European cleantech feels the pinch — looks to distinguish itself from U.S.
European cleantech is finally feeling the funding crunch. Market analysts at the Cleantech Group released a report today showing that investment in the sector during the first quarter fell to $281 million, an 11 percent drop from the previous quarter and a 31 percent drop from last year. Fourth quarter figures for 2008 were also down from the previous quarter.
Given this grim outlook, opinion is split on where green industry in Europe is headed in the next year. One camp believes European startups will continue to lose out as capital migrates to companies in the U.S. — hastened along by the economic stimulus bill. Bart Diels, cleantech investment director for Belgian private equity firm Gimv and adherent of this viewpoint, estimates that investment has grown faster in the U.S. to date, with the average American cleantech VC deal dwarfing the average European deal two to one last year.
The opposing camp says there are still opportunities on the continent for cleantech companies to get a bigger slice of the VC pie. Europe and Israel’s share of the total cleantech market could rise as high as 30 percent in 2009, according to Andrew Thomson, a senior analyst with the Cleantech Group in London. This boost would be driven by declining valuations and waning emphasis on the U.S.-centric mega-deals (especially in solar) that defined the sector in 2008, he says.
Another observation in favor of the second camp: There is more diversity in the global cleantech market than ever before — meaning more points of entry for European startups. Last year, 71 percent of cleantech investment went to energy-generation companies. But in the first quarter of 2009, energy generation fell to 55 percent, making room for investments in energy storage at 12 percent, energy efficiency at 8 percent, recycling and waste at 6 percent, and so on.
That being said, it’s clear that several types of cleantech companies are coming to the fore in Europe that are notably different from those taking precedence in the U.S. And these are poking holes in the prediction that Europe’s crop of startups will continue to be overlooked in favor of their American cousins. Here’s a quick look at the latest trends across the Pond:
Marine energy: European companies receive two-thirds of global funding for marine energy, according to Thomson. One startup to watch in this area is Marine Current Turbines, a British developer of marine and tidal energy equipment. It installed the world’s first commercial-scale tidal turbine — the 1.2-megawatt SeaGen (see right) — in Northern Ireland in 2008. The Cleantech Group says its products are soon to be widely deployed around the world.
Wave energy: Closely linked with marine energy, this industry concentrates on systems that generate energy from wave motion. Europe also gets two-thirds of global investment in this area, with Scandinavian countries leading the pack. Pelamis Wave Power is the front-runner here, having been commissioned to build the first commercial-scale wave station off the coast of Portugal.
Wastewater and water technologies: European and Israeli companies have basically cornered all of the world’s capital in this area. To name a few beneficiaries: Danish startup Grundfos BioBooster develops wastewater treatment applications tailored to industrial facilities that discharge high levels of organic material; and Air Water Treatment, based in Spain, offers proprietary and easily scalable water treatment technology. On top of that, Israel has its own incubator dedicated to water-preservation technologies called KINROT. It provides fledgling companies with the funding and guidance they need for up to two years.
Thomson points out that energy efficiency is also a strong market in Europe. The biggest and most recent of these investments went to digital radio manufacturer Ubidyne, backed by Accel Partners, BayTech Venture Capital, Doughty Hanson and TVM Capital. But with focus on energy efficiency built into the U.S. stimulus package, Europe might back away from this area to pursue greener, less crowded pastures.
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