Panning for gold between industry and science

Interesting nuggets remain to be found in last quarter's cleantech venture data.

For instance, as a percentage of early stage deals done in last quarter's cleantech venture data (3Q09), alternative energy ventures—in particular solar, followed by energy efficiency and materials—received the largest share of early stage venture deals done.

This tells us a few things when compared to this quarter’s main investment trends:

1. Investors and the scientific community alike continue to place their bets on solar. It has received the largest portion of both venture investments and early stage deals done and, while a relatively mature industry, innovators continue to pursue inexpensive solar cells that convert sunlight to electricity 2-3 times more efficiently than today’s products.
2. The transportation sector (vehicles, advanced batteries & biofuels), which received the second largest portion of venture financing, is clearly focused on commercialization. It claims only 5 percent of early stage deals done, and we predict that any innovation in this sector will likely come in advanced batteries and a cheaper more sustainable way to scale biofuels.
3. Energy efficiency technologies, which received the third largest portion of venture financing, continue to be the low hanging fruit for the cleantech industry due to their ability to build from innovation in the software and IT industries. Indeed, financing in this sector is a comfortable space for most venture capitalists.

That said, these findings highlight to us that private investment in early stage cleantech companies is only part of the cleantech innovation story.

The measure of a healthy innovation ecosystem requires a similar understanding of research and development (R&D) investments into National and University labs. This type of long term R&D investment has been at the heart of North America's technological leadership in many of its established industries, particularly IT, software and biotech.

This trend, we predict, will be no different for the cleantech industry. We should therefore, mind the sentiments of the scientific community and note their assertions about necessary technological breakthroughs, which the investment community should incubate, apply to industry and commercialize.

Last quarter's cleantech venture investment data suggests more attention could, and perhaps should, be paid to the scientific community.