Greening Venture Capital: Are Clean Technologies the Next New Thing?
Scheer, Roddy, E Magazine
In the wake of the dot-com bust, forward-thinking investors have been in search of the next big thing to revolutionize the economy while lining their own pockets. Many venture capitalists seem to be banking on the so-called "clean tech" sector--startups committed to sustainable practices and products, embracing such industries as alternative energy generation and water purification. Clean-tech companies are also emerging in the sustainable agriculture, manufacturing and transportation sectors. Today, the deals are flowing as both individual "angel" investors and well-established venture capital (VC) funds are wing for their piece of "clean tech."
With surging demand for renewable energy across Europe, Japan and many developing countries, not to mention new consumer incentives in the U.S., clean tech has emerged as one of the hottest new investment sectors. Start-ups such as Miasole, Solaicx, Konarka and Evergreen Solar have become established operators poised to usher in an economy powered by renewable sources. Along the way, these companies have garnered millions of dollars in funding from topflight VC firms.
According to Nicholas Parker, chairperson of an association of investors called the Cleantech Venture Network, more than 200 start-ups in the sector drew in 6.4 percent of all North American venture investments in 2003, up from four percent the previous year. "Clean tech is now a larger investment category than semiconductors, IT services, financial services and media," says Parker, who adds that some of the big-name venture firms such as Draper Fisher Jurvetson, Technology Partners and Kleiner Perkins have gotten into the game.
Joel Makower, who runs the research and strategic marketing firm Clean Edge, concurs: "There is no question that this is one of the next big areas of growth in the venture industry." Makower warns, though, that the venture community should be careful to avoid creating another unsustainable bubble around the clean-tech sector. "VC firms rushing into the space looking for investments could increase the casualty rate and set the scene for a bust," he says.
Saved by Angels
Well-heeled venture capitalists aren't the only ones getting in early on the cleantech revolution. Individual investors are also finding ways to get equity in some of these early stage companies via "angel" investing. Angel investors serve a critical role in the start-up process by providing working capital to companies too embryonic to seek venture capital and too risky to attract standard bank or Small Business Administration loans. …