Cleantech’s Four $1,000,000,000 Sectors

Josh Gilbert

Introduction

Our Quarterly Investment Monitor has just been released, including a round-up for 2016 to help understand the trends driving the past year’s cleantech investments. For the first time since 2011, we had four cleantech sectors pass the $1 Billion mark in global venture capital investment last year –Transportation, Energy Efficiency, Solar and Agriculture. In this blog post, we’ll go behind the numbers to have a look at some of the specific innovations and companies driving the growth and diversity we currently see within the cleantech environment.

One Billion_Sector Shares

Agriculture & Food

One Billion_Ag and Food Chart

Agriculture & Food has seen rapid growth in investment since 2014, with figures in the last three years consistently doubling the value amount of investments of previous years. The sub-sectors driving this growth are very diverse, reflecting the aggregate nature of the sector as a whole. When unpacking the upstream agricultural and downstream food innovations, there’s a plethora of technologies to choose from showcasing current sectoral innovations.

In Agriculture, sectoral growth has represented a culmination of technological advancements in automation, data & IoT, and agricultural biotech – all contributing to the sector regaining its $1B status. The utilization of drone technology is driving the automation of traditionally manual agriculture practices (PrecisionHawk’s $18M funding round in April).  IoT-driven data solutions are helping lead the digital revolution in farming, so even small-scale farmers can gather huge amounts of data (Farmers Edge received $58M in investment this year and FarmLink’s $24M equity round).  And in agricultural biotech, genetic engineering of crops is leading to the increase of drought and pest resistance, thus increasing productivity (VoloAgri’s $69M equity round and Caribou Biosciences’ $30M Series B).

In the Foods sub-sector, sustainable proteins have received significant investment, with $118M in confirmed investments in 2016, along with other investment rounds of undisclosed value. Most prominently, sustainable protein heavy-weight, Beyond Meat had two investment rounds of undisclosed value. While one thinks of sustainable protein as meat substitutes aimed at end-consumers, such as Sergey Brin’s burger or Beyond Meat’s products,  sustainable protein has also been moving further up the supply chain. There were also a number of sustainably sourced livestock feed companies that received investment in 2016 (AgriProtein Technologies, Bitwater Farms, and Midgard Insect Farm).

The vibrancy of Ag & Food innovation and investment is further reinforced when a count of the investments is made by stage. Despite the general trend of Series B+ outstripping early stage investment overall, Ag & Food early stage (Seed and Series A) investments are over 20% higher than Series B+, with 83 investments against 69, respectively.

Solar

One Billion_Solar Chart

Solar received $1.3B in investment during 2016 – the highest level of cleantech investment in the sector since 2011. With production cost and point of cost drastically falling, the sector remains an attractive proposition for new investment. On a macro-level, this positivity in the sector’s prospects is reflected in the record low bids we’ve seen at auction for solar energy, with a bid of $2.4c in Abu Dhabi in September.

Despite a general trend of large later stage investment in the solar sector, investment in innovative new technologies remains healthy as companies begin to reach maturity and marketability. For example, the perovskite film company, Oxford Photovoltaics, has received around $30M in funding over the past 18 months alone, as the company reaches marketization.

Overly simplistic narratives would suggest that the interesting developments in Solar are solely the realm of falling price point and cheaper production costs driven by Chinese manufacturing, but the example of Oxford PV shows that the sector is far from finished innovating technologically. Furthermore, the innovations in areas such as perovskite thin-film technology offer potential developments for crossover with other cleantech sub-sectors. Examples include spraying perovskite PV onto the windows of buildings, generating energy through the windscreens of vehicles or placing them on top of greenhouses where they could power smart sensors in the plants below.

Transportation

One Billion_Transportation Chart

The rise and rise of Transportation investment has largely been driven by investments in Mobility Services, with over $13.3B investment in sobility services deals in 2016. But even when mobility services are excluded like ride-hailing (Uber) or smart parking (WeSmartPark), there has still been significant growth in the Transportation sector, increasing by threefold in value from $1.3B in 2015 to $3.9B in 2016.

While IoT technology in the car has captured both headlines and many of the large investments, there is in fact diversity within the transportation investment ecosystem. Away from the billion dollar investments and supercities, companies such as Yimidida are offering innovative solutions for last-mile logistics in rural China. Utilizing software to coordinate freight shipping via crowd-sourcing, Yimidida provides delivery services in China’s small counties and villages, spread over 1,600 delivery locations located throughout the countryside. The $14M Series A funding from Sino-French investment firm Cathay Capital, Source Code Capital, and global logistics giant GLP shows the significant promise in integrated logistics services aimed at rural China. Yimidada’s founder, Yang Xingyun, has valued the potential of the market at ‘trillions of RMB.’

Energy Efficiency

One Billion_Energy Efficiency Chart

Smart buildings have been the headline sector in Energy Efficiency, with the smart home and commercial markets receiving the bulk of big investments. A prime example of these large smart building investments can be seen in Vivint’s $100M growth equity round led by Solamere Capital and Peter Thiel in April.

The advances in IoT technology and its uses have enabled the leap in smart buildings investment, but sometimes an innovative business model can be just as attractive to investors. Case in point is Urban Volt, a provider of ‘light as a service’ facilities – financing and retrofitting LED lighting installations in large commercial properties, then earning the money back through savings made by the owners. Founded in 2015 by Kevin Maughan (a former Merrill Lynch banker), Urban Volt received over $33M in Series A funding from Swiss-based sustainable investor SUSI Partners.

Conclusion

It’s clear from our recently published QIM report that cleantech investment has been in good health over the past 12 months. Both headline-grabbing growth equity deals and innovative early stage disruptors are receiving impressive levels of investment. With four $1B cleantech sectors, one can safely assume that there is sustained diversity in both technologies and capital investments as we grow into 2017.

If you want to know more, please reach out to me at josh.gilbert@cleantech.com and learn more about how you can gain access to our Quartly Investment Monitor.