Home Are smart city startups the 2.0 version of cleantech firms?

Are smart city startups the 2.0 version of cleantech firms?

The smart city space is basking in interest from global governments and companies looking to invest where environment and technology intersect. This intersection was formerly considered the domain of cleantech, and under the smart city mantle it may be so again.

A recent Bloomberg article raised the notion that many cleantech startups are rebranding as smart city companies to ride the wave of investor interest in the sector.

After years of cleantech being seen as a venture capital pariah, these companies are finding opportunity in attracting fresh capital under the guise of smart city startups.

Jenny Fielding of incubator Techstars says her group is busy pitching their latest cohort of startups to venture capitalists (VCs) as smart city companies.

“We’re not packaging this as cleantech; we’re saying these are smart cities,” says Fielding. “That’s a very popular term right now, and people are throwing a lot of money toward that proposition. I’ve seen that what’s old becomes new again, and it just has a different name and a different business model.”

And indeed, smart cities are where the smart money is at… at least for the near future. According to report by research firm Frost & Sullivan the smart city market is anticipated to grow to $1.57 trillion by 2020.

Companies branded as cleantech suffered serious reputational damage a few years ago after several major hardware investments tanked and VCs began to sour on the segment.

Sun hasn’t always shone on solar

Notable black eyes to the cleantech sector included Nanosolar Inc. which ended up having to auction off its assets in 2013 after drawing in hundreds of millions of dollars from venture investors.

Another lemon was solar firm Solyndra which collapsed in 2011 after attracting over $1.5 billion in funding.

Amid rampant smart city enthusiasm, local governments are propelling the rehabilitation of companies working in fields formerly considered cleantech. Cities are working with venture capitalists to fund innovations where clean infrastructure, Internet of Things technology and big data intersect.

And this funding renaissance is translating into a flood of financial incentives from cities including tax benefits, subsidized offices and funds for incubators.

Fielding says that cities are an ideal launch pad for newly renamed cleantech startups, because of the huge fonts of data that can be collected on energy, air quality and infrastructure.

“Cleantech, in a way, was the 1.0 version, and now if you wrap connectivity, internet and artificial intelligence and all those things that can make cleantech smart, I think there’s a value proposition that investors and the market can get their head around,” said Fielding

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