Clean Tech Cluster Analysis Update for the Puget Sound Region

Transcription

1 Clean Tech Cluster Analysis Update for the Puget Sound Region November 2009 Puget Sound Regional Council PSRC Clean Tech Cluster Analysis Update for the Puget Sound Region 01

2 Puget Sound Regional Council PSRC The Puget Sound Regional Council coordinates regional transportation, economic and growth planning for the central Puget Sound region of Washington. PSRC serves as a forum for cities, counties, ports, transit agencies, tribes and state government to work together on important regional issues, and partners with business, civic, environmental organizations, and citizens to identify and advocate regional priorities. The Prosperity Partnership is a coalition of over 300 government, business, education, labor and community organizations from King, Kitsap, Pierce, and Snohomish counties working toward a common goal of long-term economic prosperity for the central Puget Sound region. The strategy takes a two-pronged approach: cluster initiatives, to meet the needs of strategic clusters, and foundation initiatives, to strengthen the general underpinnings of the entire economy. Helping Communities and Organizations Create Their Best Futures Founded in 1988, BERK is an interdisciplinary strategy and analysis firm providing integrated, creative and analytically rigorous approaches to complex policy and planning decisions. Their team of strategic planners, policy and financial analysts, economists, cartographers, information designers and facilitators work together to bring new ideas, clarity, and robust frameworks to the development of analytically-based and actionoriented plans. Clean Tech Cluster Analysis Update for the Puget Sound Region NOVEMBER 2009 This report was sponsored by the Workforce Development Council of Seattle-King County and funded by a grant from the U.S. Small Business Administration (SBA). SBA s funding should not be construed as an endorsement of any products, opinions, or services. All SBA-funded projects are extended to the public on a nondiscriminatory basis. Additional copies of this report may be obtained by contacting: Puget Sound Regional Council Information Center 1011 Western Avenue, Suite 500 Seattle, Washington fax info@psrc.org Sign language and communication material in alternative formats can be arranged given sufficient notice by calling TDD/TTY: PSRC fully complies with Title VI of the Civil Rights Act of 1964 and related statutes and regulations in all programs and activities. For more information, or to obtain a Title VI Complaint Form, see or call Clean Tech Cluster Analysis Update for the Puget Sound Region

3 Table of Contents Introduction...1 Summary Findings... 2 I. What is Clean Tech?...5 Introduction... 5 Definitional Framework... 5 II. Economic Analysis...9 Methodology... 9 Employment...15 Business...18 Workforce...18 III. Venture Capital Analysis...21 Introduction...21 VC Investments and Deals...22 VC by Clean Tech Category...22 VC by Financing Stage...24 VC by State...25 VC by Investors and Recipients...29 The Future of VC Investment in Clean Tech...35 IV. Puget Sound s Clean Tech Ecosystem...37 Introduction...37 Clean Tech Ecosystem Strategic Map...37 Policy Environment...39 Regional and Local Actions...41 Conclusion...47 Bibliography Clean Tech Cluster Analysis Update for the Puget Sound Region i

4 List of Tables Table 1. NAICS Code Components of the Puget Sound Region Clean Tech Cluster... 9 Table 2. Clean Tech Employment by County and Industry: Puget Sound Region, Table 3. Projected Clean Tech Employment Growth by Industry: Puget Sound Region, Table 4. Projected Employment Growth Rates of Industries that Include Clean Tech: Puget Sound, Washington and U.S., Average Annual Growth Rate, Table 5. Selected Clean Tech Cluster Occupations: Puget Sound Region, Table 6. The Cleantech Group s Clean Tech Categories Table 7. State Comparisons of Clean Tech VC Dollars, 1999 Q Table 8. State Comparisons of Clean Tech VC Deals, 1999 Q Table 9. Top Clean Tech Firms in the Puget Sound Receiving Venture Capital, 2001 Q Table 10. Unique Investors Making Venture Capital Investments in Puget Sound Region Clean Tech Firms, 1999 Q Table 11. Top Ten Venture Capital Investors in Puget Sound Region Clean Tech Firms, 1999 Q Table 12. Top VC Investors in Washington (2009) and Number of Deals with Puget Sound Clean Tech Firms, Q Q Table 13. ARRA Clean Tech Highlights Table 14. Washington s Renewable Energy Tax Incentives, as of April Table 15. Part 1: ARRA Funded Clean Tech-Related Projects and Programs in the Puget Sound Region, as of November 2009 Recipients A to H Table 16. Part 2: ARRA Funded Clean Tech-Related Projects and Programs in the Puget Sound Region, as of November 2009 Recipients I to S Table 17. Part 3: ARRA Funded Clean Tech-Related Projects and Programs in the Puget Sound Region, as of November 2009 Recipients S to W List of Figures Figure 1. Clean Tech Definitional Framework Matrix... 8 Figure 2. Clean Tech Employment Distribution by Industry: Puget Sound Region, Figure 3. Annual Average Growth Rates of Industries that Include Clean Tech: Puget Sound Region, Figure 4. Clean Tech Cluster Bubble Chart: Puget Sound Region, Employment Size, Concentration, and Projected Growth Rate from Figure 5. Clean Tech Business Establishments: King, Kitsap, Pierce and Snohomish Counties, Figure 6. Clean Tech Business Establishments by Industry: Puget Sound Region, Figure 7. Clean Tech Employment by Size of Firm: Puget Sound Region, Figure 8. Map of Select Clean Tech Employment: Puget Sound Region, Figure 9. VC Investment and Deals in Clean Tech Companies: WA and Puget Sound Region, 1999 Q Figure 10. VC Deals by Clean Tech Category: Puget Sound Region, 1999 Q Figure 11. Clean Tech VC Deals by Financing Stage: Puget Sound Region, 1999 Q Figure 12. State Comparisons of Clean Tech VC Dollars: 1999 Q Figure 13. Distribution of VC Deals by Clean Tech Category: WA and Peer States, 2005 Q Figure 14. Distribution of Clean Tech VC Deals by Financing Stage: WA and Peer States, 2005 Q Figure 15. The Clean Tech Cluster in the Puget Sound Region: An Interconnected Ecosystem ii Clean Tech Cluster Analysis Update for the Puget Sound Region

5 Introduction In 2004, the Puget Sound Regional Council/Prosperity Partnership published a comprehensive economic analysis of the central Puget Sound region and guided a stakeholder working group process to develop a regional economic strategy. The 2004 economic analysis identified 15 industry clusters in the region s economy. Clean tech (formerly environment and alternative energy ) was considered an emerging cluster one with potential for above average growth, and a key focus for the Puget Sound region. The initial analysis found environment and alternative energy to consist of six industry codes, totaling some 2,200 jobs in the region. However, as clean tech advanced as a more established and better understood set of industries, it was found that the initial analysis was not adequately characterizing the cluster. Moreover, there has been growing economic interest over the past several years of gaining a better understanding of this important sector. In order to support and grow this cluster, the Puget Sound region needs accurate and timely information about clean tech in terms of the size and scope of the cluster, the specific industries within the cluster in which our region has particular strengths, and its potential for growth and development. The purpose of this report is to provide a snapshot of the existing clean tech industry cluster in the central Puget Sound region. The report serves as a platform from which we can move into more comparative analysis, evaluation, and development of a strategy to maximize competitive advantage. The report includes an analysis of the clean tech economy and venture capital investment trends. It also provides a brief overview of the policy environment for clean tech and the regional clean tech assets and opportunities the region has to offer. It is intended for economic development and workforce development professionals, policymakers, industry executives and others interested in learning more about clean tech in the Puget Sound region. A brief outline of the document is provided here: Section I presents a definitional framework for understanding the industries and terminology of the clean tech cluster. Section II of the report provides an analysis of the clean tech economy in terms of employment, size of businesses, and clean tech occupations. The employment analysis also includes past and projected growth trends since 2002 and through Section III focuses on venture capital investment trends in clean tech in the Puget Sound region and Washington state, and comparisons across seven other states. The analysis also encompasses identification of key VC recipients and investors in the region, and provides a look ahead at potential future trends in clean tech VC investment. The final section provides a summary description of the existing ecosystem, policy environment and regional actions important to the clean tech cluster in the region. Clean Tech Cluster Analysis Update for the Puget Sound Region 1

6 Summary Findings The clean tech cluster in the Puget Sound region is composed of nine major industry categories: Energy Generation and Distribution, Residential Construction, Non-residential Construction, Manufacturing, Architectural Services, Engineering Services, Environmental Consulting, Research and Development, and Recycling and Waste. There are an estimated 22,900 clean tech jobs in the region, and that number is expected to grow by about 1.4% annually over the next 4 to 9 years an addition of roughly 3,900 new jobs by Two-thirds of all businesses and 75 percent of jobs in clean tech are in King County. From 2002 to 2008, clean tech had above average rates of employment growth. The average annual growth rate was 4.2%, compared to 1.9% for all employment. Future clean tech employment growth overall for the next 4 to 9 years is expected to be slower than the past period, as a result of the economic recession, but almost all industries within clean tech will continue to grow and at a rate slightly higher than the economy as a whole (1.4% compared to 1.0%). Green building is the largest clean tech sector in the Puget Sound region by employment size with an estimated 8,800 jobs. The green building industries include Architectural Services, Residential Construction and Non-residential Construction. Architectural Services is the most highly concentrated industry in the region 2 times more concentrated than the U.S. average. The two Construction industries combined employ an estimated 5,600 in the region. Residential Construction was the fastest growing industry category from 2002 to 2008, with 5.4% average annual employment growth. However, through 2017, it is expected to decline by -0.9% annually. Non-residential Construction is expected to grow 10% in total from 2008 to The Engineering Services industry is the largest employer in the region. There are approximately 300 Engineering businesses that employ a total of 6,900. Engineering Services is a diverse field that serves many of the other clean tech industry categories, from Clean Energy to Green Building to Environmental Remediation. Environmental Consulting Services is expected to be the fastest growing industry in the region, at 4.4% annually over the next 4 to 9 years. While all clean tech industries are projected to experience slowed growth through 2017, Environmental Consulting is expected to experience the least change, from 4.9% ( ) to 4.4% ( ). Manufacturing and Residential Construction are projected to decline, at -0.6% and -0.9% respectively. However, a deeper look shows that three of the industries within Manufacturing are estimated to experience employment increases through 2017: HVAC and commercial refrigeration equipment (2.4% annual growth), electrical equipment manufacturing (3.7% annual growth), and other electrical equipment and component manufacturing (2.6% annual growth). The largest number of jobs is projected to be added in Engineering (about 1,200 jobs), Environmental Consulting (about 800 jobs), and Architectural Services (about 600 jobs). 2 Clean Tech Cluster Analysis Update for the Puget Sound Region

