of venture portfolios in the early stage private companies would be a cost-effective way for the R&D.
C. Leveraging scale and expertise to capture share in emerging industries.
Companies such as GE, Cisco, and Samsung with strong balance sheets, large-scale industrial process/engineering expertise and established sales channels are seeking to integrate these strengths with the emerging new clean tech solutions.
2. The field of VCs investing in clean energy has winnowed, leaving a select group with deep involvement.
The recent financial crisis has reshaped the clean tech venture capital industry, making lots of the VC firms exit this field of investment market, and creating the significant chance for the premier VC firms with strong and deep clean tech industry expertise to capitalize the market opportunity.
3. VCs aiming to reduce binary technology risk and leave scale-up/financing risk to public market investors.
Venture Capitalists believe the public markets are an appropriate vehicle for investors to bear the risk of scaling-up and financing the growth of technologies once they are proven.
4. Crossover investing becoming increasingly popular.
“Crossover” funds, which allow a combination of public and private-market investments, become popular. There is an increasing number of investors using late-stage private rounds as a means to steep the learning curve on the industry, and enjoy the private vs. public earnings multiple arbitrage.