Cleantech funding: which VCs are investing?

| Beauhurst

With Lloyds recently launching a £2bn “Clean Growth Finance scheme”, it seems that large lenders are beginning to see business-side demand for cleantech funding. RBS too recently surpassed its own cleantech investment target, providing over £3b of funding to UK enterprises, indicating a general increase in confidence among Britain’s institutional investors.

Other subtle shifts in public discourse are also becoming more apparent. For example, the free-market journal CapX recently published this piece, writing that “now developers looking to build new infrastructure know that it is cheaper to generate power from a wind turbine or a solar panel than it is from a gas or plant – even with the extra costs associated with balancing variable output.”

With this in mind, we decided to investigate at the venture capital end, seeing which VC firms were responsible for the most cleantech investment in Britain’s startups and scaleups.

Cleantech Venture Capital

Since the beginning of 2011, the UK’s low-carbon and renewable energy sector has seen £1.35b in publicly announced venture capital/private equity investment. As we reported earlier this year, investment levels have suffered from an ongoing malaise, despite overall levels in the UK growing considerably. (As a case in point, British startups received record levels of interest from Silicon Valley in 2017).

Looking at the period from 2011 to April 2018, the leading investor in terms of cleantech funding is CrowdCube, or rather, those using CrowdCube’s investment platform. The other big two crowdfunding platforms, Seedrs and SyndicateRoom, are also very active in this sphere.

The fact crowdfunding platforms are dominating the cleantech investment scene might suggests businesses are struggling to impress larger VC houses. However, this is actually a reflection of the broader investment market. In fact, a slightly smaller percentage of deals were facilitated through crowdfunding when comparing cleantech with all sectors. 

Whilst CrowdCube tops the table in terms of investment deals facilitated, fund manager Scottish Enterprise has actually participated in more rounds, as it manages two relevant funds – the Scottish Investment Bank and the Scottish Co-Investment fund.

Considering Scotland’s economy is much smaller than England’s, this shows that the country is punching well above its weight when it comes to development capital for young cleantech companies. There is a policy goal here – the devolved government clearly sees this an important avenue in helping to achieve its recently announced emissions reductions.

Traditional PE and VC houses are pretty thin on the ground when it comes to the top 10, which is probably due to the sector’s high failure rate. That’s not to say they aren’t playing an important role in funding clean technology – IP Group in particular, alongside Touchstone Innovations (which IP Group acquired last summer in a hostile takeover), have made a large number of investments in the sector. Altogether, funds that were either PE, VC, angel networks, or corporate strategy contributed to the majority of cleantech deals over the period.

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