7 Many clean tech occupations, such as construction managers, architects, civil engineers and carpenters, are within Green Building industries. Others suggest a concentration in environmental protection industries, such as environmental engineers, environmental scientists, and geoscientists. Occupations in the environmental fields are projected to grow faster than the other fields. Geoscientists, environmental scientists and environmental engineers have 10-year growth rates ranging from 22 to 25 percent. About half of identified clean tech occupations require a Bachelor s degree or higher and have median wages ranging from approximately $56,000 to $79,000. Electrical occupations earn closer to middle wages at around $50K, but the projected growth rates are relatively slow at 3.6 to 7.2 percent from 2006 to Occupations with median wages in the mid $20Ks to mid $30Ks tend to be in the construction and recycling and waste fields. Over the past ten years, there have been 64 venture capital deals with clean tech companies in the Puget Sound region, totaling $477 million. Energy-related clean tech has received more than half of all clean tech VC funding in the region since 1999, with a total of 38 deals. Washington ranks fifth in the nation in total VC investments and fourth in the number of deals over the past ten years. The states of California, Massachusetts, and Texas have seen considerably more VC activity for clean tech in those same time periods. The majority of all Puget Sound region clean tech VC deals over the past ten years were in the first round and follow-on stages of companies development. Washington had fewer seed financing deals (at just 1.7% of its total deals) than comparison states (8%). The majority of the top ten investors in Puget Sound region clean tech firms are located on the West Coast. Of those, California investors compose more than 60% of them. Seattle-based investors were involved in a quarter of these deals. Clean Tech Cluster Analysis Update for the Puget Sound Region 3

8 4 Clean Tech Cluster Analysis Update for the Puget Sound Region

9 I. What is Clean Tech? Introduction This section provides a definitional framework for understanding the industries and terminology of the clean tech cluster. It should be noted that the analyses in the following sections do not directly match the framework presented here due to variations in how industry data is collected and organized. The definitional framework is provided here only as a tool to help readers new to clean tech understand the components and the terminology used in the field. According to Clean Edge, a leading clean tech market research firm, clean tech refers to a diverse range of products, services, and processes that harness renewable materials and energy sources, dramatically reduce the use of natural resources, and significantly cut or eliminate emissions and wastes. This broad definition suggests that clean tech has the potential to be embodied in almost any industry. While there is agreement that all industries could be operated with less impact on the environment, experts say clean tech-specific industries have a primary focus on doing more good versus just less bad. Understandably, there is a wide gray area between these two distinctions, which is what makes the clean tech cluster so difficult to quantify. Clean tech is a dynamic, evolving set of industries. As more industries become cleaner the distinguishing properties will continue to shift and there will be a need to refine and update how clean tech is quantified. Clean Tech is Green, But Not All Green is Clean Tech However, an important distinction should be made between clean tech and green, and between jobs and industries. The definition for clean tech industries differs from the definition for green jobs. Clean tech industries have a strong focus on reducing environmental impact or addressing environmental issues as part of their core functions. Green jobs can exist in any industry or company that attempts to conduct their operations in a more sustainable or environmentally-friendly manner. In most instances, the difference is clear. For example, Starbucks has corporate goals for operating its business more efficiently and sustainably. Its sustainability manager has a green job, but their industry is coffee. A biofuels company, on the other hand, has a specific focus on providing a product that increases the availability of a renewable source of energy. Not every industry, however, can be neatly filed into either clean tech or green. For example, building-related industries, such as architecture, construction, and engineering, have design, construction, operation and maintenance of buildings and facilities as their main focus. However, due to the large impact buildings have on the usage of energy, water and other resources, green building has become an important segment of clean tech. Definitional Framework The leading, or most common, definitions for clean tech come from three of the leading clean tech industry organizations in the nation: Clean Edge, founded in 2000, is a research and publishing firm devoted to the clean tech sector. Their products and services include market research reports, benchmark stock indexes, events, and online services. Clean Tech Cluster Analysis Update for the Puget Sound Region 5

10 Cleantech Group pioneered clean technology as an investment category in They are credited with originating the term cleantech, and own it as a registered trademark. 1 Greentech Media, founded in 2007, is an online-media company focused on providing news, in-depth market research, and industry events. Each of those three organizations, as well as several others that were looked at, have slightly different methods for segmenting the clean tech industry into its subsectors. Multiple clean tech categorizations were compared in order to derive a clean tech definitional framework for this report. The framework developed for the clean tech cluster has six major components: 1. Clean Energy 2. Green Building 3. Smart Grid 4. Transportation Vehicles and Alternative Fuels 5. Advanced Materials and Environmental Products 6. Environmental Remediation and Pollution Prevention Each category is described in further detail below. It is important to note that due to the crosssectoral qualities of clean tech industries, considerable overlap can exist among the categories. Certain industries may fall within more than one category. The definitional framework suggested here is merely an organizing principle to help understand the cluster. The matrix in Figure 1 further clarifies the framework presented here. Major Clean Tech Categories Clean Energy The Clean Energy category includes industries focused on generating new energy sources that are clean and renewable. These include, but are not limited to, solar, wind, geothermal, hydro, wave, tidal and marine power, and biomass. For the purposes of this framework, clean energy primarily refers to electricity or power generation for use in the built environment, as opposed to transportation biofuels. Instead biofuels are included in the Transportation Vehicles and Alternative Fuels category along with alternative vehicles due to its primary purpose of fueling transportation vehicles, rather than buildings. Green Building Green Building refers to the design, engineering, construction and management of the built environment that incorporates passive solar, energy efficient products, energy management tools, sustainable materials, and other design and building techniques that make buildings more resource efficient to build, operate and maintain. The industries included in the Green Building category include Architecture and Design, Engineering, Construction and Installation, and Building or Facilities Management industries. Residential, industrial and commercial buildings are responsible for two-thirds of total energy used in the U.S. in both direct and embodied energy and contribute nearly the same share to carbon dioxide emissions as well. 2 Building water usage, and the types and sources of materials used to construct buildings is also of great concern. As a result, green building is a significant segment of the clean tech framework. 1 Although the investment community may use cleantech (no space) to refer to the investment category, the general public tends to use cleantech and clean tech (with a space) interchangeably. 2 Source: Energy Information Administration, Clean Tech Cluster Analysis Update for the Puget Sound Region

11 Smart Grid The term Smart Grid is used broadly here to refer to industries that provide smart energy products and technologies, or provide services that help manage or store energy in existing systems either at the distribution end or the user end. Examples of smart grid or smart energy-related industries are those involved in energy management in transmission and distribution, smart metering, power management or green IT software, fuel cells and other portable power supplies. Transportation Vehicles and Alternative Fuels The transportation sector emits the most energy-related carbon dioxide emissions in the U.S. (33% of total) and makes up 28% of total energy usage. 3 The Transportation Vehicles and Alternative Fuels category includes the design, manufacture and servicing of low or zero emissions transportation vehicles, such as hybrid cars, electric cars and vehicle electrification infrastructure and technologies. Advancements to designs in trucks and maritime vehicles are of particular concern to the Puget Sound region because of the importance of logistics and trade to our economy. This category also includes lower emitting and petroleum-free alternative fuels such as biodiesel, ethanol, compressed natural gas (CNG) and liquid natural gas (LNG). Advanced Materials and Environmental Products Advanced Materials and Environmental Products is a broad category that ranges from advanced basic materials to finished environmental products that improve upon conventional offerings by either using resources or techniques that are less resource intensive or result in less environmental impact in its usage. Composites, biobased polymers or building materials made of recycled products are examples of advanced materials that are a substitute for conventional materials. Solar water heaters, LED light bulbs or nontoxic paints are examples of products that result in smaller environmental impact during its usage compared to conventional products. Environmental Remediation and Pollution Prevention The Environmental Remediation and Pollution Prevention category is divided into two sub-areas: Waste Management and Recycling and Environmental Protection. These areas focus on remediating current environmental problems or preventing future pollution issues. Waste Management and Recycling includes waste management and treatment, recycling and composting industries. Environmental Protection refers to products or services that directly address air and water quality issues, water conservation or environmental remediation. It does not include traditional resource management activities, such as forestry or lands management. Some specific examples within this category include bioremediation, desalination and phytoremediation in the water quality area, gray water recycling systems for water conservation, and emissions monitoring and control technologies for air quality. Carbon sequestration technologies may also fall within this category. 3 Source: Ibid Clean Tech Cluster Analysis Update for the Puget Sound Region 7

