Nordic cleantech investments keeping it up...

Before you start reading, you should put this on. Great song by Tom Waits and I wrote this whole blog in the same melody so you can actually sing along;)

At Cleantech Scandinavia we just finished our annual analysis of Nordic cleantech investments. It’s the third year we do this and it allows us to make some observations over time, so here we go!

First and foremost, the total amount of capital attracted by cleantech companies in the Nordics rose to EUR 460,6 million during 2009, compared to EUR 371,9 million in 2008.

This 24% growth rate was achieved primarily because of the increase in public funding activity, which doubled compared to 2008, but it also includes a 9% increase in amounts of private equity investments. At the same time, the number of transactions in 2009 was down 22% compared to the previous year. What this means is that amounts was up per investment and, as you might have guessed, expansion stage companies attracted most of the funding.

Renewable energy remains the major part of all cleantech investments, around two thirds of all investments were made in energy related technologies, including energy generation and energy efficiency.

Waste and recycling related solutions is moving up the venture capital ladder. The number of deals in this investment cathegory was up with 60% durign a year when the number of overall investments has fallen by almost 40%. Waste related legislation is being put in place in an increasing amount of countries across the world (new EU countries, India) and a lot of raw materials are becoming increasingly expensive so this is a trend I think will continue.

As illustrative examples you can have a look at Metallkraft who recycle solar manufacturing slurry and Preseco that do turn-key waste and recycling solutions for inustries. Both got investments last year.

Another big trend is that a lot of money was invested in expansion stage companies. That means those that are over the technology risk and most of the customer risk and are now looking to grow their customer base. Around 70% of the equity that was invested went to these types of companies! Also means that there is likely quite a few seed stage companies struggling to get money...

It is clear this year that international investors have found their way to the Nordic cleatech sector. Five of the twenty biggest deals that were made during the year included international investors. This is a clear change from previous years when only a couple of deals had any international involvment. We notice it in another way at Cleantech Scandinavia. Four of our last members have been non-Nordic companies such as Siemens, BASF, Capricorn and Climate Change Capital.

Trillions and trillions of environment

Okey senores y senoras!

First of all, put this song on when you read the rest. The guy is one of my idols (Morgan Spurlock is another)...

There was a sneak-peek at some of the numbers from an upcoming study on the ”hidden” environmental costs of some major international companies. The number that made the Guardian among others, was that the estimated environmental costs of the 3000 biggest firms in the world was USD 2.2 trillion! A number that sounds huge but really means nothing to most of us, so they put it in perspective: It corresponds to 6-7% of their combined turn-over and one third of their profits. It is also a figure bigger than the national economies of all but seven countries in the world this year (which also says A LOT about how companies are overtaking nations economies…).

The study was ordered by the UN environmental programme and carried out by London-based Trucost. Naturally, this is a way to get politicians to go – Huh! If that’s correct then maybe we better enforce these costs on those very companies eh? Otherwise they are just getting away with robbery in a way … Yep, at least that’s the way I see it…

The New Scientist made additional use of the study by comparing the environmental score of some of these companies with a study made by US-based Earthsense, on how green these companies where perceived to be by the actual consumers (yes that’s you and meJ).

So, do you think the green performers where also those percieved to be green by the consumers? No such luck, green corporates… it rather looks on the graph like some companies took an environmental performance enhancement drug and pumped up their percieved ”greeness” right before the study was made.

Unfair…? Well, it’s called marketing and I think it can be unfair if companies are allowed to state things that are a bit hazy and in many cases just plain wrong (and in green marketing that is often the case I would say). In any case it is very real and also a call to put policy in place that incorporate the environment better into pricing – since even if (and that’s a big if) purchasing behavior was enacted according to consumers environmental perception of companies it would still not be right!

