Ten years ago, before the 2011 Tohoku earthquake, the green energy industry was still in its infancy. Even then, venture capitalists worldwide had already took note of this emerging trend, and various national governments had begun to provide substantial subsidies towards green energy development, including US$15 billion in guaranteed loans from the U.S. Department of Energy. After the Tohoku incident in 2011, Europe put forth an impressive effort to subsidize green energy development, and the industry saw a rapid growth as a result. This was followed by an equally impressive crash once China entered the solar industry immediately afterwards. In any case, downstream project vendors benefitted from the green energy industry crash, and on the whole, the state of the green energy industry is much healthier today than it was in 2010. This article will now go into some detail regarding what investments made during that time eventually panned out.
VC investments in green energy, much like any other investments, come with their fair share of risks. Of the 50 largest green energy startups documented by green energy consultancy GTM in 2010, 18 has gone out of business at the time of writing, with CIGS solar cell manufacturer Solyndra being most significant of the failed investments. Despite receiving nearly $1 billion in initial funding and $500 million in guaranteed loans from the Department of Energy, Solyndra was ultimately unable to compete with mainstream, silicon-based solar cells with its CIGS solutions. Even TSMC was forced to shutter its CIGS solar cell business unit. Solyndra promptly declared bankruptcy in 2011, squandering the investment efforts from the Department of Energy.
VCs are generally able to exit the market unscathed provided that their startups do go out of business. Needless to say, exiting the market entails two possibilities: either profit taking or loss taking. One example of failed VC funding is Fisker Automotive, which raised $1.5 billion in initial funding but was eventually acquired for less than one-tenth of the amount by China-based Wanxiang Group, which later considered the acquisition more liability than asset. Another instance of failed investment is EV charging startup Better Place, with initial funding of $925 million. Better Place’s assets were sold for a meagre $450,000 by Israel-based startup Gnrgy.
Naturally, as the green energy industry grows, investors are now seeing more and more opportunities to make a profitable exit from the market. With $373 million in initial funding, smart grid solutions provider Silver Spring went public in 2013. The company was subsequently acquired by its competitor Itron for $830 million in 2017, effectively giving Silver Spring’s initial backers a 200% ROI. Yet another example of great ROI for initial backers is demand response company CPower, which raised $28 million in VC funding and was acquired by Constellation Energy for $78 million. Following several subsequent M&As, CPower was eventually sold to LS Power.
Solar inverter manufacturer Enphase was able to raise $88 million in venture capital and went public in 2012. Following its IPO, Enphase raised an additional $54 million, thereby propelling its market cap to $275 million and allowing ample opportunity for its initial backers to profitably exit the market. However, things were relatively dicey for the company’s post-IPO shareholders, since Enphase’s share prices remained bearish after the IPO and dipped below the $1 mark in 2017. Fortunately, things took a turn for the better in 2018 when Enphase shares skyrocketed in 2018 and soared past $100 per share in October 2010, finally closing in on $130 per share as of late November 2020.
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On the other hand, although EV charging service provider ChargePoint has consistently maintained its market share, the company is still hemorrhaging money. Case in point, ChargePoint saw yearly revenue of $147 million but operated at a loss of $133 million, in 2019. Whereas it announced an IPO via reverse takeover in September 2020, whether investors, who collectively pooled $660 million into ChargePoint, are able to get their money’s worth from the IPO, will depend on the result of the reverse takeover and remain to be seen.
Diametrically opposed fates await various companies that either have yet to go public or are sold but are not yet able to bow out. For instance, smart electricity meter manufacturer Trilliant is steadily acquiring a series of contracts at the moment, meaning VCs should rest relatively assured of their investments in the company. Conversely, small-scale modular nuclear power developer NuScale Power is busy dealing with the curse of being over budget and behind schedule. It goes without saying that VCs with significant buy-in are now fearing the worst.
Regardless, of the 50 largest green energy VC investments in 2010, EV giant Tesla dominated the rest of its competitors. In 2010, total VC funding for the above 50 investments totaled $35 billion, while Tesla boasted a market cap of $439 billion as of early November this year. Furthermore, Tesla has also crowded SolarCity out of the market. Therefore, whether it was worthwhile to invest in green energy startups 10 years ago would depend at least partly on whether one invested in Tesla, and whether one did that was part foresight, part clairvoyance.
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