12 FIGURE 1. Clean Tech Definitional Framework Matrix SEGMENTS CLEAN ENERGY Solar Wind Hydro Ocean Geothermal Bioenergy Other GREEN BUILDING Architecture and Design Engineering Construction and Installation Maintenance SMART GRID Energy Management Energy Transmission and Distribution Energy Storage KEY TERMS photovoltaic, thermal, concentrating solar power, building integrated photovoltaic (BIPV) (does not include installers) Existing large scale hydro, small hydro, micro hydro Wave, tidal, marine biomass, anaerobic digesters, waste to energy cogeneration, combined heat and power (CHP), hydrogen Sustainable or green architecture, sustainable or green design, resource efficient design, living buildings Civil, mechanical, structural engineering, consulting Construction management, project management, equipment installers, building code compliance Energy services, facilities management, building management, evaluation, energy auditing, energy modeling & analysis, retrofit Energy efficiency products and systems, smart grid, smart meters, energy management software Smart grid, vehicle to grid Fuel cells, advanced batteries, hybrid systems, portable power technologies (that store power that can be fed back into a grid) TRANSPORTATION VEHICLES AND ALTERNATIVE FUELS Vehicles and Infrastructure Fuels Electric vehicles, hybrid electric vehicles, plug-in hybrid electric vehicles, zero emissions vehicles, charging station infrastructure Biodiesel, algae biofuels, LNG, CNG, ethanol, hydrogen ADVANCED MATERIALS AND ENVIRONMENTAL PRODUCTS Advanced Materials Advanced Products and Systems Biobased materials, composites, biomimetics, non-toxic materials, nanomaterials, recycled materials Lighting (e.g. LEDs, CFLs), solar powered devices, solar heaters, radiant heating systems, tankless water heaters, fuel cells, advanced batteries, hybrid systems, portable power technologies ENVIRONMENTAL REMEDIATION AND POLLUTION PREVENTION Waste Management Recycling Air quality Water and Wastewater Treatment Water Conservation Environmental Remediation Source: Puget Sound Regional Council. Collection, solid waste treatment, hazardous waste treatment, composting Recovery, recycling Emissions monitoring, emissions control, air purification equipment, environmental compliance, carbon sequestration Bioremediation, desalination, filtration, purification, phytoremediation, smart fertilizers Gray water recycling, black water recycling, metering and control Wetlands restoration, soil remediation, brownfields reclamation EXAMPLES OF TYPES OF COMPANIES Utilities, manufacturers, waste to energy producers Architecture, engineering, construction, development, and energy services firms Energy software firms, transmission and distribution firms, fuel cell manufacturers, battery manufacturers Vehicle manufacturers, vehicle infrastructure technology firms Biofuels producers, feedstock growers Materials engineering firms, R&D organizations Equipment manufacturers, R&D organizations Waste management, recycling, & composting firms Environmental consulting and environmental engineering firms 8 Clean Tech Cluster Analysis Update for the Puget Sound Region

13 II. Economic Analysis Methodology The primary source of economic data used for this analysis is the Bureau of Labor Statistics (BLS) which tracks industries using the standardized North American Industrial Classification System (NAICS). Using the Definitional Framework presented in the previous section, the clean tech categories were matched to NAICS code categories as closely as possible. Since clean tech spans many traditional sector categories, not every clean tech segment can be neatly captured within a single NAICS code and there is also considerable overlap. To ensure TABLE 1. NAICS Code Components of the Puget Sound Region Clean Tech Cluster a conservative analysis, only the NAICS INDUSTRY DESCRIPTION PCT SHARE IN CLEAN TECH DEFINITION major NAICS industry codes ENERGY GENERATION AND DISTRIBUTION with clean tech employment Hydroelectric Power Generation 100% are included and, in some Electric Power Distribution 47% cases, only a percentage of the industry is counted. Table 1 lists Steam and Air-Conditioning Supply 100% all the clean tech NAICS in the RESIDENTIAL CONSTRUCTION region and the associated percentage share that is counted as part of the cluster New Single-Family Housing Construction New Multifamily Housing Construction New Housing Operative Builders 20% 15% 18% The percentages applied were largely informed by the statewide survey results in the 2008 Washington State Green Economy Jobs report by Washington State Employment Security Department (ESD). ESD s green jobs survey results were used to estimate what share of certain industries should be counted as part of the clean tech cluster. The percentage comes from the share of surveyed firms within the NAICS category that reported having green jobs. For example, 41% of Architectural Services firms (541310) who responded to the survey reported having green occupations at their company. 4 A more detailed description of the methodology is included in the Appendix. 4 See Appendix for a more detailed discussion of the methodology used to derive the list of clean tech NAICS components for the Puget Sound region Residential Remodelers 20% NON-RESIDENTIAL CONSTRUCTION Industrial Building Construction 13% Commercial and Institutional Building Construction 20% MANUFACTURING Air Purification Equipment Manufacturing 100% Semiconductor and Related Device Manufacturing 10% Other Electronic Component Manufacturing 11% Automatic Env l Control Mfg for Res, Comm, and Appliance Use 100% Power, Distribution, and Specialty Transformer Manufacturing 100% All Other Misc Electrical Equipment and Component Mfg 71% ARCHITECTURE Architectural Services 41% ENGINEERING Engineering Services 56% ENVIRONMENTAL CONSULTING Environmental Consulting Services 100% RESEARCH AND DEVELOPMENT Research and Dev in the Physical, Eng, and Life Sciences 22% RECYCLING AND WASTE Hazardous Waste Treatment and Disposal 100% Other Nonhazardous Waste Treatment and Disposal 100% Remediation Services 100% Materials Recovery Facilities 100% Source: Employment Security Department, 2008; Puget Sound Regional Council, Clean Tech Cluster Analysis Update for the Puget Sound Region 9

14 Caveats While NAICS is the best census-based source of economic data available for the nation, it is an imperfect coding system for an industry as diverse and dynamic as clean tech. Though the NAICS component list reflects a significant portion of the clean tech cluster, it should not be considered a comprehensive accounting of the cluster. Lack of survey responses or similar proxy measures of the clean tech share of some industries makes it difficult to estimate clean tech in other NAICS categories, and therefore may be excluded. In some cases a company may register itself by a different NAICS code, or multiple codes, either because their business has more than one primary function or because there is no other existing code that best matches their business type. As such, they may be excluded from the figures presented in this report. However, while the analysis is not perfect, it is the best estimate available for quantifying clean tech in the Puget Sound region based on primary data statistics. For the past and future trends analyses, 100% of all the NAICS listed in Table 1 was used to derive growth rates. This is because the clean tech percentage of each partially counted industry cannot be isolated for analysis in past or future years. The growth rate of the whole industry codes is used to project future clean tech growth from existing clean tech-only employment figures. It is important to note that the clean tech shares may grow at different rates from the whole industries in which they are a part. Furthermore, the proxy measure of the clean tech share of each industry may rise or fall over time in specific categories. Future updates to clean tech figures would need to be adjusted to account for these types of changes. Employment projections should be treated as very general estimates of how clean tech may be expected to grow into the future. Since growth rates for the industries as a whole are being applied to more specific clean tech shares of those industries, these numbers should be viewed as representative of the potential direction and magnitude of clean tech employment change, rather than as employment forecasts. Employment In 2008, the central Puget Sound region had an estimated 22,900 clean tech jobs across the nine industry categories of the region s clean tech cluster: Engineering Services, Architectural Services, Residential Construction, Non-residential Construction, Recycling and Waste, Research and Development, Environmental Consulting, Manufacturing, and Energy Generation and Distribution. As can be seen in Table 2, three-quarters of those jobs were located in King County. The largest employment category was in the clean tech share of Engineering Services, which had an estimated 6,900 jobs nearly one-third of all clean tech cluster employment in the region, as illustrated in Figure 2. 5 It is followed distantly by the clean tech shares of the Architecture and two Construction industries. 6 5 The Engineering Services category is 56% clean tech. Please refer to Table 1. 6 Architecture is 41% clean tech, and Construction industries range from 13-20% clean tech. Please refer to Table Clean Tech Cluster Analysis Update for the Puget Sound Region

15 TABLE 2. Clean Tech Employment by County and Industry: Puget Sound Region, 2008 INDUSTRY KING KITSAP PIERCE SNOHOMISH REGION Engineering 5, ,900 Architecture 2, ,200 Residential Construction 1, ,000 Non-Residential Construction 1, ,600 Recycling and Waste 1, ,000 Research and Development 1, ,900 Environmental Consulting 1, ,600 Manufacturing 930 * * 220 1,290 Energy Generation and Distribution TOTAL 17, ,500 2,400 22,900 Share of Total 75% 4% 11% 10% 100% Source/Note: Bureau of Labor Statistics, PSRC Covered Employment Dataset. Totals may not sum due to rounding. * Data suppression required. However, when the clean tech shares of Architectural Services, Residential Construction, and Non-Residential Construction industries are combined, these Green Building-related industries constituted the largest share of the cluster with estimated 8,800 jobs and at least 38 percent of all clean tech employment in the region. And considering the role of the clean tech share of Engineering Services in building and construction activities, Green Building s total share may be even greater. In addition to building and constructionrelated activities, engineering firms serve many other areas of the clean tech cluster, including energy generation and distribution activities, and environmental remediation and pollution prevention activities. The clean tech share of Energy Generation and Distribution 7 is just two percent within the region, but is most likely undercounted since some known public utilities such as City Light and Tacoma Power are not included within the same NAICS code. And, Puget Sound Energy may be licensed under multiple NAICS codes since they are also the administrative headquarters of the utility. FIGURE 2. Clean Tech Employment Distribution by Industry: Puget Sound Region, 2008 Source: Bureau of Labor Statistics, PSRC Covered Employment Dataset. 7 Energy Generation and Distribution is composed of three NAICS codes Electric power distribution s clean tech share is 47%. Clean Tech Cluster Analysis Update for the Puget Sound Region 11

