Venture Capital Funding For Smart Grid Dropped Last Year

Venture capital (VC) funding for the smart grid sector in 2011 was “anemic,” according to the annual and fourth quarter merger and acquisition (M&A) and funding activity for the smart grid sector for 2011 released Mercom Capital Group, LLC. The average VC funding round dropped by 50 percent in 2011 to $7.5 million compared to almost $15 million in 2010. VC funding in 2011 brought $377 million in 50 deals (24 disclosed) compared to $769M in 51 deals in 2010 (27 disclosed).

Mercom blames the drop in VC funding on “current economic conditions and uncertainty along with a lack of clear direction in the Smart Grid sector is plainly evident based on the depressed funding activity so far this year.”

The M&A activity in the third quarter of 2011 was also “very weak,” according to Mercom, with $30 million in five deals. In the second quarter of 2011 there were nine deals which resulted in $4.3 billion in M&A transactions. Only four acquisition transactions were disclosed out of 30 total transactions, following the same pattern as in 2010 when only four transactions out of 40 were disclosed.

The top VC deals in 2011 were:

• Networks, a broadband home management company ($51.6M)


• SmartSynch, a smart grid company that uses cellular networks for utility smart grid projects ($25.7M)


• Silver Spring Networks, a provider of utility networking equipment for smart grid deployment ($24M)


• Gridpoint, an energy management solutions provider ($23.6M)


• JouleX, a provider of energy management systems for data centers and distributed office environments ($17M)

Smart grid communications companies raised almost half of the VC funding last year, with $185 million in 20 deals. The top VC funding deals in the third quarter of 2011 were:

• $16 million raised by SynapSense in Series C


• $15 million raised by EnergyHub in Series B


• $14 million raised by Power Assure in Series B round

The top VC capital investors in 2011 were:

• GE with six deals


• Emerald Technology Ventures and Kleiner Perkins Caufield & Byers with five deals each


• Foundation Capital, Intel Capital and Rockport Capital had four deals each

The major M&A transactions in 2011 were:

• $2.3B (billion) acquisition of smart meter company Landis+Gyr by Toshiba


• $2B acquisition of Telvent, a real-time IT solutions and information provider, by Schneider Electric

"Even though the number of transactions was about the same as last year, the average deal size dropped in half," said Raj Prabhu, managing partner at Mercom Capital Group. "Interestingly, the number of VC investors increased to 92 from 87 in 2010, pointing to continued investor interest but lower risk appetite."

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