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The Massachusetts clean-technology industry has become less competitive with its larger counterpart in California at getting venture capital deals since 2008, according to a Boston Business Journal review.
Massachusetts has long been a distant second to California in terms of venture capital deals and dollar amounts for cleantech. And while the Bay State’s business and government leaders have no illusions about overtaking their West Coast competitor, they have at least hoped to shrink the gap between the two states.
Yet that gap appears to be widening, at least when it comes to the number of cleantech VC deals, according to figures from the Cleantech Group in California.
In 2008, California saw four times as many cleantech VC deals as Massachusetts (134 to 36), according to the figures. The share going to California grew in 2009 and has expanded further in the first half of this year, when California saw more than five times as many deals as the Bay State (92 to 18).
Observers generally believe the number of VC deals, rather than the dollar amounts, are a more accurate reflection of the health of a state’s cleantech industry, since massive deals tend to skew the data. Still, the dollar figures speak volumes: California has raised more cleantech VC in the first half of this year alone — $2 billion — than Massachusetts has raised since 2005 ($1.8 billion).
Yet both California and Massachusetts have clear leadership roles in the U.S. cleantech industry, ranking consistently in the top three on every state-by-state metric, said Ron Pernick, managing director of California-based research firm Clean Edge Inc., which issued a report on the Massachusetts cleantech industry in April.
In fact, Massachusetts does disproportionately well for its size when it comes to cleantech VC deals: Per capita, the Bay State had 16 percent more deals than California between 2007 and 2009, according to Pernick.
Areas where Massachusetts is most competitive, according to the Clean Edge report, are energy efficiency, solar and energy storage.
Yet California has had some major advantages, including a greater depth of entrepreneurial talent ready to take cleantech firms to the next level, said Chuck McDermott, general partner at the Boston office of RockPort Capital Partners, which also has an office in Menlo Park, Calif.
“There was a bench of ‘athletes’ there that had done these types of things two, three or four times already,” he said. “We had somewhat less of that here in New England.”
Efforts by the New England Clean Energy Council — which started a fellowship program last year for entrepreneurs seeking to get into cleantech — have helped to address the issue, McDermott said. But other issues remain in Massachusetts, including a lack of success at commercializing innovative research, said Rob Day, partner at Black Coral Capital in Boston.
Research institutions in California have been more geared toward commercializable technology, whereas many research centers in Massachusetts “have historically focused on research for research’s sake,” Day said.
But that’s also starting to change. Two models for this, Day said, are the Deshpande Center for Technological Innovation at MIT, which seeks to connect MIT researchers with the business community, and the TechBridge Program of the Fraunhofer Center for Sustainable Energy Systems in Cambridge.
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