16 Past and Projected Employment Growth The industries that include clean tech have experienced above average growth over the past few years, growing at a rate of 4.2% per year, compared to 1.9% for total employment. Figure 3 shows the annual average growth rate from 2002 to 2008 of industries that include clean tech. FIGURE 3. Annual Average Growth Rates of Industries that Include Clean Tech: Puget Sound Region, INDUSTRY AVERAGE ANNUAL GROWTH RATE Residential Construction Activities* 5.4% Engineering Services* 4.9% Environmental Consulting Services 4.9% Non-Residential Construction 3.7% Architectural Services* 3.6% Research and Development* 3.3% Manufacturing* 2.5% Energy Generation and Distribution* 2.0% Recycling and Waste 1.8% Total Clean Tech Employment 4.2% Source/Note: Bureau of Labor Statistics; PSRC Covered Employment Dataset; Berk & Associates, * Includes employment numbers beyond the percentage counted as clean tech in the existing employment analysis. The fastest growing industries that contained clean tech during the time period studied were Residential Construction (5.4% average annual growth), Engineering (4.9% average annual growth), and Environmental Consulting (4.9% average annual growth). However, due to the downturn in the economy, these rates are expected to slow over the next few years. Table 3 takes the projected annual growth rates presented in the table above, and applies them to the clean tech specific share of those industries to develop growth estimates through 2012 and TABLE 3. Projected Clean Tech Employment Growth by Industry: Puget Sound Region, TOTAL % AAGR* CHANGE INDUSTRY CATEGORY (EST.) 2017 (EST.) Environmental Consulting 4.4% 1,600 2,000 2, % Research and Development 2.7% 1,900 2,100 2, % Recycling and Waste 2.4% 2,000 2,200 2, % Architectural Services 1.9% 3,200 3,500 3, % Engineering Services 1.9% 6,900 7,400 8, % Energy Generation and Distribution 1.5% % Non-Residential Construction 1.1% 2,600 2,700 2, % Manufacturing -0.6% 1,300 1,300 1, % Residential Construction -0.9% 3,000 2,900 2, % Total Clean Tech Employment 1.4% 22,900 24,600 26, % Source: Bureau of Labor Statistics; Employment Security Department; Berk & Associates, Totals may not sum due to rounding. * Growth rate projections are for industries as a whole and not specifically the clean tech share of those industries. 12 Clean Tech Cluster Analysis Update for the Puget Sound Region

17 The clean tech sector is estimated to see employment increase from 22,900 jobs to about 26,800 jobs over the forecast period a 15% increase. The largest number of jobs is projected to be added in Engineering (about 1,200 jobs), Environmental Consulting (about 800 jobs), and Architectural Services (about 600 jobs). The highest total percentage of job growth between 2008 and 2017 is projected in Environmental Consulting (47%), Research and Development (27%), and Recycling and Waste (24%). Figure 4 below shows the employment concentration of industries that include clean tech in the Puget Sound region, compared to the concentration of these industries nationwide. This bubble chart displays several pieces of information at once. The size of each bubble symbolizes the size of each industry s current clean tech employment. Bubbles above the 1.0 horizontal line are industries in which the region has a higher concentration of jobs than the U.S. average, and those below the line are industries that have a concentration of jobs below the U.S. average. So, an employment concentration ratio of 1.5 means that the industry is 50% more concentrated in this region than in the average U.S. region of similar size. Bubbles to the right of 0% are industries that are projected to grow from 2008 to 2017, and those to the left will decline in employment during that period. Data note: The employment concentration ratio and the average annual growth rates displayed here are for the total employment within each industry (and not only the percentage counted as clean tech). Therefore, it is important to note that not all of the growth in these industries may be attributed to the clean tech portions of those industries. FIGURE 4. Clean Tech Cluster Bubble Chart: Puget Sound Region, Employment Size, Concentration, and Projected Growth Rate from Source/Note: Bureau of Labor Statistics; PSRC Covered Employment Dataset; Berk & Associates, * ECR and growth rate projections are for industries as a whole and not specifically the clean tech share of those industries. Employment estimates in each bubble are for the clean tech specific share in the region. Clean Tech Cluster Analysis Update for the Puget Sound Region 13

18 The chart shows Engineering, Architecture and the two Construction industries to be the largest industry categories by employment size. Of these, all but Residential Construction are expected to grow over the next nine years. In terms of employment concentration, Architectural Services (2.1), Environmental Consulting (1.7) and R&D (1.6) are the most highly concentrated industries in the region. Environmental Consulting is also the fastest growing industry, projected to have an average annual growth rate of 4.4%. Only Residential Construction and Manufacturing are expected to decline through 2017, at a rate of -0.9% and -0.6% per year, respectively. Areas of relatively low employment concentration in the region are the Recycling and Waste (1.1), Manufacturing (0.8), and Energy Generation and Distribution (0.3) industries. These three industries also had the slowest average annual growth rates during the period 2002 to Puget Sound Region Compared to Washington State and Nation Table 4 displays the estimated average annual growth rates in the Puget Sound region compared to Washington State and the nation. TABLE 4. Projected Employment Growth Rates of Industries that Include Clean Tech: Puget Sound, Washington and U.S., Average Annual Growth Rate, PUGET SOUND REGION WASHINGTON STATE NATIONAL INDUSTRY CATEGORY Architecture* 1.9% 1.9% 2.3% Energy Generation and Distribution* 1.5% 0.6% 0.3% Engineering* 1.9% 1.9% 2.3% Environmental Consulting 4.4% 4.4% 5.9% Manufacturing* 0.6% 0.2% 1.1% Non-Residential Construction* 1.1% 1.3% 1.2% Recycling and Waste 2.4% 1.2% 2.1% Research and Development* 2.7% 2.6% 0.9% Residential Construction* 0.9% 0.7% 1.1% Industries that Include Clean Tech* 1.4% 1.3% 1.7% All Industries 1.0% 1.0% 1.1% Source/Note: Bureau of Labor Statistics; Employment Security Department; Berk & Associates, The BLS projection horizon was to ESD s projection horizon was to * Includes employment numbers beyond the percentage counted as clean tech in the existing employment analysis. As a whole, industries that include clean tech are not projected to grow faster than the national average, and only slightly faster than the state average (1.4% regionally versus 1.3% statewide). However, in all three geographies, the projected growth rates are higher than the economy as a whole. Clean tech in the Puget Sound region is expected to grow 1.4% annually compared to 1.0% for all industries. 14 Clean Tech Cluster Analysis Update for the Puget Sound Region

19 The Puget Sound region s growth rates are estimated to outpace the nation in Energy Generation and Distribution (positive growth of 1.5% regionally versus decline of 0.3% nationally), and Research and Development (2.7% regional growth versus 0.9% nationally). Environmental Consulting Services, which is expected to be the fastest growing industry in the region, is expected to grow just as quickly statewide (4.4% annually) and even more quickly at the national level. (5.9% annually). Manufacturing and Residential Construction are estimated to decrease in employment in the region and the nation over the study period. However, a deeper analysis reveals that within the Puget Sound region, three of the sub-industries within Manufacturing are estimated to experience employment increases through 2017: HVAC and commercial refrigeration equipment (2.4% annual growth), electrical equipment manufacturing (3.7% annual growth), and other electrical equipment and component manufacturing (2.6% annual growth). Business In 2008 there were nearly 1,600 clean tech business establishments in the Puget Sound region, with almost two-thirds, or more than 1000 businesses, in King County alone. 8 Both clean tech businesses and the jobs are concentrated in the urban areas of King County, but there are also some clean tech jobs throughout the four-county region. More than two-thirds of clean tech businesses are in the Residential Construction industry. These businesses tend to be small with an industry total of just under 3,000 jobs. Engineering and Architecture industries which have the highest clean tech employment in the region, have the second and third largest number of establishments. Engineering businesses are the largest employers in clean tech in the region. There are approximately 300 Engineering businesses that employ a total of 6,900. There are very few Energy and Manufacturing establishments. 8 Business establishments are individual workplace locations. One company can have multiple business locations. For example, CH2M HILL is one firm that has multiple locations and therefore constitutes multiple establishments. FIGURE 5. Clean Tech Business Establishments: King, Kitsap, Pierce and Snohomish Counties, 2008 Source: Bureau of Labor Statistics, PSRC Covered Employment Dataset. FIGURE 6. Clean Tech Business Establishments by Industry: Puget Sound Region, 2008 Source: Bureau of Labor Statistics, PSRC Covered Employment Dataset. Clean Tech Cluster Analysis Update for the Puget Sound Region 15

20 Clean tech businesses in the Puget Sound region tend to be small businesses employing between 1 to 100 employees. Figure 7 shows that over 14,000, or about two-thirds of all clean tech jobs, are at small businesses with fewer than 100 employees. Medium-sized firms employee about 6,000, or one-quarter, of all clean tech cluster workers. There are fewer large firms in clean tech in the region. They employ about 2,100 workers, or 12% of the total. Figure 8 is a geographic representation of the approximate locations and relative densities of clean tech jobs in the Puget Sound region. Note that the map only illustrates employment from those NAICS where 100% of the industry code is included in the clean tech definition. Due to the nature of the data, industries where only a share is considered clean tech cannot be accurately displayed on a map. Therefore, FIGURE 7. Clean Tech Employment by Size of Firm: Puget Sound Region, 2008 the map only shows the Environmental Consulting and Recycling and Waste industries, and parts of Energy Generation and Distribution and Manufacturing. It does not show the Construction industries, Architecture, Engineering, R&D and some portions of Energy and Manufacturing. Table 1 lists all the specific NAICS codes that are counted 100%. The map clearly displays that a majority of clean tech jobs are in King County specifically downtown Seattle and South Seattle. This is not surprising considering that the majority of jobs in general tend to be concentrated in these areas. The map also shows that many jobs are within or near regional growth centers. Finally, this geographical representation also demonstrates that while clean tech jobs are concentrated in the urban areas, there are job locations distributed throughout the four-county area. Source: Bureau of Labor Statistics, PSRC Covered Employment Dataset. 16 Clean Tech Cluster Analysis Update for the Puget Sound Region

