Turning Green into Gold - Cleantech Investing in Australia

Turning Green into Gold is the first-ever comprehensive summary of the trends in venture capital investing in Australian cleantech companies for the period analysed. It presents data on cleantech IPOs and Buyouts of Australian companies between 1999 and 2006, and Australian cleantech Mergers and Acquisitions activity between 2005-2006. Venture capital investment data covers the period 1999 - Q1 2007.

Australia has a long history of technological invention, a dynamic economy and an energetic engagement with environmental issues. Cleantech investing brings together technology, environmental and financial performance – seems to be a natural fit. Embracing knowledge based products and services that optimize the use of natural resources while reducing ecological impact and adding economic value through lowered costs or improved profitability.

Australian cleantech companies are being bolstered by ongoing venture capital investment, while IPOs, Buyouts and M&A activity paint a relatively optimistic picture for exiting those investments further down the track. Investment in the nascent Australian cleantech industry has grown, but not at the same scale or speed as cleantech investing in North America and Europe where it has boomed.

However with cleantech coming into the limelight for institutional investors, policy makers and the general public, venture capital investments are expected to pick up quickly in Australia in the coming two to three years. Australian cleantech investing is at the same stage as North America some three years ago, that is, poised for rapid growth and the harvesting of returns for early investors.

Key drivers behind the investment activity specific to the region include:

  • Technology readiness and capability
  • Environmental pressures, including climate change and drought
  • Government policy and programmes aimed to stimulate different cleantech segments and venture capital investing
  • Consumer/end-market demand for environmentally friendly & more efficient products
  • The availability of capital.

The study of investments made between 1999-Q1 2007 found that:

  • A total of $539m ($360m US) was invested into some 75 companies by VCs. This capital was dispersed in a total of 174 deals.
  • Cleantech companies comprised an average of 21 venture capital deals per annum worth on average $65m ($43m US) per annum; which translates to a quarterly average of 5-6 deals and $16m ($11m US).
  • Cleantech investment accounted for an average of 3% of total Australian VC investments by amount and 4% of the total number of VC deals per year (total VC as measured by the Australian Bureau of Statistics, 2007). In the fiscal year of 2002 (i.e. Q3 2001- Q2 2002) Cleantech reached 6% of all VC invested in Australia by amount, and 7% of the number of deals.

The bulk of the investors in cleantech were predominantly generalist funds, though several specialist venture capital funds were the most active in terms of number of investments made. There have been recent closings of several specialist cleantech funds in the region, as well as interest coming from European and North American cleantech investors where the category has much stronger attention and interest. Australia is currently seen as fertile ground for foreign investors in cleantech.

Excerpts from Executive Summary of Turning Green into Gold - Australian Cleantech Venture Capital and Private Equity Investments, co-authored by Cleantech Ventures and published by the Cleantech Network. The full report is available for download.

Source: Cleantech Venture Network .

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