Market researchers say venture capital has been flowing rapidly into companies which are developing environmentally friendly technologies, which either provide superior performance at lower cost or reduce the amount of resources needed to maintain productivity levels.
The sector, which has been dubbed 'cleantech', encompasses a wide variety of technology spaces, including energy, water, agriculture, transport and manufacturing solutions which create less waste or toxicity.
According to research conducted by Dow Jones VentureOne and Ernst & Young, US$1.28 billion was invested in 'cleantech' companies last year in China, Europe, Israel and the United States, almost double the level invested the year before.
Along with the growth in the levels of investment, the size of financing deals bestowed on cleantech companies had also grown. The research study stated that the median size of a cleantech financing round last year was US$6 million globally and US$7.5 million for companies headquartered in the US.
'In the past 12 months we have seen an increasing number of venture capital funds start to invest in emerging clean technology companies,' said Gil Forer, global director of Ernst & Young's Venture Capital Advisory Group in a recent press release.
'Although we expect the number of investors in this sector to grow, both in terms of sector-focused funds and mainstream funds, the challenge for venture capitalists will be to understand which clean technology segments fit the venture capital model and where venture capital involvement adds the most value. We also believe that China and India will play a major role in building the innovation pipeline in clean technology.'