21 FIGURE 8. Map of Select Clean Tech Employment: Puget Sound Region, 2008 Source/Note: Bureau of Labor Statistics, PSRC Covered Employment Dataset. Only jobs in NAICS industries that are counted 100% in clean tech are represented here. Industries where only a percentage is in clean tech cannot be accurately reflected on a map. Clean Tech Cluster Analysis Update for the Puget Sound Region 17

22 Workforce Clean tech occupations can range from entry level jobs in recycling collection to engineering manager positions requiring a high level of education and technical expertise. They are jobs that are both local-serving (in businesses implementing energy efficiency technologies), to export-oriented (businesses that sell products or serve clients outside the region). There is still limited information about clean tech-specific occupations, but current research and data tell us that existing occupations are adapting to the clean tech market. Table 5 below is a select list of clean tech occupations seen to be important to future clean tech businesses based on a review of information and data about green jobs, clean tech industries, and employment projections. These occupations have a range of educational and training requirements and range in median wage from $26,320 for construction laborers to $105,430 for engineering managers. TABLE 5. Selected Clean Tech Cluster Occupations: Puget Sound Region, PROJECTED EMPLOYMENT SOC EDUCATIONAL GROWTH CODE OCCUPATION MEDIAN WAGE ATTAINMENT OR TRAINING Engineering managers $105,430 Bachelor s or higher degree, 7.3% plus work experience Computer software engineers, applications $79,780 Bachelor s degree 44.6% Electrical engineers $75,930 Bachelor s degree 6.3% Construction managers $73,700 Bachelor s degree 15.7% Geoscientists, except hydrologists & geographers $72,660 Master s degree 21.9% Environmental engineers $69,940 Bachelor s degree 25.4% Mechanical engineers $69,850 Bachelor s degree 4.2% Civil engineers $68,600 Bachelor s degree 18.0% Architects, except landscape and naval $64,150 Bachelor s degree 17.7% Environmental scientists and specialists, $56,100 Master s degree 25.1% including health First-line supervisors/managers of $53,850 Work experience in a 9.1% construction trades and extraction workers related occupation Electrical power-line installers and repairers $50,780 Long-term on-the-job training 7.2% Electrical and electronic engineering technicians $50,660 Associate degree 3.6% Architectural and civil drafters $41,960 Postsecondary vocational award 6.1% Civil engineering technicians $40,560 Associate degree 10.2% Operating engineers and other construction $36,890 Moderate-term on-the-job training 8.4% equipment operators Carpenters $36,550 Long-term on-the-job training 10.3% Hazardous materials removal workers $35,450 Moderate-term on-the-job training 11.2% Refuse and recyclable material collectors $28,970 Short-term on-the-job training 7.4% Construction laborers $26,320 Moderate-term on-the-job training 10.9% Source: BLS Occupational Projections and Training Data, Edition. While BLS data does not specifically differentiate clean tech occupations, the prevalence of engineers and scientists on the list indicate the importance of a high skilled workforce trained in science and engineering. Half of the selected list of occupations require a Bachelor s degree or higher and 18 Clean Tech Cluster Analysis Update for the Puget Sound Region

23 have median wages ranging from approximately $56,000 to $79,000. Engineering managers have the highest median wage and require a combination of both high educational attainment and work experience. Electrical occupations earn closer to middle wages at around $50K, but the projected growth rates are relatively slow at 3.6 to 7.2 percent from 2006 to Occupations with median wages in the mid $20Ks to mid $30Ks tend to be in the construction and recycling and waste fields. Many of the occupations, such as construction managers, architects, civil engineers and carpenters, are within green building industries. Others, such as environmental engineers, environmental scientists, and geoscientists, suggest a concentration in environmental protection industries. The environmental fields are projected to grow faster than the other fields. Geoscientists, environmental scientists and environmental engineers have 10 year growth rates ranging from 22 to 25 percent. The field of computer software engineers is included here to show its growing importance in smart grid-related software development. It should be noted, however, that its high projected 10-year growth rate of 44.6 percent is for the entire spectrum of software engineering positions, of which only a small portion may be related to smart IT applications. But given our region s strength in IT, the intersection of IT with energy efficiency applications is important. Clean Tech Cluster Analysis Update for the Puget Sound Region 19

24 20 Clean Tech Cluster Analysis Update for the Puget Sound Region

25 III. Venture Capital Analysis Introduction Access to capital is a critical component for the growth and success of individual clean tech companies and for the sector as a whole. While the previous section primarily described the existing clean tech economy in the region, this section focuses on the emerging areas of clean tech as evidenced by trends in venture capital investments. Venture capital (or VC) funding provides investment and working capital for newer companies. Many of the Puget Sound region s existing clean tech companies are in traditional industries such as Recycling and Waste and Environmental Remediation. However, the newer clean tech companies are often not easily categorized into existing industry terms because they may not even exist in the traditional lexicon of industry statistics. Trends in venture capital investments can be useful indicators of the direction of future growth areas in innovative and technology-oriented industries. This section provides an examination of venture capital investment in the Puget Sound region s clean tech firms. Investment trends help show the growth potential for the clean tech sector and how the region stands in comparison to other parts of the country. The analysis encompasses: Identification of key VC investment trends in Washington and the region, and comparisons across other states; Identification of key VC recipients and investors in the region; and A look ahead at potential future VC trends in the industry Both the clean tech sector and the venture capital industry are dynamic and subject to change as technology, innovation, and the market change. Therefore, this section is a snapshot in time of these fluid sectors. Table 6. The Cleantech Group s Clean Tech Categories CLEANTECH GROUP MAJOR CATEGORIES DESCRIPTION 1 Energy Generation Wind, Solar Hydro/marine, Biofuels Geothermal, Other 2 Energy Storage Fuel Cells Advanced Batteries Hybrid Systems 3 Energy Infrastructure Management Transmission 4 Energy Efficiency Lighting Buildings Glass Other 5 Transportation Vehicles Logistics Structure Fuels 6 Materials Nano Bio Chemical Other 7 Manufacturing Advanced Packaging Monitoring and Control Smart Production 8 Agriculture Natural Pesticides Land Management Aquaculture 9 Water and Wastewater Water Treatment Water Conservation Wastewater Treatment 10 Air and Environment Cleanup/Safety Emissions Control Monitoring/Compliance Trading and Offsets 11 Recycle and Waste Recycling Waste Treatment Source: The Cleantech Group. The source for the clean tech venture capital data presented here is from The Cleantech Group. The table above identifies the 11 clean tech categories used by this source. It is important to note that while similar, these categories are not identical to those in the Definitional Framework presented in Figure 1 earlier in this report. References to clean tech categories in this section only will refer to the categories used by the Clean Tech Group. Clean Tech Cluster Analysis Update for the Puget Sound Region 21

26 VC Investments and Deals The clean tech sector, along with biotechnology, software, and telecommunications, is a focus for venture capital investment in Washington. Over the past ten years, there have been 64 venture capital deals with clean tech companies in the Puget Sound region. This represents approximately 80% of all 79 clean tech deals made statewide. Total venture capital investments and deals for Washington and the Puget Sound region are shown in Figure 9. FIGURE 9. VC Investment and Deals in Clean Tech Companies: WA and Puget Sound Region, 1999 Q Source/Note: The Cleantech Group; Berk & Associates, year-to-date includes Q1 and Q2. Some deals have undisclosed amounts and therefore are not reflected in the total dollars invested. Both Washington and the Puget Sound region experienced significant growth in clean tech venture capital investment between 2005 and 2007, reaching a peak of $208.8 million invested and 18 deals in Since 2007, Washington and the Puget Sound region, in particular, have seen a decrease in venture capital investment. Between 2007 and 2008, total investment in Puget Sound clean tech companies decreased by approximately 52%. As of end of June 2009, there have been eight deals in the Puget Sound region, but total funds invested has equaled only 23% of 2008 investments, suggesting that deals are becoming smaller. VC by Clean Tech Category To learn more about the 64 venture capital deals involving clean tech companies in the Puget Sound region, total deals are further examined by clean tech category and VC financing stage. Figure 10 displays the number of deals per year by company clean tech category. 9 9 The Cleantech Group s clean tech categories differ slightly from those presented in the Definitional Matrix in this report. For a full description of the Cleantech Group s categories, please refer to Table Clean Tech Cluster Analysis Update for the Puget Sound Region

27 FIGURE 10. VC Deals by Clean Tech Category: Puget Sound Region, 1999 Q Source/Note: The Cleantech Group; Berk & Associates, The Other category includes: transportation (6 deals); materials (3 deals); recycling & waste (2 deals); and manufacturing (1 deal). The clean tech categories used here are from Cleantech Group and may differ slightly from the definition framework presented in the previous section of this report. The chart highlights the region s diversity of clean tech firms based on types of VC deals. Puget Sound region companies receiving VC investment include 10 of the 11 Cleantech Group categories; only the category of Air and Environment is not represented in the region s VC deals. Energy-related clean tech has received more than half of all clean tech VC funding in the region since 1999, with a total of 38 deals. The following points are noteworthy about investment in these subsectors: The category of Energy Generation has received the most deals (14). Energy generation began receiving VC investment in 2005, but as a percentage of deals, it has seen a consistent decline between 2005 and Quarter 2 of Five of those deals were made with one company, Imperium Renewables, a biodiesel company based in Seattle. Since its last deal in 2008, the company has fared poorly with the downturn in the biodiesel market. There have been 12 deals in the Energy Efficiency category. Thus far in 2009, energy efficiency has recorded three deals, the most of any category. The combined categories of Energy Storage and Energy Infrastructure together have 12 deals (6 each) since 1999, but have had no deals thus far in Clean Tech Cluster Analysis Update for the Puget Sound Region 23

