Smart grid venture funding plunges

Quick Take: The smart grid trend is about a decade old now. The early VCs are now looking for an exit via an acquisition (relatively easy as long as you don't ask for too much) or an IPO (relatively hard). Plus, most of the Really Big Opportunities already have multiple competitors. As a result, many of the current deals making the rounds are for niche opportunities that command less money. – Jesse Berst

Mercom Capital Group describes venture capital activity in the smart grid sector as "anemic at best" in 2011. The clean energy communications  and consulting firm recently released its annual report on merger and acquisition and funding activity, noting that VC funding in 2011 brought in $377 million in 50 deals (24 disclosed) compared to $769 million in 51 deals in 2010 (27 disclosed).

According to Mercom, the average VC funding round dropped by 50 percent in 2011 to $7.5 million compared to almost $15 million in 2010.

Noting that the average deal size dropped in half, Mercom Managing Partner Raj Prabhu said: "Interestingly, the number of VC investors increased to 92 from 87 in 2010, pointing to continued investor interest but lower risk appetite. Strong M&A activity was driven by power giants like Siemens, Schneider Electric, ABB and GE."

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 Jesse Berst is the founder and chief analyst of Smart Grid News.com. He consults to smart grid companies seeking market entry advice and M&A advisory. A frequent keynoter at industry events in the US and abroad, he also serves on the Advisory Council of Pacific Northwest National Laboratory's Energy & Environment directorate.