Venture Investment on the rise since 2005 Lux Research

Venture Investment on the rise since 2005 but biased toward on-site generation and BEMS.

Building Energy System Venture Funding on the Rise

Venture funding for energy-efficient building technologies swelled to $944 million in 2014, with total funding during 2012 to 2014 higher than any three-year period over the last 15 years, according to Lux Research.

From 2012 to 2014, venture capitalists poured a record $2.64 billion into this segment, despite a decline in cleantech funding.  In 2014, investors closed 111 deals related to energy systems in buildings -- a 208 percent rise since 2008.

“Stoked by crowdfunding and private equity cash, we expect to see further exits in hardware and building energy management systems (or BEMS) software in the near term,” said Alex Herceg, Lux Research Analyst and the lead author of the report titled, “Funding Early-stage Innovation for Building Energy Systems.”

 “The surplus of money is also pushing venture firms like Intel Capital to take a value-added approach by offering entrepreneurs commercialization support in addition to money, e.g., R&D  expertise and customer channels,” he added.

Lux Research analysts evaluated the funding ecosystem for innovation in energy-efficient building technologies. Among their findings:

  • North America is a dominant force. With $501 million, North America dominated investment in building energy technology with a 74 percent share of the total funding. Israel continued to be a node of high activity with $37 million in cumulative funding.
  • Funding for on-site generation surges. BEMS and lighting tech developers, at 31 percent and 19 percent, respectively, have nearly maintained their share of funding from 2012 levels. The big change has been in on-site generation technologies, whose share has sharply risen from 21% in 2012 to 31 percent by 2014.
  • VC exits remain strong. Building energy efficiency remains one of the few cleantech segments with a strong and diverse set of exit events for venture backed companies, e.g., IPOs for Opower ($115 million) and Control4 ($500 million), and acquisitions of Nest (by Google for $3.2 billion) and SmartThings (by Samsung for $200 million).
  • Crowdfunding is emerging as a viable alternative. Early-stage companies are still largely neglected and entrepreneurs are tapping new funding sources such as crowdfunding. LIFX, for example, first ran a successful Kickstarter campaign for its networked LED bulb before securing $12 million from Sequoia Capital.  

The report, titled “Funding Early-stage Innovation for Building Energy Systems,” is part of the Lux Research Efficient Building Systems Intelligence service.

Lux Research provides strategic advice and ongoing intelligence for emerging technologies.

 

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