28 VC by Financing Stage Financing stages correspond to the lifecycle of a company and product. The product lifecycle begins with an idea or concept, moves to research and proof-of-concept, then to the product design stage, and matures to product development, manufacturing, and delivery. At the same time, the company develops, often beginning with just one or a handful of entrepreneurs and employees, then progressing to a more developed and staffed business. The Cleantech Group s database of VC deals starts at the seed financing stage, following startup and the earliest phase investments. It categorizes the stages in the following order: 1. Seed 2. First Round 3. Follow-On 4. Mezzanine 5. Private Equity 6. Acquisition or buyout Figure 11 identifies the number of deals by financing stage of the Puget Sound region s clean tech VC investments from 1999 to FIGURE 11. Clean Tech VC Deals by Financing Stage: Puget Sound Region, 1999 Q Source: The Cleantech Group; Berk & Associates, As reflected in the data, first round and follow-on stages compose the majority of all clean tech VC deals over the past ten years. This makes sense given that these are the typical stages in which VC funding occurs. There have been 36 follow-on deals (56% of all deals) and 25 first round deals (39% of all deals). 24 Clean Tech Cluster Analysis Update for the Puget Sound Region

29 Looking only at the past three years, follow-on financing has equaled between 60% and 75% of VC deals, from 2007 through 2009 YTD. In contrast, first round deals have been declining as a percentage share of total deals since 2005, going from a high of 71% of deals in 2005 to a low of approximately 12% in 2009 YTD. These trends could reflect the following issues: A maturing clean tech sector. As clean tech companies began receiving first-round money in the early 2000s, they may have become good candidates for follow-on financing. The presence of the region s first acquisition/buyout in 2009 supports the notion of a maturing sector. Greater risk aversion in the VC industry as a whole. As stakeholders and industry sources report, VC investing has become more risk-averse with the economic downturn. With risk and uncertainty increasing, funders would rather invest money in more proven and developed firms than with newer and unproven companies. There have only been two seed clean tech investment deals recorded in the Puget Sound region since the investment category began being tracked. This is not surprising, given that this is the riskiest stage for VC investors. However, these data may not capture the full extent of the earliest seed and angel funding in clean tech, as these early investments are not as well-tracked in the industry. The Puget Sound region has seen a lack of late-stage VC funding. The Washington State Department of Commerce reports that, nationally, 80% of VC-backed companies fail or do not generate a profit. There are however exceptions. For example, in May 2009, Azure Technologies, a producer of high pressure technology for industrial and consumer goods manufactured and headquartered in Kent, Washington, was bought by Milestone Partners, a private equity firm in Pennsylvania. Also not included in the data above is the fact that NEAH Power Systems, based in Bothell, is now a publicly traded company. VC by State Clean tech, as it gains the attention of policymakers, investors, and consumers, is growing as a sector in several parts of the country. In this next section, VC figures for Washington and the Puget Sound region are compared with seven other states: Arizona California Colorado Massachusetts Minnesota Oregon Texas This group of states was chosen for analysis for several reasons. They represent states identified by research and data as leading clean tech venture capital states, and indicator states with peer regions identified and used by the Puget Sound Regional Council/ Prosperity Partnership because of their comparability with Washington and the Puget Sound region. Total VC Investments Washington is in the top five U.S. states receiving clean tech investments. Figure 12 presents total VC investment in clean tech for Washington, the Puget Sound region, and the seven comparative states, between 1999 and Quarter 2 of Table 7 and Table 8 provide the supporting data regarding total investment dollars and number of deals. Clean Tech Cluster Analysis Update for the Puget Sound Region 25

30 FIGURE 12. State Comparisons of Clean Tech VC Dollars, 1999 Q Source/Note: The Cleantech Group; Berk & Associates, year-to-date includes Q1 and Q2. TABLE 7. State Comparisons of Clean Tech VC Dollars: 1999 Q2 2009, in Millions of Dollars YTD TOTAL California $99.9 $243.4 $220.0 $169.2 $302.5 $228.1 $452.8 $1,180.1 $1,862.5 $3,440.4 $1,560.0 $9,758.9 Massachusetts $19.3 $74.1 $30.2 $76.7 $97.7 $96.2 $189.0 $274.3 $370.5 $519.4 $314.2 $2,061.6 Texas $22.0 $29.0 $4.7 $61.3 $42.9 $36.1 $57.3 $278.3 $253.8 $512.9 $144.7 $1,443.0 Colorado $0.0 $41.4 $0.0 $9.5 $34.9 $53.5 $8.5 $54.7 $104.3 $442.3 $122.8 $871.9 Washington $15.8 $72.9 $3.5 $5.0 $24.7 $49.5 $23.9 $107.1 $208.8 $186.8 $40.5 $738.3 Puget Sound Region $1.5 $4.0 $3.5 $5.0 $12.2 $24.5 $23.9 $87.1 $199.3 $94.3 $22.2 $477.3 Oregon $7.0 $2.4 $22.4 $0.0 $7.4 $9.0 $1.2 $11.0 $46.5 $205.0 $21.1 $332.9 Arizona $6.3 $7.8 $0.0 $4.5 $0.0 $1.8 $0.8 $18.2 $41.8 $21.0 $56.0 $158.2 Minnesota $4.7 $0.0 $0.0 $3.0 $2.4 $39.8 $16.7 $12.0 $33.5 $6.0 $33.5 $151.6 Source/Note: The Cleantech Group; Berk & Associates, year-to-date includes Q1 and Q2. 26 Clean Tech Cluster Analysis Update for the Puget Sound Region

31 TABLE 8. State Comparisons of Clean Tech VC Deals, 1999 Q YTD TOTAL California Massachusetts Texas Washington Puget Sound Region Colorado Minnesota Arizona Oregon Source/Note: The Cleantech Group; Berk & Associates, year-to-date includes Q1 and Q2. As the tables show, Washington ranks fifth in total investments and fourth in the number of VC deals over the past ten years. In fact, for the ten year period from 1999 to Q2 of 2009, the Puget Sound region recorded more total VC deals than the states of Colorado, Minnesota, Arizona and Oregon. California is by far the national leader in clean tech, with approximately $3.4 billion in VC investments in Regions within California with strong clean tech clusters include Silicon Valley and the San Diego area. The states of Massachusetts and Texas are also significantly ahead of Washington in VC dollars and deals for clean tech. In Quarters 1 and 2 of 2009, Massachusetts and Texas received $273.7 million and $104.2 million more than Washington, respectively. The Boston area is the main recipient of clean tech VC funding in Massachusetts, and the Austin area is the strong clean tech region in Texas. Colorado has received more total VC dollars than Washington over the past ten years. This can be traced back to 2008, when Colorado clean tech firms received $442.3 million in VC investments. Three particularly large deals account for this spike in total investments. Clean tech firms in Colorado tend to be located in the region spanning between Fort Collins and Colorado Springs. Clean Tech Categories Figure 13 presents investments deals between 2005 through Quarter 2 of 2009 for each state, by clean tech category. The total column on the far left creates an index from which can be identified a state s relative strengths compared to the seven states totals. Clean Tech Cluster Analysis Update for the Puget Sound Region 27

32 FIGURE 13. Distribution of VC Deals by Clean Tech Category: WA and Peer States, 2005 Q Source: The Cleantech Group; Berk & Associates, Washington s composition of clean tech deals is similar to the composition of the seven states total deals. Washington has a slightly higher percentage of energy efficiency-related clean tech deals, but the overall percentage of energy-related clean tech deals is nearly 70% for both Washington and all seven states. The most noticeable deviations from the group s mix of clean tech categories include: Oregon s Energy Storage and Generation deals account for half of its total clean tech deals. Minnesota s Materials and Manufacturing deals account for one-third of its total clean tech deals. Similarly, Arizona s Materials and Manufacturing deals account for a third of its total clean tech deals. 28 Clean Tech Cluster Analysis Update for the Puget Sound Region

33 Financing Stages Figure 14 shows total investment deals between 2005 and Quarter 2 of 2009 by financing state for each state. FIGURE 14. Distribution of Clean Tech VC Deals by Financing Stage: WA and Peer States, 2005 Q Source: The Cleantech Group; Berk & Associates, As the exhibit shows, for all states, follow-on financing accounts for the majority of clean tech deals conducted in the past five years. First round deals account for the next greatest percentage of all investment deals across the states. Again, this makes sense given that investments at this stage are considered to be less risky. The lack of any private equity deals differentiates Washington from six of the seven states. Washington also has had fewer seed financing deals (at just 1.7% of its total deals) in comparison to most other states and the group s percentage as a whole (8%). VC by Investors and Recipients VC investments are driven by people and relationships. Deals are made between entrepreneurs and VC investors, based on previous track record, management team, and many other factors besides a firm s business plan. The section below presents who is receiving and who is providing venture capital in order to identify key players in clean tech and venture capital in the region. Recipients of Venture Capital: The Clean Tech Firms The decision to invest is based on the growth potential of the company. Table 9 identifies the region s clean tech firms receiving more than $10 million in venture capital over the past ten years. Thirteen companies are on this list, with total funding ranging from $11 million to $122.5 million. Clean Tech Cluster Analysis Update for the Puget Sound Region 29