AND it shows the power of communication, since it is not what you do, it is what people notice that you do that tends to matter… so marketing-skilled people need to get involved in the environmental work of the company in a very pro-active way, but I guess that’s not exactly news…

Metallkraft attracts € 17 Million as Climate Change Capital enters Nordic Cleantech

Norwegian company Metallkraft has a new part owner in one of our most recent members - Climate Change Capital, the UK based cleantech fund now making their first (but I imagine not last…) entry into the Nordic cleantech space. The € 200 million cleantech fund led the investment round and subscribed to € 10.3 million of the total € 17 million in convertible bonds that where issued. Current owners also took part.

Metallkraft is an interesting company in many ways. They have the cleantech industry (solar) as their main customer and their business idea is to improve the environmental performance of the customer.

Metallkrafts business is recycling the slurry that is used in the wafer cutting process when you make solar panels. The slurry needs to continously be replaced with fresh slurry and disposed of in an environmentally sound way. For an industry living off its environmental benifits this for sure needs to be dealt with in an environmentally harmless way. Metallkraft recycles the slurry retaining its cutting abilities without adding any chemicals. Needless to say perhaps, but the cost of recycling is far lower than buying the slurry fresh and simply paying for disposal of the used batch. I like the company also for the reason that it exemplifies what happens when a company in one country and industry makes it big. Suppliers and other actors surrounding the big company tend to gain as well – which means that successful cleantech growth leads to more cleantech growth… Metallkraft is one of several promising and fast growing companies in or related to the solar industry that are now emerging in Norway, many of them in the surge of REC, and I am sure we will see more international leaders among them.

It should be said that Metallkrafts solution is not the only thing that convinced Climate Change Capital to invest. As Simon Drury of Climate Change Capital points out: We firmly believe that Metallkraft’s management team is one of the best we have seen and in my experience this is the most important investment factor to get right”. So naturally, the right team needs to be in place, and I think Simon states the mind of many of his colleagues in that quote.

Don’t go to sleep yet policymakers, cleantech innovation needs you!

COP 15 was a disappointment to many and there is now certainly a risk that policymakers leave the building, metaphorically speaking, leaving markets to take over and solve the environmental problems the best they can. Can they and should they?

Cleantech Scandinavia recently attempted to analyze Nordic cleantech patent application levels.The European Patent Office and OECD’s environmental directorate did a similar attempt analyzing cleantech patent application levels worldwide.

OECD carried out statistical analysis for basically all energy generation technologies showing a marked increase in wind, solar and hydro after the Kyoto agreement was signed. Their analysis also found that cleantech patent activity was dominated by Japan, US, Germany, Korea, Great Britain and France. (87% of solar photovoltaic patents were for instance handed in by Japan, US, Germany, Korea and France).

At Cleantech Scandinavia we looked at Nordic cleantech related patents, using basically the same methodology. This revealed a number of things that we found interesting:

Solar shows remarkable patent growth over the last ten years. Over the same period, numerous new solar companies have been formed in the Nordics.

LED lighting patents are also on the rise. The first wave already a few years ago but now experiencing a second growth stage, likely fueled by energy efficency demand and upcoming legislation banning light bulbs in the EU.

The heat pump industry showed for us, an unexpected development. Seen from a Nordic perspective, this industry comes off as a fairly mature. From an international perspective however, the potential for heat pump technologies is clearly both existing and growing. As an example, heat pump company Thermia sales were up with 100% last period, stating new legislation in Spain as a main reason. The potential to make heat pump technologies more energy efficient has clearly stimulated innovation in the heat pump industry as patent applications where clearly up the last years.

Recycling solutions tend to operate on policy driven markets. This was also reflected in patent levels, with applications rising strongly in the period when a lot of new recycling regulations where put in place (extended producers responsibility for packaging, car scrapping schemes and so on). Application levels remain high, probably driven probably also by increased resource efficiency and increasing raw material prices over the monitored period.

To highlight later stage growth companies in the Nordics we asked a couple of questions to 81 Swedish and 23 Finnish cleantech growth companies. One of them was on policy dependency. 74 % of the Swedish and 70% of the Finnish companies answered that policy benefited their market/solution.

