State of Green Business

Cleantech Surges with $48B in Funding Last Year

Cleantech Surges with $48B in Funding Last Year

With more than $48 billion in funding for clean technology R&D in 2006 alone, it's clear that government, corporate, and financial have turned on to the promise of the technology. But a new report from Lux Research warns that the boom may be a bubble.

Among the signs the authors note as suggesting a bubble in the making, IPO value for cleantech rose from $1.6 billion in 2005 to $4.1 billion in 2006, and venture capital raised climed to $1.5 billion from $623 million, primarily on solar and biofuel deals. That investors are rushing to get in on these two sectors while avoiding other opportunities in air, water, and waste suggests to Lux researchers that an investing frenzy is underway.

"Cleantech encompasses innovative technologies specifically designed to optimize the use of natural resources and reduce environmental impact, with five top-level segments: energy, air, water, waste, and sustainability," said Lux Research President Matthew M. Nordan. "Driven by solar and biofuel deals, the energy segment looks overheated -- there"s no way that more than a fraction of the 930 energy start-ups operating worldwide can possibly succeed. But the attention to energy masks neglected opportunity in other segments: For example, the waste segment accounted for 32 percent of merger and acquisition value last year but only 1 percent of IPO value and 4 percent of venture capital."

Lux Research's Cleantech Report, the first comprehensive research report of its kind, presents comprehensive analyses of clean technologies across sectors; details the playing field with numbers from corporate R&D, venture capital, IPOs, patents and more; and profiles more than 200 companies from small startups to large, established corporations.

Among the findings of the report:
  • Cleantech takes high priority: George Bush"s 2007 State of the Union address emphasized alternative energy and action against climate change; CEOs at firms from GE to BP to Toyota tout their new revenue streams from cleantech; and bellwether venture capitalist John Doerr calls cleantech "the largest economic opportunity of the 21st century."

  • Cleantech commercialization is not a U.S.-centric phenomenon. The Asia/Pacific region is the R&D leader, leading in 2006 government funding (38 percent), corporate R&D spending (34 percent), and scientific publications (38 percent). Europe is the IPO leader, with a majority (55 percent) of IPO value in 2005 and 2006 from European companies. The U.S. leads only in 2006 venture capital deployed (72 percent) and patents issued (46 percent).

  • Total cleantech R&D funding hit $48 billion in 2006, with energy claiming the lion"s share. Of this, government funding totaled $24 billion in 2006 with energy taking 57 percent; corporate R&D spending hit $22 billion in 2006 with energy accounting for 55 percent; and cleantech venture capital (VC) totaled $2.04 billion in 2006 to reach a cumulative total of $6.06 billion since 1995. VC money has been highly concentrated: Since 1995, the top 10 percent of venture-funded start-ups have received 39 percent of cumulative capital deployed.

  • Innovation in cleantech has exploded in the last decade: Approximately 1,500 cleantech start-ups operate worldwide -- 930 in energy, 45 in air, 90 in water, 120 in waste, and 315 in sustainability. 29,874 scientific journal articles were published on cleantech topics in 2006, while 4,093 U.S. patents focused on cleantech were issued. U.S. cleantech patents issued have grown at an average of 5 percent per year since 1995, double the rate for patents overall.

  • Press coverage of the cleantech theme has risen sharply in the last two years, with 3,485 articles in major print media in 2006, and growth in the number of such stories of more than 70 percent in both 2005 and 2006.
"Targeting the 21st century"s most important issues in energy, water, and sustainability, cleantech has emerged as one of the most important areas of growth, innovation, and investment," said Ira Ehrenpreis, General Partner at venture capital firm Technology Partners and investor in start-ups such as Imperium Renewables. "Lux Research"s The Cleantech Report is a seminal piece of research that successfully provides financial, corporate, and government decision-makers with the data and case studies they need to make informed, strategic decisions."

More information about the Cleantech Report is available from LuxResearchInc.com.