Market assessment of the UK venture capital market for early-stage clean tech companies
Market assessment of the UK venture capital market for early-stage clean tech companies.
Documents
Details
This market assessment report examines the state of the UK venture capital (VC) market for early-stage clean tech companies.
London Economics (LE) were commissioned by Department for Business, Energy and Industrial Strategy (BEIS) to look at early-stage investment (at seed and VC stages) in UK clean tech companies in 2021 and what changes have occurred over the previous 5-10 years. The potential role of clean tech companies to reduce greenhouse gas emissions and to stimulate economic activity is significant and therefore this assessment was essential in gaining an understanding of what state the market is in and factors facilitating growth in the future.
The study contains the following:
- an assessment of the current (2021) state of early-stage investment in clean tech in the UK
- a comparison of the UK clean tech sector with other high-income countries (Germany, France, Sweden, and the US)
- a comparison of recent trends in the UK clean tech, biotech, and artificial intelligence sectors with other high-income countries (Germany, France, Sweden, and the US)
A summary of the key findings in the report:
- early-stage investment in UK clean tech companies have risen from approximately £163 million in 2017 to approximately £420 million in 2021, (an overall increase of 158%)
- since 2017, total investment in the artificial intelligence and biotech sectors rose by 112% and 49% respectively
- much of the growth seen for clean tech occurred between 2020 and 2021, and it is not yet clear whether this is indicative of a longer-term trend; over the period 2017 to 2020 the number of investment rounds and the overall amount invested into AI and biotech grew faster than the amount invested in clean tech. In 2021 the overall volume of early-stage investment in UK clean tech companies was still considerably smaller than the volume of early-stage investment in AI and biotech companies (£420 million compared with £710 million and £615 million respectively)
- the UK showed larger increases in terms of total value of seed rounds and of series A rounds in clean tech companies as a percentage of GDP since 2017 when compared to other high-income countries (Germany, France, and the US). However, Sweden had a higher increase than the UK
Some challenges in early-stage clean tech companies in the UK identified were
- access to funding (particularly for companies developing hardware innovations)
- shortage of technical skills (particularly in STEM skills)
- complex regulatory environments
Overall, if the current trend of increased funding in clean tech in the UK continues, it will produce a significant number of success stories which will in turn encourage further funding in clean tech innovations in the UK. However, achieving this will require conditions (economic and governmental) that continue to promote investment in clean tech in the UK.