Does any of this mean anything? I think it does. I think it means that in many cases and on many markets, policy has been crucial for cleantech innovation to happen. The oil crisis in the 70’s set off a surge in insulation related patents but that just clarifies the point further. Clear price signals are needed for innovations to happen.

Of course, it can be argued that what I am talking about is in the past. It doesn’t mean it has to be like this in the future. Perhaps we have now reached a level of oil and raw material prices that, coupled with increased environmental awareness, means we don’t need the policy makers to guide markets any longer. I wish, but I don’t think so. Chinas oil demand has increased ten-fold the last decade, water is increasingly becoming a scarce resource and waste is literally piling up in many parts of the world. We are just not creating, and more importantly deploying, solutions quickly enough.

I hope that we will see increased activity from policy makers to guide markets and consequently innovations into the low carbon and low pollution levels where we need to go. So stay awake policymakers, cleantech still needs you!

Two big Norwegan cleantech deals close the old year - Innotech Solar and Kebony

Norwegian Investinor (and yes, naturally they are a Cleantech Scandinavia member) is already into the cleantech industry through investments in electric car-maker Think and Metallkraft (another cleantech fast-grower doing recycling in the solar industry). They opened their bank account before the holidays, investing 6.3 million euro in Innotech Solar, making it one of the bigger cleantech investments during the year. Innotech Solar was founded by people from within the solar industry, who saw a market opportunity in the solar cells that where not used due to low efficiency. Innotech Solar buys these cells and has the technology and production capacity to upgrade them, making them profitable. It is recycling and reuse in an industry where access to raw material has been crucial. The company was established in spring 2008, has grown to 42 employees, and already has sales offices in Germany and China. The company has previously managed to attract VC money from two of the most active cleantech investors in the Nordics - Northzone Ventures and Sustainable Technologies Fund.

Kebony is another Norwegian company that managed to secure their money end 2009 by completing a 12 million euro financing round led by the Environmental Technologies Fund. The company supplies a hardwood alternative using wood modification technology to transform conventional, fast growing, wood species into wood with the properties of hardwood (trees that end up as hardwood are otherwise typically found scattered in the world’s rainforests, where they are eagerly sought after but expensive to harvest in a sustainable way). Their hardwood is on the pic below.

It is particularly fitting that a couple of Norwegian companies end the year since Norway had an impressive number of big cleantech deals throughout the year, with companies such as ReVolt, Norsun and THINK all finalising big investment rounds. So what do u think - Norway - from oil to cleantech nation?

Wishes for the new year - that biodegradable plastics finally take off!

You may have heard about biodegradable plastics for many years, you may even have tried it (usually in the form of a corn based plastic bag) but they have yet to take off in volumes. I know conventional plastic has a lot of qualities that are hard to replace – you can mold it, it is flexible, strong, it holds moisture and odor away… but! It also sucks as a material. It takes forever to biodegrade so it ends up everywhere. All over beaches in the form of plastic bottles, all over the countryside in the shape of plastic bags, and finally even in the stomachs of birds, as photographer Chris Jordan shows us in the video-clip. Usually I focus on the solutions but this time I think the problem deserves a look...

And I guess I don’t need to mention it is made of oil, a resource known for its carbon emissions as well as its scarcity.

There are some options going to market, US based Cereplast is moving in on some large consumer markets with their biodegradable plastic (usable for things such as Starbucks coffee mugs and similar). In the Nordics we have companies such as re8 Bioplastics doing plastic replacements for moldable applications (they can make bandy-sticks of superior quality to plastics to mention one product). Another company in this field is Organoclick, with a chemical solution that can give oher materials such as paper, the same qualities as plastic, making it water resistant www.organoclick.com. This can enable substitution of a lot plastic products. Xylophane is another exciting one. They have a barrier material for packaging based on renewable raw material. They have attracted investments from leading international cleantech VC Capricorn of Belgium and Swedish VC SEB Ventures (both these investors are members of Cleantech Scandinavia btw:)).

