Cleantech Investment: A Decade of California’s Evolving Portfolio

The clean technology (clean tech) sector is a vital part of the economy, generating new jobs and businesses while making California’s transition toward a cleaner and more efficient economy possible. Through the creation of products and services that assist this shift towards clean, low-carbon based products and processes, cleantech companies are changing the economic and global landscape.

Investment fuels cleantech innovation. In the last few years, funding for cleantech companies has evolved as early technologies, like solar and wind power, have taken hold and new technologies, such as advanced biofuels and more efficient batteries, continue to emerge. A decade’s worth of data provides a holistic view of how the cleantech sector is maturing, with investments in companies ranging from early stage angel funding to late stage project finance. Recent trends show that while early stage venture capital (VC) ebbed after a surge in experimentation, later stage investments have increased in the last five years.

Corporations are playing an increasingly prominent investment role as they identify strategic growth prospects and establish valuable partnerships to deploy cleantech products and services. Though down from peak levels, VC investors are still actively engaging with cleantech companies. In addition, institutional and public investors have increasing opportunities to invest in technology implementation and publicly-traded cleantech companies. This report illustrates the emerging trends in California’s cleantech investment portfolio and shows that financing for development, growth, and deployment of cleantech products has grown over the past ten years while new investors have become involved.

  • While many focus on VC investment as an indicator of growth in the sector, it is important to expand that view as cleantech products and services move toward deployment.
  • Development & Growth investment contributed to the expansion of the cleantech sector over the last decade.
    • This direct investment into California startup companies is more than three times higher in the first half of 2013 compared to the first half of 2003.
    • More recently, investment in Development & Growth in California slid about 44 percent from the second half of 2012 to the first half of 2013 (from about $1.5 billion to $870 million).
    • Venture capital specifically decreased less than Development & Growth overall, down about 22 percent in the same period (from $870 million to $680 million).
  • Project financing for the deployment of cleantech products was more than three times higher in 2012 than in 2007.
    • California’s estimated share of project finance investment in the United States rose above 40 percent in the first half of 2013, though investment levels were down from the spike in the second half of 2011 and down about three percent from the second half of 2012.
  • Despite the drop-off since the peak of investment in 2010 and 2011, there are twice as many VC and corporate investors involved in the cleantech sector today than in the first half of 2003, when the industry was just taking off.
  • Corporations play a pivotal role as strategic investors in cleantech companies.
    • Over the last ten years, the number of VC deals with corporate involvement has increased and at least 24 percent of cleantech VC deals had corporation participation over the last three years.
    • In the last decade, the average VC deal amount has been an average of 48 percent higher if corporations were involved in the round.