A new study released today by Sustainable Development Technology Canada (SDTC) and Cycle Capital Management, in collaboration with Écotech Québec, sheds light on some of the struggles encountered by Canada’s cleantech sector.
The study entitled, Forging a Cleaner and More Innovative Economy in Canada, examines the current challenges of the financing chain to foster innovation in Canada’s cleantech sector.
The report focuses on the key segments of the financing chain for innovative cleantech companies: deal flow generation initiated by patenting for commercialization purposes; seed and early stage financing and scale up financing. The authors analyze Canada’s strengths and weaknesses for each of these segments.
While Canada demonstrates relative strengths in early research and pre-commercial efforts, the number of clean technology academic patents in Canada is only 7 per cent of what it is in the U.S., which is less than expected on a per capita basis. For industrial patents in this space, Canada represents 9 per cent of the U.S., which is nearly at par relative to the size of the economies. However, in most sectors, the majority of the top 15 assignees are non-Canadian multinationals. The Canada/U.S. ratio is 13 per cent for water and wastewater patents.
In terms of venture capital (VC), the findings show that, relative to the size of the economies, the number of VC rounds in Canada is comparable to that in the U.S. (9.8 per cent), but the relative size of investment per round is 56 per cent, and, consequently, the total investment is about half of what it should be on a per capita basis (5.5 per cent). The gap in round sizes further widens for late stage investments, at 45 per cent in relative size of investment per round.
The authors examined the sector’s access to domestic venture capital, venture debt and grants. They point to a number of areas for urgent improvement where Canada lags other global leaders.
Gilles Duruflé, an independent consultant advising venture capital and private equity funds, institutional investors and governments, in and Louis Carbonneau, a recognized expert in intellectual property, conducted their analysis based of databases on scientific publications (Scopus), patents (Orbit) and venture capital investment and investors activity (Pitchbook, Cleantech Group). The report also uses proprietary information from Cycle’s and SDTC’s deal flow.
The authors conducted an in-depth survey of the specialized cleantech funds that exist in Canada. It showed that only a small number of specialized cleantech funds exist in Canada and their size is relatively limited, well below $300 million with the exception of XPV Water which specializes in technologies related to water treatment.
The full report can be accessed on SDTC’s website.