VENTURESCOPE(2)

“This is fantastic, we've got so many tree huggers and so many investors in one room!”

These words were exclaimed by one enthusiastic entrepreneur who couldn't contain his excitement at last month's Essential Cleantech conference in London. Hosted by the Cambridge-based venture research group Library House, the event brought together some of the most significant players in the European and global clean technology investment sector including investors, entrepreneurs, corporates and journalists.

The choice of venue may have been a bit intimidating for the speakers. Hosted at the BFI IMAX theatre in London, the event featured gigantic images of the panelists projected on the larger-than-life screen behind them. The speakers included Uwe Albrecht, managing partner at Siemens Venture Capital; Richard Barrington, head of British and Irish public policy for Sun Microsystems; Ken Carter, energy manager for Tesco; and Ziad Tassabehji, a director with the Abu Dhabi Future Energy Company.

With all speakers in agreement that venture capital has an important, if not the most important role to play in developing technologies that can solve the climate crisis, the question became how to make sure Europe is on the forefront of that innovation. A report unveiled by Library House at the conference had some worrying signs. The report shows that although cleantech venture capital in Europe has grown dramatically since 2000 against a backdrop of falling activity in other sectors, the US is far surpassing Europe in cleantech investing. US investors participated in more cleantech deals in Europe itself than investors from any European country except the UK last year. Public sector support for cleantech companies in Europe outside of the UK has been positively dismal. Although in the UK the public sector participates in over 45 percent of all cleantech deals, the average for the whole of Europe is just 14.7 percent.

At the same time the report shows that investment in these technologies in Europe, which include alternative energy solutions, solar panels, material innovation and other technologies for reducing carbon emissions, is heating up. In 2006, over €400 million ($544 million) in venture capital money was invested in 95 deals, bringing the total money deployed in the sector in Europe past the €1 billion mark. In total 217 cleantech innovation companies are currently venture-backed in Europe, with just over 40 percent of these located in the UK. These UK investments have been helped by public sector backed funds such as the Carbon Trust, which is the first such cleantech-dedicated fund in the UK.

But although governments can help by increasing public funding, the entrepreneurs and investors at the conference all seemed to think that business would be the real leader in the sector. Abu Dhabi Future Energy Company director Ziad Tassabehji pointed out that even if every country in the world signed on to the Kyoto Protocol and reduced their emissions by the EU goal of 20 percent, it still wouldn't solve the carbon problem. “The only way this will be solved is by developing many, many new technologies,” he told the audience. Jeremy Leggett, founder of solar panel producer Solarcentury, agreed.“In my view, business is taking this more seriously than government,” he said.

Library House CEO Doug Richard said that in his opinion the hottest thing to watch in the sector is lighting. “If I had to invest in one thing I would invest in LED lightbulbs,” he said. Such lightbulbs, which are currently being developed, may be able to provide low-power lighting solutions that are actually adequate, something that industry has failed to achieve so far. Richard added that some of the companies and their products to watch across Europe include Norwegian solar cell producer Norsun, German fuel cell producer PEMEAS, Scottish offshore wave energy company Ocean Power Delivery, and Swedish solar air conditioning company Climate Well. He also noted that many of the companies that have been working on developing component solutions over the past several years are now preparing to unveil commercial packages. This means that significant returns may be just around the corner. In many ways, Richard noted, the cleantech market today resembles the IT industry 20 years ago. But it remains to be seen whether this technology will receive the public sector support of 20 years ago as well.

For more information about cleantech investment, be sure to read the June issue of PEI's sister publication IP Investor, which is dedicated to the subject.