The market is clearly huge, have a look at http://www.d2w.net. They count the approximate number of plastic bags consumed each year (don’t know how they come up with the number but it is stunning if ti is correct) and this is not counting all the hard molded plastics or packaging-related plastics that go in the dumpster each year.

SO that's my first wish for the new year, alongside with wanting to learn to do a proper tomoe-nage judo throw, something I have yet to manage...

And if you have the stomach for it take a look at http://www.chrisjordan.com/ for more pictures of environmental concern.

Why I love Finland…

There is something about the way a Finnish entrepeneur can say - We now have a turn-over of 100 million Euro and next year it will be probably 300 and we have a profit of some 10 million Euro, as if he was stating that he just needs to go to the toilet before he’s off to catch his train.

I know I am generalizing but after having hosted three events in Finland, I believe it is a fact: Finns do more and talk less. There is no boosting in this country, there is also no talking down on others to make yourself look better, there is only people trying their very best to succeed at what they do!

After the Cleantech Venture Day in beautiful Sibelius hall in Lahti I am also impressed with the way that a lot of Nordic cleantech companies are moving forward (I tend to always be impressed by entrepeneurs willing to risk complete failure to succeed, but still…). I was not the only one impressed, feed-back from the investors present was generally positive towards the selection of investment opportunities (and this is not always the case). This time we had a later stage focus meaning that we had tried to round-up some companies that have managed to succesfully commercialise their solution and now were looking to expand further.

The companies that presented were not all in that stage but rather a mixture. Effpower of Sweden showed bipolar battery technology for hybrid vehicles and they have succesfully managed to find target segments where there is imidiate business for them. They were currently being tested in projects of total order values in the range of 100 MEUR. Energy storage was a theme among presenting companies wuth European batteries present (recently built Europes largest battery factory for large scale applications such as electric vehicles) and Alelion of Sweden to mention a few. A company still in the commercialisation phase that presented was Canatu. It is a Finnish company that does nano-tubes making thin films achieve a lot better electrical conductivity (one of many advantages if I understood correctly). When that get’s on the market I think we will see a very proftable company.

What else left an impression? Lord Brown of Riverside (former Chief executive at BP) gave a really good and clear presentation abot the role of government in bringing down carbon emissions.

- Avoid picking winners but be still involved in and invest in a few strategic energy choices.

- Aim for certainty and stability (while critisising CAFE standars and Cap and trade for their lack of that) and

- Aim to inernalise externalities in the final energy costs (including removing some of the 2-300 billion in current subsidies to fossil fuels).

It may not be news but it gives another impression when these things come from the former Chief Executive of BP…

Oh, and we gave a special award to Lassi Noponen, former chairman of WinWinD, a Finnish company that raised 120 MEUR from Masdar Cleantech fund when he was the chairman of it. He was genuinely moved and it felt great to be able to do something like that. He was at our first investor event beginning of 2007 and presented his business case to a crowd of very sceptical investors. They gave him a hard time about more or less everything. I remember the answer ha gave to the question, can a slow moving wind turbine like this really handle cold conditions? Lassis answer was short and sweet:

- It was developed in the north of Finland.

Say no more…

Here is a pic of me and Magnus with Lassi and the award, a piece of raku by Dan Leonette.

Another thing that left an impression was the cleantech related developments that are now taking place in India. Areas that are currently at very early (or non-existent) levels of environmental protection are having policies and regulations placed upon them in a way that will completely transform the India market. YES bank (they never say no:)), a rapidly growing India bank, gave a presentation on cleantech in India. Waste handling and treatment, water conservation and treatment, wind and the solar market will be huge in India over the years to come.

An interesting fact - There are 300 sunny days in India. Let’s see if someone turns that into a song…