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A little bit about me

Hi. While this blog is a part of Seed Catalyst’s website, I realised over the initial few weeks that a lot of you are first introduced to the firm via the blog rather than our home page.

So to introduce myself - I’m a business consultant working with early stage technology firms to help streamline their strategy and go-to-market approach and support them for fund raising. 

With this blog, I aim to capture key market trends that I see in the industry, the ecosystem and cross-plays in some of the more interesting and upcoming sectors, as well as cover interesting companies that I meet. 

I will also be addressing vexing and interesting valuation and deal/term-sheet structures that would be of interest to technology start-ups at various stages of their growth.

So let’s get started...

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Cleantech in Europe PDF Print E-mail
Blog - New money
Thursday, 17 June 2010 21:19
Illustration: Different types of renewable energy.

 

 

 

European venture capital may have been a weaker cousin to its US counterpart but the story seems to be changing when it comes to the cleantech sector.  Sure cleantech has a huge definition – all the way from renewable energies such as solar panels and wind to battery innovation, electric vehicles, electrical components, plant electronics, monitoring IT, transmission innovation, data monitoring – a huge range.

 

A cut of investment across sectors in 2009 and these are also quite broadly defined:


 

Top Venture Capital Clean Technology Sectors in 2009
Technology Sector Amount Invested % of total
Solar $1.2 billion 21%
Transportation (including electric vehicles, advanced batteries, fuel cells) $1.1 billion 20%
Energy Efficiency $1.0 billion 18%
Biofuels $554 million 10%
Smart Grid $414 million 7%
Water $117 million 2%
Source: Cleantech Group (cleantech.com)

 


One of the reasons for the assured growth in Europe has been the government support provided to the sector in the form of feed-in tariffs and the like. Another positive for investors has also been the fact that the new technologies require support from specialists and backers even as the banking sector has been tightening its belt.


The sector is still evolving however. While it is an emerging sector, the growth is in a range of sub-sectors which prevents the formation of bubbles and over-valuation. This creates a huge potential increase in opportunities as well as investment volume. Sure the emphasis is on VCs to identify the winners in the range of applications being explored and then support them through their growth. There is invariably an initial period of higher capital investment as compared to counterparts in digital media or e-commerce. Thereafter, it is a question of exit opportunities. Tech in Europe has suffered due to its lack of proximity to Silicon Valley but when it comes to cleantech the emphasis needs to be on advertising the successful European stories and development of the IPO market.


And why the focus on Europe? It was summarized perfectly by Patrick Sheehan, past Chairman of EVCA ‘From a European perspective, there is an understanding that Europe is a good place in the world to do cleantech. In contrast to the software industry, for example, the locus isn’t in California. The locus, if there is one, is probably in Europe. The societal awareness of the issues are more ingrained here. EU legislation on a range of issues has prompted change; Europe has a long tradition in the area, which is quite different from other parts of the world .’


And now for some numbers: cleantech investment in the third quarter of 2009 according to Deloitte

US: $1.1bn in 73 disclosed rounds a rise of 8% over Q2

Europe and Israel: $457m in 53 disclosed rounds a rise of 62% over Q2!

China: $41.8m across three venture deals

 

Further, according to the Cleantech group, North America’s share of clean technology venture capital was down from 72% in 2008 to 62%, a four year low, while the share for Europe and Israel was up from 22% in 2008 to 29%, a five year high. North America continued to attract the largest percentage of clean technology venture capital in 2009, with Europe and Israel in second place, followed by China (6%) and India (3%).

 

In Europe, the leading sector in 2009 has been Energy Efficiency, which more than doubled its share of investment to 19% ($304 million in 38 deals), moving it ahead of Solar ($292 million in 35 deals).

Countries which registered an increase in VC investment from 2008 included Norway, France, Switzerland, the Netherlands, Belgium and Denmark. The leading country for investment was the UK ($291 million in 61 deals, a decrease of 21% from 2008), followed by Norway ($234 million in 12 deals, an increase of 333% from 2008) and Germany ($207 million in 17 deals, a decrease of 47% from 2008).

So where are the opportunities: sure solar and wind have already seen huge investments. The emphasis is now on energy efficiency technologies, smart grids, materials. However a focus is needed not to let the growth falter. While there may be complaints regarding the governmental support being provided to the sector in Europe, the US is not all that far behind. One clear example is A123 Systems which received close to a $250 million grant from the Obama administration. There is increasingly a huge challenge from Asian markets. Still the advantage of the growth in Europe is that the sector has started moving away from early adopters to mainstream users and that is where Europe is ahead.

 


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