Internet of Things Fuels VC Smart Grid, Energy Storage Investment

Venture capital (VC) investment groups put $81 million of capital across 12 transactions to work in up-and-coming smart grid systems vendors in 3Q, substantially less than 2Q’s $104 million and 18 transactions, Mercom Capital reports.

Though down on a quarterly sequential basis, smart grid start-ups have raised $370 million from VC investors year-to-date in 2015. That includes private equity and corporate VC investments and compares to $325 million raised in 3Q 2014, according to Mercom’s ¨Smart Grid, Battery/Storage, Efficiency Funding and M&A 2015 Third Quarter Report.¨

Turning to 3Q funding and VC investments in battery and energy storage, Mercom recorded a total of $96 million in nine transactions, with battery/energy storage systems integrators accounting for the bulk of the total. 3Q’s $96 million VC capital raise is below that raised in the year-ago period, when VCs invested $126 million across 13 deals in promising battery/energy storage technology developers.

VC Smart Grid Investments Higher Year-Over-Year

Twenty-two VC groups invested capital in smart grid VC funding rounds during the quarter. Raising a total $46 million in five transactions, smart grid communication companies – notably those that provide smart home automation technology – raised the most funding. That’s way up from $2 million in five transactions in the year-ago period.

A step behind that, smart grid startups developing plug-in hybrid electric vehicle (PHEV) charging and vehicle-to-grid (V2G) technologies raise the second highest total VC investment dollars in 3Q, Mercom highlights in a press release.

Among the largest VC-smart grid sector transactions in the quarter just ended, PubNub raised $20 million from a VC investment group that included Sapphire Ventures, Relay Ventures and Scale Venture Partners. A provider of residential and commercial electric vehicle (EV) charging solutions, SemaConnect raised $15 million in VC funding from PearTree Partners, the second largest transaction Mercom recorded for 3Q.

Mercom 3Q top 5 VC smart grid investments 110615

¨Internet of Things¨ Meets the Smart Grid

PubNub has developed a data stream network that fuels and supports real-time home automation apps, innovative technology that’s indicative of the role new smart connected grid, building and home applications are playing in building the ¨Internet of Things.¨

Along the same lines, Link Labs raised $5.7 million from TCP Venture Capital, Maryland Venture Investors, Inflection Point Partners and individual investors, Mercom reports. Link Labs has developed low-power wide-area network (LPWAN) technologies capable of sensing, monitoring and distributing data from equipment and devices in factories, as well as smart buildings and homes.

Likewise, Bastille raised $9 million – the third largest transaction by dollar value in 3Q – from Bessemer Venture Partners and other angel investors. Bastille is developing ¨Internet of Things¨ security technology used to detect and prevent threats to critical, highly-sensitive infrastructure, such as electricity grids.

Also of note, one of the largest smart grid mergers and acquisitions (M&A) transactions to date took place in 3Q, Mercom notes. Honeywell acquired Elster’s smart meter business unit for $5.1 billion.

Geographically, more VC capital ($65 million in nine transactions) was invested in young U.S. smart grid ventures in 3Q than was the case in any other country. That accounted for 81 percent of the global total, according to Mercom.

3Q VC Investments in Smart Battery/Energy Storage

Of the total $96 million VCs invested in battery and energy storage start-ups in 3Q, energy storage system integrators attracted the most capital. Just over one-third of the total resulted from just one transaction: Millbrae, California-based Stem raised $33 million from RWE Supply & Trading, the energy trading business unit of Germany’s utility-energy services group RWE.

Stem has developed and continues to refine a platform that integrates and aggregates energy stored across utility customers’ battery storage systems so that utilities can access them to more efficiently respond to fluctuating grid supply-demand conditions.

Another pioneering distributed energy storage systems integrator, Herndon, Virginia-based Greensmith raised $12.3 million from utility and energy services group American Electric Power (AEP). In addition, Hayward, California-based distributed intelligent battery storage systems provider Primus Power raised $25 million in a Series D funding round, the second-largest among battery/energy storage start-ups in 3Q.

The U.S. accounted for all the funding and VC capital invested in battery/storage start-ups in 3Q. In addition to VC investments, battery and energy storage companies raised $48 million in four debt and public securities markets in 3Q, down from $69 million in seven deals in 2Q’15.

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