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Cleantech startup? Try one of these countries

Cleantech startup? Try one of these countries

There were no surprises in the release of Cleantech Group and WWF's clean energy index this week.

Denmark, followed by Israel, Sweden, Finland and the US, provides the best conditions today for cleantech startups, with companies in the Asia Pacific region following when it comes to commercial success, the first Global Cleantech Innovation Index shows.

Coming Clean: The Global Cleantech Innovation Index 2012evaluated 38 countries on 15 indicators related to the creation and commercialisation of cleantech startups, generating an index measuring each one’s potential relative to economic size, to produce entrepreneurial companies and commercialise clean technology innovations over the next 10 years.

The top four countries all have small economies and while they are the source of more than their fair share of innovation, they have less ability to scale up companies. And as home to three of the four, Scandinavia emerged as a clear regional winner.

Denmark leads in “evidence of commercialised cleantech innovation” and came out on top for value-added in cleantech manufacturing, which represents a massive 3.14 percent (pi!) of GDP for the country.

Meanwhile, Israel excels on the emerging cleantech front with the most Global Cleantech 100 companies per GDP and the second-highest concentration of cleantech VC activity - around 0.03 percent GDP over the last two years.

The index shows Canada and Ireland scored surprisingly well given their lack of reputation for cleantech innovation; both countries scored in the top 10 for general innovation drivers and evidence of commercialised cleantech innovation, if relatively less well on the other factors. They have active later-stage cleantech companies that are contributing to the commercialisation of clean technologies, though less to underlying innovation.

In absolute terms, without factoring in economic size, the US leads in many measures of cleantech innovation: the country has the greatest public cleantech R&D budget, the greatest number of cleantech startups and investors, as well as the most venture capital, private equity, and M&A deals in cleantech. 

However, the Asia Pacific region performs well when it comes to scaling up entrepreneurial cleantech companies to wider commercial success and revenue creation.

China and India may not have dominated this year but they stand out as having potential to rise through the ranks in the coming years. They are already strong centres for the production of cleantech products and have increasingly supportive governments, large sums of private money ready to be invested, and massive domestic markets, the study says.

“The global macro-economic landscape is shifting; fostering entrepreneurial start-ups and growth companies with clean technology solutions will be an increasingly important part of countries’ competitiveness on the world stage,” said Richard Youngman, Cleantech Group managing director Europe & Asia.

The index argues that governments can influence cleantech innovation in many ways: R&D spending; policies that help technologies bridge the cost gap to achieve competitiveness; and policies that influence market economics to facilitate wide adoption. Governments can also
ensure that necessary infrastructure is in place for cleantech, which is especially important for the development of renewable energy generation technologies requiring effective governance around grid capacity and regulatory frameworks

Beyond government activity, it points out that availability of private finance is vital to fuel the growth of innovative cleantech companies and to bring technologies from the laboratory to the market.

Private finance tends to be more strategically targeted than many blanket government incentives, filtering for the most disruptive technologies and backing them with investor experience and networks.

Indeed, some have criticised public subsidies for artificially shielding technologies from market forces. Prominent cleantech investor Khosla Ventures advises companies that “subsidies bring cash flow forward but seldom create your market or build your business. In order to succeed, your product must be price competitive without subsidies.”