Report Shows the Cleantech Landscape is Thriving, But There’s More Work to Be Done

By Jolina Marie Dimen

The Wells Fargo Innovation Incubator (IN2) recently released a paper on the current state of the cleantech landscape, “Perspectives from the IN2 Network: State of the Cleantech Landscape.” Drawing from interviews with partners and data from more than 1,360 startups nationwide in 2020 compiled in collaboration with the  IN2 Channel Partner network, the paper discusses trends in geography and the influence of supporting organizations and institutions on the cleantech landscape. It also includes a gap analysis from the perspectives of both network partners and companies, as well as recommendations for improvement.

The Landscape
One major theme among those interviewed for the paper is a growing concern that the landscape has a shortage of early-stage startups, but the research shows this perception is incorrect. Among the 80% of companies founded in the past 20 years and still in business, 29% are at bench scale stage, 28% are at prototype stage, and 43% are commercially ready, demonstrating that there is a healthy range of startups across the U.S. The highest proportion of early-stage startups are related to energy storage and the highest proportion of late-stage startups are related to energy efficiency. Notably, Massachusetts has a more even distribution in both company stage and technology type than many other states. Among the startups that National Renewable Energy Laboratory (NREL) supported from 2017 to 2019, California, Colorado, Massachusetts, New York, and Virginia had the highest number of companies.

Support, Partnerships, and Funding
According to the paper, an important driver in the long-term success of companies is support from other institutions and organizations, which provide access to funding and other network partners. But cleantech and hardware technology companies are often considered high-risk by potential partners because of the expected time it takes them to  reach commercialization and profitability. Potential partners often need evidence of credibility and competence from a startup before they are willing to team up, meaning startups often struggle to gain access to pilots and demonstrations that require partnerships with utilities and large corporations. The paper proposes a solution for startups seeking to gain third-party validation that paves the way for partnerships with utilities and corporations, suggesting that startups work with national laboratories such as NREL and lab-embedded entrepreneurship programs that can help incubate companies.

The ecosystem of partners can also help entrepreneurs build the business knowledge necessary for ventures to succeed. Startups need more than just a novel technology or service — entrepreneurs must also have business acumen and strategy to successfully fundraise, write grant proposals, and build and collaborate with their team. Both network partners and companies identified a lack of business knowledge as a gap, and IN2 suggests accelerators and incubators should provide more training on these topics.

Diversity, Equity and Inclusion
Diversity is another area the cleantech sector must address, according to IN2. Gender and ethnic diversity has been proven to benefit companies, and research shows that companies with more diversity are also more likely to generate above-industry-average returns. According to the research, a diverse team has at least one member who is female, a person of color, differently abled, or a veteran. In a survey of 140 cleantech companies, 78% have a majority of white employees and 93% have a majority of male employees. To address the lack of diversity and help break down historic barriers to entry for people of color, women, and other underrepresented groups, the paper recommends implementing robust STEM education and entrepreneurship programs across the ecosystem and supporting diversity in early-stage venture capital firms.

At NECEC, we are seeking new ways to address the lack of diversity in the cleantech landscape. In 2020, NECEC’s Cleantech Open Northeast had one of its most diverse cohorts yet, with the majority of the startups in last year’s cohort (63%) led by women, women of color, and people of color. We hope to continue that trend by partnering with groups like The National Society of Black Engineers, The American Association of Blacks in Energy and Browning the Greenspace to help us recruit and attract a more diverse cohort of startups, mentors, investors, volunteers, and sponsors to the accelerator in 2021. In addition, we will include training for the 2021 Cleantech Open Northeast cohort on the value of building a diverse team and on best practices to build a culture of diversity, equity, and inclusion. This is just one step in the organization’s larger commitment to diversity, equity, and inclusion and to accelerating a prosperous clean energy future that benefits all communities.

Measuring Environmental Impact
The paper also examines the challenges that cleantech startups face in measuring their own environmental impact. According to IN2, the lack of a measurement standard by which startups can calculate their greenhouse gas emissions and other environmental factors is one barrier, but many organizations are developing their own methodologies.

In collaboration with NYSERDA, the New York State Pollution Prevention Institute, Clean Energy Ventures and others, Cleantech Open Northeast is developing programming in 2021 to enable our startups to calculate their greenhouse gas emissions reduction potential. This will help them build a measurement mindset into their companies as they grow.

Hope for the Future
The IN2 report provided a thorough assessment of the cleantech landscape, showing that there is a healthy distribution of startups and partners in the U.S. But there is also room for improvement: network partners need to work together to streamline the pipeline and support startups, companies should partner with national laboratories and universities, participate in multiple accelerator and incubator programs, and build diverse teams.The cleantech landscape is doing well, but there is more work to be done to support a robust ecosystem.

Jolina Marie Dimen is a Development Intern for NECEC’s Cleantech Open Northeast and a student at Wellesley College.