Energy efficiency, long the girl in practical shoes who's never asked to dance, is looking much more attractive to VCs in light of surging energy prices.
North American investment in energy efficiency technologies--such as software and electronics equipment that help individuals and businesses track their energy use--more than tripled in the second quarter from a year ago, according to a Cleantech Venture Network report. Energy efficiency investments reached $60.9 million, compared with $15.2 million in the same period last year, the industry monitor says.
A slew of energy management startups raised sizeable capital. In May, GridPoint raised $16 million, Prenova received $11 million, and Broadband Energy Network got more than $2 million. Fat Spaniel raised $3.5 million in March, and Comverge took in $5.5 million in April.
Energy management technologies haven't always been this appealing. "Energy efficiency is a sleeping giant," says Robert Wilder, CEO of WilderShares, which manages two clean-energy indexes. "It doesn't have the sexy allure of solar power or huge wind. But we have Saudi Arabia-sized oil reserves under our feet in America through energy efficiency."
Some VCs still shy away from funding efficiency companies because, for most of the year, energy demand is only at 60% to 70% of its capacity, says Chris Hickman, an executive VP of Cellnet, a company that builds fixed wireless networks for energy metering. For those investors, finding new energy sources in nature is the long-term solution for meeting the increasing global demand for electricity. Still, making the most of what's in the power grid now has presented money-making opportunities for some VCs.