How Warren Buffett and Google are changing CA cleantech

Publication Date
Source
Silicon Valley Business Journal
Year Published
2013

Silicon Valley venture capitalists have been investing in cleantech companies for more than a decade.

Now, an uptick in funding from some of the biggest names in business - think Berkshire Hathaway and Google - are helping to diversify and expand California's cleantech industry, according to a new report by San Francisco based think tank Next 10.

The influx of corporate cash - coupled with recent high profile IPOs in the industry and a 108 percent jump in new cleantech patents over the last five years - has led Next 10 Founder and venture capitalist Noel Perry to declare that the industry has moved beyond the category of "emerging" technology.

"It shows that California's clean technology economy is diversifying and expanding at a healthy pace," Perry told me.

Overall public and private investments in clean technology dropped 42 percent to $3.75 billion in 2012, which the report attributes to "market uncertainty, changes in national policy and the maturation and consolidation of companies in the sector."

However, Perry said a shift in the sources of cleantech funding shows that the industry is changing from one that relies on seed stage venture capital to one ready for investment from major corporations.

In 2008, 64.8 percent of California cleantech investing was done by venture capitalists, while 27 percent included corporate investors, according to research by Collaborative Economics for the Next 10 report.

In 2012, 34.3 percent of the state's cleantech investments came from VCs, compared to 35.5 percent of deals with corporate investors. During that period, cleantech financing with debt also increased from 5 percent to 19.7 percent.

"Corporations have come in in a very big way where we didn't see it before," said Doug Henton, chairman and CEO of Collaborative Economics, pointing to recent solar and wind investments by major companies like Google. "We see this as a positive development."

Here's a rundown of other key findings in the report:

  • Silicon Valley was the biggest metro area for cleantech venture capital, attracting 43 percent, or $1.1 billion, of the total $2.6 billion invested in 2010.
  • From 2009 to 2011, California solar patents more than tripled, leading the nation. The state also leads the U.S. in patents for water, batteries and energy infrastructure.
  • Energy productivity - measured as a ratio of GDP to each unit of energy consumed - increased by about 2 percent from 2009 to 2010 in the state. The measure declined nationwide.