An Update on the Energy Efficiency Sector

Last year, the global Energy Efficiency sector completed more deals than any of its peer industries, according to Cleantech Group’s i3 platform. The past quarter saw sustained momentum within the sector, so much so that Energy Efficiency led all other industries in total accrued investments, receiving over $520 million, or 18% of all Q1 cleantech fundraising. By all accounts, efficiency software and hardware providers are doing well.

That said, can we really call this news? For the past decade, Energy Efficiency has consistently been at the vanguard of cleantech fundraising, second only to Solar. Moreover, the former has been far more consistent in its fundraising ability than Solar, an industry known for its highs and lows.

So while healthy numbers may be old news for the sector, sub-sector capital allocation is always changing. Energy Efficiency covers a wide swathe of subsectors, from Smart Glass to Efficient HVAC to Cleanweb and so on.  Thus, the most recent data enjoin us to ask where, specifically, are the most recent windfalls landing?

View designs and manufactures intelligent glasses that electronically tint in response to sunlight, and in doing so, mitigates reliance on HVAC systems; the company claims energy reductions in the realm of 20%. Figures like that (plus, some very comely new designs) helped CEO, Dr. Rao Mulpuri, raise slightly over $100 million last January from the reticent Madrone Capital Partners. No doubt, this injection played a major role in positioning “hardware” as the leading sub-sector within the broader energy efficiency industry.

Santa Clara county neighbor, Nutanix, also found reason to celebrate last January after pooling together $100+ million from a much larger group of investors led by SAP Ventures and Riverwood Capital. Through its software-driven virtual storage platform that combines computation and storage into a single solution, Nutanix enables reduced power consumption and cooling requirements. Such a splendid fundraising round and a very recent partnership with Dell put the company, and to an extent the efficient IT infrastructure sub-sector, in an exciting place. Nutanix has plans to IPO, but only after it reaches a $3 billion market cap (they currently stand at $1 billion).

While it may be hard to top 1Q14, the next quarter just might be up to the task. With three weeks left in the quarter, Lattice Power, a Global Cleantech100 company and developer of LEDs, just acquired $80 million in fresh capital, and many smaller deals have preceded it. Moreover, U.S. and especially European policy are poised to prompt substantial demand spikes in energy efficiency technology. The U.S. Department of Energy made $4 billion in loan guarantees available for innovative energy efficiency projects and European leaders are close to setting a 40% energy efficiency target for 2030.[1] Of course, other cleantech sectors will continue to make their own strides in the coming months, but keep an eye out for a big push from the Energy Efficiency sector.