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Cleantech Future Breeds New Optimism

kachan, dallas, kachan & co 2If you’ve not been paying much attention to cleantech in the last little while, it’s time to sit up and take notice.

Because post-Solyndra, cleantech has been quietly gaining momentum.

We had the chance to take a close look at the fundamentals of cleantech over the last two months in co-authoring a new 38-page research report in conjunction with Oakland, Calif.-based advocacy group As You Sow and the Responsible Endowments Coalition of Brooklyn, New York.

The paper analyzes the most recent investment research available across a number of industries and major impact areas. It identifies key drivers and market size projections for various cleantech categories and looks at examples of products and technologies currently on the market. Finally, we highlight a handful of large, mid and small cap firms and funds as possible points of entry for investors within each industry.

Even after only being a relatively new investment theme, cleantech is still—even today after a downturn—attracting nearly a quarter of global venture capital available.) Cleantech has multi-trillion dollar individual addressable markets of power, water, agriculture, transportation and others. And cleantech’s drivers are not going away any time soon.

The cleantech wave can be compared to other technology booms of the last 50 years, like the dot com boom, the networking craze, biotech, the PC and the microprocessor. We found a number of parallels and a number of reasons for optimism when you compare the cycles. After 20 years in technology, personally, the more I looked at the data, the more it felt like I’d seen this movie before.

For instance, the downturn in venture capital: Venture capital often spikes early in emerging categories, later to be replaced with more traditional levels of investment and other sources of capital as industries develop. It happened in the Internet era, and this transition has begun in cleantech as shown below; venture capital is playing less of a leading role in driving cutting edge technology, as it’s being being augmented by corporate investors and other sources of funds. More detail in our report.

Venture capital spikes in Internet and cleantech

Actual and estimated venture capital spending in Internet and cleantech. Source: Matthew Nordan

There’s another relevant curve, below, that looks a lot like the one above. We hypothesized in an analysis this summer that cleantech had bottomed out on the Gartner hype cycle. We make the more detailed case in our report that cleantech, as in every one of the previous waves I just mentioned, had experienced the same initial enthusiasm, the same frothiness, the same “irrational exuberance” as Alan Greenspan put it, that these other technologies did as expectations initially exceeded reality.

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