China’s economy is booming, why shouldn’t the country’s cleantech sector follow suit. According to a new report by The Cleantech Group, cleantech venture funding in China is on the up and up and will surpass $720 million in 2008.
The China Cleantech Venture Capital Report (which you can check out for free here) provides a detailed look at the growth of cleantech investment in China. It’s already the third largest venture capital category in China (behind information technology and communications), and cleantech venture investments in 2006 totaled $420 million. That’s up a whopping 147 percent increase from the $170 million invested in 2005.
Most notably, the report expects the growth trend to last, pointing out that 2007 is “on track to surpass 2006” for cleantech venture investment. After all, the first quarter of 2007 saw $154 million for six deals, compared to the two deals totaling $11 million in Q1 2006.
Still, China’s cleantech VC investment is small compared to the U.S. and Europe. While China took in $420 million in cleantech investment 2006, Europe snagged $700 million and the U.S. took in $2.9 billion total in 2006 VC backing. China’s average deal size was $16.2 million, which wasn’t as large as the $19.9 million average deal in the U.S., but did surpass Europe, where the average deal size was only $5.6 million.
The majority (17) of the 32 deals made from Q1 2006 to Q1 2007 were for energy generation companies. Of that total, 13 of the deals were in solar, two were in wind power and two were for biomass startups. Water and wastewater, which “shows potential as the next emerging segment in China,” notes the report, was the second most popular area to back, with 6 deals.
The report points to how influential policy is when it comes to interest in China’s cleantech industries and says China’s Renewable Energy Law “attracted a flood of venture capital investment” in 2006. And also sites more policy initiatives, specifically the 11th 5-Year Plan, that will continue to fuel China’s cleantech sector.
For additional key findings, including an interesting VC-funding breakdown by geographic area of China, as well as a profile of the eight 2006 IPO’s from Chinese VC-backed energy and water startups, check out the report.