34 TABLE 9. Top Clean Tech Firms in the Puget Sound Receiving Venture Capital, 2001 Q2 2009, in Millions of Dollars YTD TOTAL TOTAL INVEST. DEALS 1 Imperium Renewables $9.5 $43.0 $70.0 ND $ Energy Generation 3 Targeted Growth $5.6 $10.0 $22.3 $ Agriculture 3 HaloSource $3.5 $21.0 $11.5 $ Water & Wastewater 4 AltaRock Energy $4.0 $26.3 $ Energy Generation 5 Clear Water Compliance Services $25.0 $ Water & Wastewater 6 Inrix $10.0 $15.0 $ Transportation 7 Verdiem $1.5 $1.6 $1.5 $8.3 $12.0 $ Energy Efficiency 8 NEAH Power Systems $5.0 ND $15.9 $1.6 $ Energy Storage 9 Prometheus Energy Company $20.2 $ Energy Generation 10 Naverus $10.0 $4.0 $ Transportation 11 PowerIt Solutions $7.1 $6.0 $ Energy Efficiency 12 3TIER Environmental Forecast Group ND $2.0 $10.0 $ Energy Infrastructure 13 EnerG2 $8.5 $2.5 $ Advanced Materials Source/Note: The Cleantech Group; BERK, Top clean tech firms are defined as those firms receiving more than $10 million in venture capital investment during the study period (Q Q2 2009). None of these companies received VC funds in 1999 and 2000, so those years are not displayed here year-to-date includes Q1 and Q2. ND means the amount of an investment deal was not disclosed. Given the dynamism of the sector, the data above is supplemented with qualitative research to see where the companies are today. Most of the 13 companies are still in business and based in the Puget Sound region. Brief updates, based on the companies own websites and local news articles, are included below: Imperium Renewables, a producer of biofuels based in Seattle, received the most venture capital funding in the region, totaling $122.5 million between 2005 and However, in late 2007, Imperium Renewables cancelled its IPO, and CEO Martin Tobias resigned and left the Board. To date, Imperium Renewables has not recovered from the collapse of the biodiesel market. Targeted Growth is a crop-based biotechnology company founded in 1998 and headquartered in Seattle. In August 2009, Targeted Growth s General Manager Margaret McCormick, PhD was appointed to the Washington State Clean Energy Leadership Council. In October 2009, Sustainable Oils, Targeted Growth s joint venture with Green Earth Fuels based in Montana, was awarded a contract by the Defense Energy Support Center to supply camelina-based jet fuel for the U.S. Air Force. 30 Clean Tech Cluster Analysis Update for the Puget Sound Region

35 HaloSource, a producer of water treatment and antimicrobial technology, opened a new office and manufacturing facility in Bangalore, India in June The India location is in addition to its corporate office in Bothell and manufacturing facilities in Raymond, Washington and Shanghai, China. AltaRock develops and commercializes geothermal technology to produce power. AltaRock has its technology development office in Seattle, but is headquartered in Sausalito, California. In September 2009, AltaRock announced it would suspend its demonstration project of engineered geothermal systems (EGS) in the Geysers as a result of drilling difficulty. It has a portfolio of approximately 20 patent filings related to EGS. Clear Water Compliance Services provides water treatment services. Clear Water was founded in 1998 in response to the implementation of new phases of the Clean Water Act and Endangered Species Act. Its corporate headquarters and warehouse and manufacturing facility are located in Lynnwood. Clean Water also has an office in Loomis, California. Inrix provides real-time, historical, and predictive traffic information for 18 countries. In August 2008, it announced the release of its free INFRIX TRAFFIC! Application for the iphone. Inrix is headquartered in Kirkland and also has a Europe office in Krefeld, Germany. Verdiem was founded in 2001 and is headquartered in Seattle. It provides enterprise software solutions to reduce energy consumption of PC networks. Verdiem is led by Jeremy Jaech, a serial entrepreneur who also founded Visio, and comes from the IT sector. In March 2006, NEAH Power Washington merged with Growth Mergers Inc. to become NEAH Power Systems, a company developing power solutions for portable electronic devices and headquartered in Bothell. It is now a publicly-held technology development company (NPWZ). Prometheus Energy, based in Redmond, is a producer of liquid-based natural gas, founded in It has had an up and down history, going public on London s Alternative Investment Market in 2006, only to be delisted in However, in July 2009, Prometheus Energy entered into a $10 million investment deal with Shell Technology Ventures. Naverus provides performance-based navigation for aviation. Naverus is headquartered in Kent, Washington, and has offices in Brisbane, Australia, and Beijing, China. In September 2009, Naverus announced receipt of a Letter of Qualification from the Federal Aviation Administration to design and validate Required Navigation Performance flight paths for public use in the U.S. Earlier in April 2009, Naverus raised $4 million in follow-on venture funding. PowerIt Solutions provides intelligent energy management systems for industrial applications. PowerIt Solutions is headquartered in Seattle, Washington, and has five offices across the U.S. and in Europe. In May 2009, the company raised $6 million in VC funding. 3Tier Environmental Forecast Group provides weather-driven renewable energy assessment and forecasting for wind, solar, and hydro power projects. 3Tier was founded in 1999 and is headquartered in Seattle, with offices in Germany, India, Panama, and Australia. EnerG2 engineers nano-structured materials for energy storage and is headquartered in Seattle. In August, EnerG2 was awarded $21.3 million in federal stimulus funds to help build the world s first facility dedicated to the commercial-scale production of nano-engineered synthetic high-performance carbon electrode material. The facility is located in Oregon. Clean Tech Investors There have been 91 unique investors involved in the 56 venture capital investments made in clean tech firms in the Puget Sound region between 1999 and Quarter 2 of Table 10 presents a complete list of these investors. Clean Tech Cluster Analysis Update for the Puget Sound Region 31

36 TABLE 10. Unique Investors Making Venture Capital Investments in Puget Sound Region Clean Tech Firms, 1999 Q Intel Capital 2 Acorn Ventures, Inc. 47 IOA LLC 3 Advanced Technology Ventures 48 J.T. International 4 Alexander Hutton Venture Partners Inc. 49 JGE Capital Management 5 Alliance Bernstein L.P. 50 Khosla Ventures 6 Alliance of Angels 51 Kleiner Perkins Caufield & Byers 7 Alta Partners 52 Masdar Clean Tech Fund 8 Angel Investors 53 Milepost Ventures 9 Angels with Attitude 54 Milestone Capital 10 ArcelorMittal 55 NCD Investors (formerly Northgate Capital) 11 Ardsley Partners 56 Nomura New Energy & Clean Technology Ventures 12 Attractor Investment Management 57 Nth Power 13 August Capital 58 Nth Power Clean Energy Fund 14 Bain Capital 59 Nth Power Fund II-A LP 15 BASF Venture Capital GmbH German Office 60 Odyssey Biofuels 16 BlackRock Natural Resources Fund (Fund of BlackRock Inc.) 61 Origo Resource Partners 17 Brighton Jones Wealth Management 62 Origo Sino-India PLC 18 Britannia Business Follow on Fund 63 OVP Venture Partners 19 Brittania Holding Ltd. 64 Palladium Capital Advisors 20 Buerk Dale Victor, LLC 65 Perham Ventures 21 Capricorn Investment Group 66 Phoenix Partners 22 Castile Ventures 67 Plainfield Asset Management 23 Catamount Ventures, LP 68 Private Aaron Mandell 24 Cedar Ventures 69 RAB Capital 25 CMEA Ventures 70 Robeco Alternative Investments 26 Columbia Pacific Advisors 71 Second Avenue Partners 27 Columbia Pacific Management 72 Siemens Venture Capital GmbH 28 Copia Associates 73 SilverPoint Capital 29 East Park Partners 74 SJF Ventures 30 Ecofin, Ltd. 75 Sojitz Corporation 31 Enterprise Partners Venture Capital 76 Sound Energy Partners, Inc. 32 Expansion Capital Partners, LLC 77 Southport Energy Alternatives 33 Federal Street Capital Corporation 78 Stark Biodiesel Investments 34 Finavera Ltd. 79 Stark Investments LP 35 Firelake Capital Management, LLC 80 Stellar Holdings 36 Foundation Capital 81 Technology Partners 37 Frazier Technology Ventures 82 Technology Partners Fund VII, LP 38 Fred Hutchinson Cancer Research Center 83 Treaty Oak Capital Management 39 Full Spectrum Capital 84 Unilever NV 40 Goldman, Sachs & Co. 85 Unilever Ventures, Ltd. Division of Unilever 41 Good Energies Inc. 86 Venrock Associates 42 Google, Inc. 87 Vulcan, Inc. 43 GrowthWorks Capital, Ltd. 88 Washington Research Foundation 44 Ignition Partners 89 WestAM Private Equity Group 45 Imperium Renewables, Inc. 90 WRF Capital 91 WV Canadian Fund Inc. Source: The Cleantech Group; Berk & Associates, Clean Tech Cluster Analysis Update for the Puget Sound Region

