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February 23, 2007
Alt Energy's Stellar Returns - Size Matters, says Eurosif
Your a:c euro reporter has been calling out the positive returns in alt energy investing for a while now. A Eurosif study provides more fodder for that positive view and reveals some meaty figures on the European market.
The report, based on a survey of 23 funds active in the sector, says that VC-like returns are expected by those investing in the sector and in some cases are already happening. It's not about providing charitable donations.
And there are a couple of good case studies with exit multiples that show that green investing is not always about newfangled power generators or electric cars.
But pension funds and foundations are leaving the funding of green VC funds in Europe to high-networth individuals and family offices. We've posted here before that pension fund apathy and that of the well-paid folks that advise them, so-called gatekeeprs, are underfunding alt energy investment in the region and this report makes it clear.
Maybe it's a form of the short-termism that Paris-based Sofinnova's Jean Bernard Schmidt talked about recently at an institutional inestor confab (see Short-termism link below).
Other nuggets are listed below.
Last year was a boom year with €158M invested by those surveyed
The good news, about €1.58B was raised by 2006 for alt energy investing in Europe. The bad news, it's a drop in the bucket compared to the €72B raised mainly by private equity houses in the region.
Early returns are stellar --
Of the 57 portfolio companies sampled, five had completed an IPO and three had been sold to a trade buyer. This group of companies had produced an average annualised return of 476% for their investors.
> Schmack Biogas delivered its VC backer 10 times money at its IPO and they still have some share left
> SimplySwitch delivered its VC backer 22 times money.
It is not all rosy. There are companies that don't make it, as the report shows, and many that have not appreciated in value since initial investment. Not surprising since most of the VCs in the study have only been putting money into the sector for a few years. Let's hope they don't all start investing with a short-term strategy, that is, investing for the quick flip or backing only late stage deals.
One of the findings of the study is intriguing: larger funds had better IRRs (The Internal Rate of Return is a metric used by buyout and VC firms to measure returns over time and can be applied to a single investment or a fund - we are not informed which is the case for the following quote).
Funds that had attracted more than €100 million of capital earned IRRs more than ten times those of funds that were under €100 million.
Read - Short-termism damages EU economy (reuters)
View Eurosif Report (pdf)
Posted on February 23, 2007 06:40 AM | Posted to Alternative Energy | Permalink
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