What’s hot in cleantech for 2010
Writing from San Francisco, it is hard to imagine that 2010 will be anything but a good year for cleantech. Then again, San Francisco is not your normal cleantech city, and California is not your normal cleantech state. Indeed, as Earth2Tech’s cleantech startup map clearly shows, the Golden State is one of the main engines for cleantech innovation at the startup level. This is particularly true in the case of venture-backed companies investing in today’s ‘hot’ tech, like solar.
San Francisco, therefore, is a good place from which to do some blue-sky cleantech thinking. While working here and avoiding the dark and gloomy depths of the British winter, it feels appropriate to gaze into my crystal (or silicon) ball and to highlight the top three trends for cleantech in 2010.
1. Renewed cleantech VC activity
Compared with 2007 or even early 2008, cleantech VC funding remained fairly low in 2009. The year started badly, with record low amounts of VC investment compared with 2008: indeed, in the first quarter of the year, investment was down 46% on the previous year.
However, 2009 was not uniform by any means. Indeed, by end of the third quarter, VC investment had actually increased by 182% compared to the first quarter. Venture capital’s ‘exit velocity’ from 2009 is high. However, as data from Ernst & Young shows, what has changed is the emphasis on commercialization: 61% of new capital investment has been directed at companies which are currently shipping products to market.
This implies a continued, strong flow in terms of capital amounts, financing rounds, and number of deals in 2010. However, it also implies more caution in capital allocation at the VC level. Expect venture backers in 2010 to focus closely on firms well past initial development stages, or firms which can generate revenue streams with their early or established products.
2. Service provider consolidation
Cleantech service providers – from research and analysis firms, to consultancies, to web-based platforms and networks – are key to this information-intensive sector. As Matthew Kiernan, founder of sustainability research firm Innovest, argued in his book Investing in a Sustainable World, (published in late 2008) service providers have often been the innovative thinkers in cleantech, pointing towards new directions for more established investors, finance houses and asset managers. As cleantech grows, those firms which have a finger on the sector’s pulse will be of increasing importance as gatekeepers and providers of information and analysis.
So, expect consolidation among service providers as the cleantech service space becomes more mature in 2010. This will mean increased involvement in cleantech service provision by larger firms needing to incorporate a cleantech dimension in their research, media or consultancy offerings. Indeed, Kiernan’s own firm Innovest was taken over by the RiskMetrics Group in early 2009, so as to provide a ‘ready to go’ sustainability research arm for the group. Another sign pointing towards consolidation in 2010 is the takeover of cleantech information and research company New Energy Finance by Bloomberg in 2009. As Michael Kanellos, senior cleantech analyst at Greentech Media here in San Francisco, recently told me, ‘When these larger more established players come into the sector, that’s when these firms or their activities can take off; that’s when established firms’ structures and management can really play a role in developing cleantech service providers’.
3. 2010: the year of solar?
The technology to watch in 2009 was, supposedly, solar. It seems, however, that 2010 will really be the ‘solar year’. Indeed, 2009 provided a strong basis for the build-up of interest in solar, with the IPO landscape dominated by solar offerings. However, 2010 will see solar investment concerning not only specialised funds and venture firms, but larger companies too.
In part, this will be backed by government interest, by the tranches of stimulus packages focused on green energy, and by the continued interest in green building. In part, it will be fuelled by the more cautious investment approach taken by cleantech investors; as such, solar is an established and understandable technology, and investors will be especially conversant with solar panels, photovoltaics, and established components.
By Federico Caprotti, reporting for Skipso from San Francisco

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