Clean Tech Innovation

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2021
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Clean Tech Innovation

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2021
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Clean Tech Innovation

Clean Tech Innovation

There has been a tremendous increase in interest in Clean Technology (also known as Climate Tech) investments in the past few years across the United States—and especially in California. The number of California Clean Tech deals in 2021 is expected to greatly surpass those of 2020, which would make it the year with the most Clean Tech deals in California’s history—indicating that increased federal emphasis on climate action may have influenced new investment. While 2021 did see a significant increase in Clean Technology investments, a majority of those funds went primarily to a small handful of firms and came in the form of Later Stage venture capital. While 2020 and 2021 did see some dampened company formation and merger and acquisition activity, the same was not true for investment more broadly. This analysis does not cover the last third of 2021, so by the end of the year there could be a completely different narrative surrounding Clean Tech. Nevertheless, the trends thus far point to a year that will see California setting records in many categories both in terms of number of deals and total investment, despite the impact that COVID-19 has undoubtedly had—especially on the sector’s fringes.

Clean Technology Investment in California

As of August 30, 2021, there has been over five times the amount of investment in Clean Technology compared to the entirety of 2017.
However, a sizeable portion of this money has gone to a small group of companies that received massive investments: The two largest deals in 2021 (totaling $5.15 billion) were completed by Rivian, a personal electric vehicle manufacturer. Generate, a green investment firm, secured the third-largest deal in 2021 ($2 billion). These three deals accounted for 63 percent of the total Clean Tech investment in 2021. This speaks to the ‘lumpiness’ of this data—just a few decisions can swing trends in a given year.

Investment has exceeded 2020 levels in every category though August 30, 2021, except for Food Systems (which includes companies working on greener food systems), which is, as of this report’s publishing, 40 percent lower than the 2020 total.
Land Use, Carbon Tech, and Industry & Materials have more than doubled their 2020 total thus far in 2021, and “Transportation and Mobility” has recovered from its 2020 drop-off.

Data

California Clean Technology Mergers and Acquisitions, Entrances and Exits

In 2020 and 2021, the landscape of California firms on the fringes (i.e., firms on the verge of being founded, merging, being bought out, or going out of business) of the Clean Tech industry shifted dramatically. Fewer companies were founded in 2020 and 2021 combined (10) than any year since 2011 (7).
Five companies went out of business in the past two years, two in 2020 and three in 2021. The COVID-19 pandemic has been a disruptive force for many businesses, so it is possible that it played a part in this downturn.

There were, however, eleven “Mergers/Acquisitions” in 2021, which was a new high for California.

Data

Figure 61. Clean Technology Entrances/Exits Over Time

California Clean Technology Investment by Stage and Segment

There were more deals completed in the Later Stage VC category than in any other—marking the first time that this has happened since at least 2010.
Early Stage VC has been shrinking in the past four years, going from 57 percent of the total California Clean Tech investment in 2018 ($3.49 billion) to just 4 percent in 2021 ($519 million).