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Bargain Shopping - Acquisitions are Crucial as VCs Pass-Over Grid, Storage and Vehicle Ventures

Independent and corporate venture capital (VC) financing for smart grid, energy storage, and electric vehicle (EV) sectors fell sharply in the past 12 months, after reaching an all-time six-month high at the outset of 2010. Furthermore, investors have neglected early-stage companies in favor of heavily-funded, high-risk, late-stage companies creating an unprecedented gap between late-stage and early-stage funding. This shortage of early-stage funding has put the majority of start-ups on the auction block, allowing larger players to grab valuable intellectual property (IP) at bargain valuations and resulting in a spike in merger and acquisition (M&A) activity. Aside from two landmark acquisitions, acquirers have demonstrated a strong preference for immature companies with limited external funding, offering acquirers an inexpensive means to complete their product lines. These acquisitions offer strong benefits to large and small companies, but acquisition opportunities decline as markets rapidly mature and solidify. Therefore, clients would be wise to make their final offers to promising start-ups, while start-ups would be wise to take whatever they can get.

Table of Contents

  • Executive Summary
  • Landscape
    • Smart Grid, Energy Storage, and EV Funding Stalled in the Past 12 Months
    • Automotive and Fuel Cell Companies Draw the Most VC Attention
      • Transportation Continues to Dominate, While Stationary Power Overtakes Smart Grid
      • Early-stage Money Disappears, while Late-Stage Companies Draw Additional Funding
    • Acquisitions Offer Promise for Start-Ups and Incumbents, but What Makes a Strong Acquisition Target?
    • Landscape Conclusions
  • Analysis
    • M&A Activity Surges in the Smart-Grid Market
      • Acquirers Prefer Early-Stage Companies
    • The End of the VC Model Creates Both Risk and Opportunity
  • Outlook
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