Born-to-Be-Green: Financing Cleantech Firms in the UK

Abstract

This paper investigates the financing of 739 Cleantech firms in the UK that have recently raised equity finance. We find that Small and Medium Sized Cleantech firms raise external equity due to financial constraints and to ameliorate illiquidity. We also provide evidence that intangibility does not play such an important role in raising equity financing and discuss the role of IAS38 for Cleantech firms. We find that software-led Cleantech firms raise greater amounts of finance than hardware-led firms. We provide further evidence of the potential equity gap for long horizon, capital intensive and complex innovative hardware-led Cleantech firms. We recommend the need for government and large corporations to provide long horizon, deep pocket investment to assist Cleantech firms reach commercialization.

Keywords: Equity Financing, Cleantech, Entrepreneurial Finance, Intangible Assets, Patient Capital