By Rob Day
It's been a crazy year in cleantech, and a lot of things didn't go as expected.
Even if I'm not particularly good at it, I find the annual prediction exercise to be useful for developing a coherent picture of the coming year, as at least a starting point for planning. And it's also just a bit of fun to take some guesses and see how they turn out.
2012 flummoxed me because I was too optimistic this time last year. I thought we were about to turn the corner on cleantech venture firm fundraising, and thus that we would start to see a rebound in dealmaking. I failed to see just how toxic the politicization of cleantech would become. And I generally was too aggressive on trends that I do believe are underway, but that are moving a lot more slowly than I'd projected.
"1. Both dollar totals and deal totals for U.S. cleantech venture capital will be up more than 20% over 2011."
We haven't gotten the 4th quarter tallies yet, but it would have to be a huge turnaround for the deal and dollar totals -- which have been declining throughout the first three quarters -- to end up even catching up to 2011 levels, much less expand upon them. I'd thought that economic stabilization was coming (somewhat true) and that therefore LPs would start making commitments to VCs this past year (not true at all).
2012 was clearly a down year for cleantech venture capital dealmaking. Will we see a rebound in 2013?
"2. At least one 'brand-name IT entrepreneur' will launch or join a cleantech effort."
VERDICT: DIRECTIONALLY CORRECT, BUT WRONG ON SPECIFICS
The merger of cleantech markets and IT/web business models is actively underway now, and it's become a strong driver of the current activity in the cleantech venture market. And I've seen strong entrepreneurs with an IT background get into the market this past year. I wouldn't say we've seen a "brand-name IT entrepreneur" jump very visibly into the sector this year, however (not counting those who'd done it earlier, of course). No offense intended to any who jumped in and feel I should consider them a brand-name, of course!
"3. There will be at least one additional major syndicate of family offices launched to target cleantech (or a synonymous label for the sector)"
VERDICT: DIRECTIONALLY CORRECT, BUT WRONG ON SPECIFICS
I've continued to see more and more family offices get into the sector and start to look to be active. But we just haven't seen any such additional syndicate officially launched. ...Yet.
"4. There will be no progress made on U.S. federal energy policy, and there will be a rollback of state-level policy."
Predicting very little progress on energy policy at the federal level seemed too obvious, so I just had to try to up the level of difficulty by projecting a rollback at the state level. D'oh. I still think attacking state-level policies is the next step for anti-cleantech forces out there in the political world, but really 2012 was more of a stalemate at that level than a rollback year.
"5. Significant and visible consolidation within the solar industry will occur."
And it will continue.
"6. 2012 will see the emergence of multiple 'roll-up' efforts."
VERDICT: ANECDOTALLY CORRECT
I've talked with a lot of entrepreneurs and investors who are starting to see the opportunity to take advantage of today's low valuations to roll up separate vendors into a fuller offering for customers. I've seen it happen a few times as well. But I wouldn't say it's been a very significant and meaningful trend yet. Stay tuned.
"7. New hybrid investment models will emerge."
VERDICT: STILL HASN'T HAPPENED
On the basis of talking with a lot of investors who are talking about and planning unique strategies (such as combined debt / equity offerings, venture capital + project finance, or investments into service models), I have now predicted the visible emergence of such hybrid approaches in 2010, 2011, and 2012. It's time to stop making this prediction. This appears to be one of those concepts that everyone agrees should happen, but for some structural reasons few investors have the flexibility to actually do it at scale.
"8. 2012 will see a big wave of corporate M&A in the cleantech sector."
We still don't have the Q4 numbers on this, of course, but the Cleantech Group data for the first three quarters indicate that global cleantech M&A activity was actually down slightly. I end up talking with more and more corporate managers about cleantech, and I see a lot more anecdotal evidence that large corporates are getting serious about investing in and making acquisitions in the sector. But thus far that hasn't presented itself in the data of completed deals.
"9. A major geopolitical event will spike oil prices above $120/barrel."
Here's what I wrote a year ago: "I predicted this last year as well, and sure enough, we had spikes because of geopolitical events, but in the end, the macroeconomic blues held down prices below $120/barrel for the entire year. As noted, I'm hopeful of at least some economic stabilization in 2012. On the basis of that hope, I'm willing to continue to bet on major price volatility for oil, one of the world's tightest and most easily manipulated markets. Until we finally figure out how damaging it is to our economy that we allow ourselves to be dependent upon such a headline-risk input, and start to wean ourselves off of Middle Eastern oil through smart policy and long-term capex decisions, markets will continue to be near-term price-inelastic and thus we will continue to see spikes whenever some crackpot somewhere around the world decides to make a stink.
"If China's economic expansion loses significant steam, or Europe fumbles and causes a global recession, this prediction will be wrong. But given even a halfway-decent economy in 2012, such volatility seems pretty inevitable. To borrow from Rick James, 'Oil is a hell of a drug.'"
Wrong two years in a row. And now there are more supply-driven downward pressures on oil than we've seen in several years.
"10. Several 'environmental markets' will collapse and shut down."
In fact, the launch of the California carbon trading market was good to see. Carbon credits and other environmental markets continue to have their difficulties, but I was wrong to suggest they were going away in 2012.
"11. There will be an overall pullback in non-U.S. cleantech venture capital deal counts, but an increase in project finance."
VERDICT: TOO EARLY TO TELL, BUT SEEMINGLY CORRECT
We need to wait to see the Q4 numbers, but early indications are that this guess ended up being right.
"12. The Redskins will have a losing record next season."
VERDICT: DELIGHTFULLY INCORRECT
RG3 is even better than I'd hoped.
So all in all, I was probably only around 25% right for 2012. Meh. In a few days I'll once again attempt to forecast the year ahead. Will I manage to do better for 2013? I hope that we all do, 2012 was a pretty lousy year for our sector.