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The clean technology sector was a lone glimmer of hope for the venture capital business through the financial crisis and ensuing recession. Quarterly updates gave positive news despite the destruction of capital elsewhere in the global financial markets. Now that the results are in for 2009, however, the outcome isn't as positive as many expected. According to data from market research firm Cleantech Group and accounting and consulting firm Deloitte, venture capital funding fell 33% last year, but still held up better than the market as a whole.
Overall, venture capital investment activity fell to levels not seen since 2003, when the market was still finding its way out of the dotcom bust, which destroyed vast amounts of wealth and forced a generation to accept that they wouldn't be able to play ping pong at the office. Within the category, cleantech has shown remarkable growth over this period. In 2004, the sector accounted for only 3% of all venture capital funds invested. By 2009, it surged to 25%. Last year, it pulled in more VC capital than any other sector -- including software.
Within the cleantech sector, solar picked up the most VC financing, receiving 21% of the funds available to the sector. Nonetheless, investment in solar fell 64% from 2008. Meanwhile, transportation and energy efficiency posted record years for VC investment. Solar struggled because of the steep costs to commercialize the technology. The energy efficiency category, on the other hand, can get products to market using proven technologies and requiring the assumption of less risk: It's a winning formula for VC investors. VC funds pumped into the energy efficiency sector increased 39% last year to $1 billion. The transportation sector posted a 47% growth rate, ultimately receiving $1.1 billion in venture funding.
North America appears to be losing ground, according to the findings. Though the region still dominates the cleantech venture capital space, its share is shrinking. North America raked in 62% of the cleantech VC pie, which is off from 72% in 2008. Europe and Israel, on the other hand, saw their combined share increase from 22% in 2008 to 29% in 2009. This shift could be a risk management move, though, as these regions have moved a bit further along the cleantech maturity cycle than the U.S. has.
It may have been a tough year for VC investment in the cleantech sector, but 2009 wasn't really kind to anybody. The cleantech sector has pulled through and is poised to benefit from an up-tick as soon as the VC community is happy to pry open its collective wallet.
Within the cleantech sector, solar picked up the most VC financing, receiving 21% of the funds available to the sector. Nonetheless, investment in solar fell 64% from 2008. Meanwhile, transportation and energy efficiency posted record years for VC investment. Solar struggled because of the steep costs to commercialize the technology. The energy efficiency category, on the other hand, can get products to market using proven technologies and requiring the assumption of less risk: It's a winning formula for VC investors. VC funds pumped into the energy efficiency sector increased 39% last year to $1 billion. The transportation sector posted a 47% growth rate, ultimately receiving $1.1 billion in venture funding.
North America appears to be losing ground, according to the findings. Though the region still dominates the cleantech venture capital space, its share is shrinking. North America raked in 62% of the cleantech VC pie, which is off from 72% in 2008. Europe and Israel, on the other hand, saw their combined share increase from 22% in 2008 to 29% in 2009. This shift could be a risk management move, though, as these regions have moved a bit further along the cleantech maturity cycle than the U.S. has.
It may have been a tough year for VC investment in the cleantech sector, but 2009 wasn't really kind to anybody. The cleantech sector has pulled through and is poised to benefit from an up-tick as soon as the VC community is happy to pry open its collective wallet.
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