Venture Capital Financing of Cleantech Innovation How Categorisation of Cleantech Innovation can reduce Investment Barriers: geographic focus on Sweden

Abstract: The industrial development has during the last century caused a disturbance to the ecological system in the ecosphere, and many industrial processes are still systematically causing harm. In an increasing manner this is raising a demand for technology that reduce the burdens on the ecological system. The innovation of technology that responds to these demands is important, not just for human well being, but also for worldwide economic growth. Even though there is a demand for such technology and a potential for financial returns for investors, the innovation area of environmental technology innovation attracts less financing than other technology innovation areas. In the innovation process, financial backing is an important component. Previous research has shown that investor backed ventures are more likely to perform well than those companies that have not attracted external funding. To understand why environmental technology innovation is less attractive to investors, this paper provides a presentation of the process of innovation, the systems of innovation and equity financing of innovation, as well as an analysis of barriers to invest in environmental technology innovation and the use of investment sector categorisation. The research can help to understand the investment barriers of environmental technology innovation and how categorisation may help to reduce such barriers. Also, it contributes to the understanding of how a new sector for venture capital investments may emerge.