Although clean technology has been one of the few
bright spots in terms of venture capital investment recently, companies in the sector aren't immune to the economic downturn afflicting other kinds of startups.
Venture capitalists who invest in cleantech will veer away from more capital-intensive technologies in 2009 toward less costly applications, according to a new survey. That means relatively less investment in, for example, biofuel and solar equipment startups and more money for companies focusing on energy efficiency, monitoring, and IT and software, says Cooley Godward Kronish LLP.
The report, released this week at the Silicon Valley law firm's energy efficiency conference in Redwood City, Calif., polled VCs, cleantech entrepreneurs and related industry professionals about investment priorities next year. Of the VCs, 70% said they will target more capital-efficient businesses. Respondents also believe that cleantech companies seeking outside funding will have to lean on venture investment, with a large majority predicting that the debt and private equity markets will pull back from investing in startups in the sector trying to commercialize their products. Meanwhile, more than 60% of those surveyed expect a rise in exit activity next year, as consolidation and economic woes cause the sector to contract.
"Notwitstanding these unprecedented economic times, investors and entrepreneurs continue to be bullish about cleantech innovation as a fundamental driver of the economy over the long term, but in the near term investors will be increasingly selective, many favoring less capital-intensive investments opportunities, including in the area of energy efficiency," says Gordon Ho, head of Cooley's cleantech practice, in a statement.
--Alain SherterSee Oct. 18 post on recent levels of VC investment from Tech Confidential
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