By 2004, VC has slightly recovered with 8,840 deals at a volume of $45.5 billion. Nearly 3% of the total deal volume was spent on 277 cleantech deals, totaling $1.3 billion. Media attention to cleantech articles rises to 3.4 %. In 2007, when cleantech had its peak year the global VC industry invested $ 81.3 billion in 9,525 deals and within the cleantech category it invested $ 12.4 billion in 561 deals which is 15.3% of the whole market. Media attention towards cleantech was also high at 10%.
In 2005 the cleantech category was growing immensely in media attention. The relative importance for all cleantech associated articles jumps from 2% in 2004 to 9% in 2005. Mainstream media incorporated the terminology relatively late. From the mid-1990's more specialized media reported on the category frequently. Therefore, the category had reached some legitimacy even outside of the VC industry by 2005 (O’Rourke, 2009). In the institutionlization stage the relative importance of recycling disappears. Media attention drops to 11% in 2005 followed by a steady decline down to 2 to 4% until the end time period. This drastic shift away from technologies focused on addressing climate change to other technology categories shows the closeness of the category to market driven businesses as discussed by Caprotti (2012). Wind, Solar and other Renewable Energy Sources reached their maximal importance during the institutionalization stage. Wind peaks at 9% from 2004 to 2006, solar fluctuates between 14 and 20%, and other renewables stay at 17 to 19%. Additionally there is a brief increase in attention towards biofuels, which appear more heavily in 2005 with 9% of the attention and rises to 14% in 2007.
The cleantech VC category is firmly established in the institutionalization stage. With the burst of the Dotcom bubble, mainstream VC investors sought new investment areas. Combined with the attacks on the World Trade Center in New York City, there was increased interest in reducing dependence on oil-based technologies. Another major turning point for cleantech investment was California’s Green Wave initiative. Beginning in early 2004 the treasurer of California mandated CalPERS and CalSTRS to invest into environmental conscious assets. The first $500 million tranche was earmarked for PE/VC investments to develop clean technologies. This public effort spearheaded the widespread acceptance of the category and influenced many of the developments of the category. There was a clear shift towards cleantech for technological revolution.
These factors motivated VC investors to consider industries which, by mid-2004 were labeled as cleantech, as a suitable investment field. As a result, cleantech VC investments category expanded rapidly. With dedicated funds, mandates arise from pension funds or corporate investors and big multi fund investors seeking to raise new fund vehicles targeted at the cleantech market. KPCB for example launched their Green Growth fund in early 2008. The support for cleantech is changing drastically as well. For example, in 2004 Germany’s “Renewable Energy Sources Act” drove installations of RE technologies. The solar energy market grew immensely during this time, even though it has not been economically viable without public support. This rise in demand led to more and more company formations in the RE and solar fields worldwide.
Relevance as an investment category creates a VC and entrepreneurial network coevolution process. The popularity of cleantech across investment participants, from institutional investors over VC funds to start-ups fosters a growing market. A general understanding of industry participants and technologies exists (Caprotti, 2012; O’Rourke, 2009). Market information/ support providers like the Cleantech Group, Clean Edge, and New Energy Finance gain importance and provide databases, reports and organize conferences and fairs to promote the industry (see O’Rourke, 2009 for a detailed analysis on cleantech service providers). High growth attracts general VCs without prior experience in asset heavy industries like cleantech start entering the category and results in new and less skilled VC managers raising funds. The abundance of capital spread across companies, and leads to increased competition, high valuations and skepticism about the long term viability of funded companies. This later stage introduces overshooting (Lerner, 2002).