37 Table 11 identifies the top ten venture capital investors by the number of Puget Sound region deals made over the past ten years. These top ten investors account for over half of all of the 64 VC deals made in that time period. TABLE 11. Top Ten Venture Capital Investors in Puget Sound Region Clean Tech Firms, 1999 Q INVESTORS IN PUGET SOUND REGION CLEAN TECH FIRMS NUMBER OF DEALS INVESTOR LOCATION 1 Nth Power 6 San Francisco CA 2 Alta Partners 4 San Francisco CA 3 Frazier Technology Ventures 4 Seattle WA 4 Kleiner Perkins Caufield & Byers 4 Menlo Park CA 5 Technology Partners 4 Palo Alto CA 3 Menlo Park CA 7 Good Energies Inc. 3 Washington DC 8 Intel Capital 3 Santa Clara CA 9 Phoenix Partners 3 Seattle WA 10 Vulcan, Inc. 3 Seattle WA Source: The Cleantech Group; Berk & Associates, Number of Deals by Top Deals by California Investors 24 Deals by Washington Investors 10 The majority of major investors in Puget Sound region clean tech firms are located on the West Coast. Of those, California investors compose more than 60% of the 37 deals represented here. Seattle-based investors were involved in more than a quarter of these deals (10 out of 37). As Table 11 shows, three Seattle-based VC firms are among the top 10 investors in the region s clean tech companies. Two of the three, Vulcan, Inc. and Frazier Technology Ventures, are active in sectors other than clean tech. Vulcan, founded by Paul G. Allen in 1986, pursues endeavors as varied as real estate, information technology, and ownership of the Experience Music Project and the Seattle Seahawks, among many ventures. Frazier Technology Ventures focuses on technology and communication investments in the Pacific Northwest. No information could be obtained regarding Phoenix Partners. Table 12 identifies the top 25 VC and private equity firms in Washington state, as reported by the Puget Sound Business Journal s 2009 Book of Lists, and whether or not they have taken part in a deal with a regional clean tech firm, as reported by the Cleantech Group. Clean Tech Cluster Analysis Update for the Puget Sound Region 33

38 TABLE 12. Top VC Investors in Washington (2009) and Number of Deals with Puget Sound Clean Tech Firms, Q Q PUGET SOUND REGION TOP VC AND PRIVATE EQUITY FIRMS* LOCATION CLEAN TECH DEALS 1 Polaris Venture Partners Seattle 0 2 Ignition Partners Bellevue 1 3 Frazier Healthcare and Technology Ventures Seattle 3 4 ARCH Venture Partners Seattle 0 5 Rustic Canyon Partners Seattle 0 6 Endeavor Capital Seattle 0 7 OVP Venture Partners Kirkland 1 8 Blue Point Capital Partners Seattle 0 9 Maveron LLC Seattle 0 10 Madrona Venture Group Seattle 0 11 Voyager Capital Seattle 0 12 Evergreen Pacific Partners Seattle 0 13 Banyan Capital Partners Vancouver, B.C Northwest Venture Associates Spokane 0 15 Winona Capital Management LLC Seattle 0 16 Staenburg Venture Partners Seattle 0 17 Buerk Dale Victor LLC Seattle 0 Fluke Venture Partners Bellevue 0 19 Washington Mutual Seattle 0 20 Pacific Horizon Ventures Seattle 0 21 SeaPoint Ventures Seattle 0 22 Integra Ventures Seattle 0 23 Benaroya Capital Co. LLC Seattle 0 24 WRF Capital Seattle 1 25 Divergent Ventures Seattle 0 Total Deals 6 Source/Note: Puget Sound Business Journal s 2009 Book of Lists; The Cleantech Group; Berk & Associates, PSBJ ranks firms by total funds under management in Of the top 25 VC and private equity investors in Washington, 23 are located in the Puget Sound region, primarily in Seattle. Only six of these firms participated in a VC deal with a regional clean tech firm. Stakeholder interviews supported this observation that few Seattle-based VC are currently engaged with the clean tech sector. It was also noted, however, that some VC firms are exploring opportunities in the clean tech sector. 34 Clean Tech Cluster Analysis Update for the Puget Sound Region

39 The Future of VC Investment in Clean Tech While predictions of future VC investment in clean tech are difficult to make, through a survey of the latest industry research and interviews with local clean tech and VC stakeholders, the following trends are likely to shape the clean tech sector in the short, medium, and long term. Trend #1: The Worst May be Behind Us VC investments as a whole and particularly in clean tech have rebounded in Quarter 2 and Quarter 3 of 2009, leading some analysts to believe that the worst is behind us. According to Ernst & Young, VC deals in U.S. clean tech companies rose 46% between the second and third quarter of 2009, equaling $965 million. The recent rebound suggests that the economy is stabilizing, with expectations having been reset, and investors ready to invest again. In addition, merger and acquisition activity related to clean tech has increased to $9 billion in Quarter 2 of Barring unexpected increases in unemployment, real estate defaults, or inflation, VC funding for the clean tech sector is expected to increase. Trend #2: Investors Will Continue to be Cautious While the trend may look upwards, the investment climate is still cautious, and the IPO market remains inactive. The last company in Washington to go public was Clearwire back in Many Seattle VC investors say they are investing less money overall. This could mean that VC investments will go toward less capital-intensive types of clean tech in the near future. Stakeholders also identified a trend of greater investing in the less risky, follow-on financing stages. Trend #3: Government Policy and Support Will Continue to Shape Clean Tech s Future The federal government s support of clean tech through ARRA is significant and totals around $787 billion. In fact, some have dubbed the federal government the only active VC funder around. The full effect of ARRA funds is still to be felt, as funding continues to be awarded. In addition, changes to regulations such as those being considered in the Clean Energy and Security Act could have a significant effect on demand for clean tech products and services. This increased focus and involvement of government comes with mixed reviews. Government investment in clean tech is hugely beneficial to the companies that can get it and can further attract more investment dollars. However, the federal government typically invests in more established and proven companies than VC investors do. There may also be some unintended consequences. The government through its allocation of funding may be picking winners and losers, and this process could result in some misallocation of capital. Government funding is also unpredictable. Finally, ARRA funds are one-time infusions of capital and do not constitute a steady, sustainable revenue source for either local governments or companies. Government regulations help shape the market and demand for many clean tech products and services. The current political climate leans toward stricter environmental regulations and preferences for cleaner products. However, as some stakeholders have noted, inconsistencies in regulations across jurisdictions and changes in regulations can also be detrimental to companies. Clean Tech Cluster Analysis Update for the Puget Sound Region 35

40 Trend #4: Areas of Current Focus Include Energy Efficiency, Renewable Energy Generation and Storage, Smart Grid, and Cleaner Cars Certain areas of clean tech are getting more attention than others. In ARRA, approximately $16.8 billion was allocated to energy efficiency and renewable energy related projects. Local stakeholders have likewise noticed an increased interest in energy efficiency. As reported by the Cleantech Group, industrial energy efficiency is becoming a major source of carbon savings. From a VC perspective, the energy efficiency category is often less capital intensive than other categories, and thus, may do better in the current risk-averse environment. Renewable energy generation is also becoming an increasing focus for utilities nationwide. This trend will be further strengthened if the Clean Energy and Security Act, with its renewable energy electricity requirement, is approved by Congress. U.S. News & World Report reported that electricity and electricity generation raised the most venture capital in clean tech in As renewable energy continues to grow, energy storage becomes more important. According to Clean Edge, storage for renewable energy is the number one barrier to bringing renewable energy into the energy mix at a large scale. Increasing attention is being given to smart grid technologies. ARRA funding, which totals $11 billion for smart grid, is likely to have a stimulating effect on smart grid technology development and perhaps, investor funding. Lastly, technological innovations are making cleaner cars possible. In Quarter 2 of 2009, clean tech transportation, which includes vehicles and advanced battery storage, received 33% of VC investment in U.S. clean tech firms. Locally, this trend is manifested through the electric plug-in demonstration project, occurring in Seattle and four other cities. Trend #5: Demand For Clean Tech Products and Services Will Continue to Increase in the Future The long term outlook for clean tech looks strong. As many stakeholders agreed and identified, key trends all point to increased demand for the clean tech sector. These trends include: Rising energy costs A greater U.S. focus on energy security and decreased dependence on foreign oil Greater understanding and acceptance of climate change and a desire to reduce greenhouse gas emissions These trends all encourage greater demand for clean tech products and services. 36 Clean Tech Cluster Analysis Update for the Puget Sound Region

41 IV. Puget Sound s Clean Tech Ecosystem Introduction The Puget Sound Region has a strong combination of assets and opportunities that can make clean tech industries a viable sector for economic growth. The region has an educated and talented workforce trained in science and engineering fields, a strong research university in the University of Washington, a growing list of clean tech curricula in the region s 18 community and technical colleges, a knowledgeable citizenry with a strong environmental ethic, and an entrepreneurial spirit. Furthermore, our existing strengths in information technology and life sciences are a considerable asset in advancing smart grid, nanomaterials, advanced sustainable biofuels and other innovative technologies. The Puget Sound region s links with other parts of the state are also an opportunity and an asset. Washington State University, Bonneville Power Administration, Pacific Northwest National Laboratory and WSU s Energy Program are all critical institutions for advancing research and innovations for clean technologies and commercializing and implementing those technologies. This section provides a qualitative summary overview of the clean tech ecosystem in the region in terms of a schematic look at the relationships and connections within the clean tech cluster, the federal and state policy environment for clean tech, and selected clean tech projects and initiatives going on in the region. Clean Tech Ecosystem Strategic Map Figure 15 is an ecosystem map of the Puget Sound region s clean tech cluster. Cluster maps graphically illustrate the interrelationships and interconnections within a cluster. In a growing cluster, these relationships are reinforcing growth begets growth as the network effects of collaboration and upstream and downstream supply chains are amplified. As this clean tech schematic shows, the clean tech cluster is a growing, dynamic and interconnected network of clean tech companies, supporting services and organizations, and foundational inputs, such as infrastructure, business assistance, and access to capital. As the region s clean tech subsectors and companies grow, so too will their supporting vendors and service providers. As the market grows, regional benefits in the form of employment and environmental enhancement will also expand. Clean Tech Cluster Analysis Update for the Puget Sound Region 37

42 38 Clean Tech Cluster Analysis Update for the Puget Sound Region Source: Berk & Associates, FIGURE 15. The Clean Tech Cluster in the Puget Sound Region: An Interconnected Ecosystem