After soaring in 2008, cleantech venture investment has plummeted in 2009.
In the first half of this year, cleantech companies raised $512 million—about one-fourth of the $2 billion invested in the sector in the same period a year ago, according to the MoneyTree Survey from the
And while funding improved some in the second quarter, with VCs investing $274 million, up 15% from the $238 million invested in Q1, VCs say they don’t expect any near-term return to last year’s levels.
“The cleantech financing bubble has burst,” said Mamoon Hamid, a principal at
Although Solyndra to date has raised $226 million in venture funding from USVP,
Hamid was one of five venture investors who participated in a panel discussion last week in Palo Alto, Calif., called “The Current State of the CleanTech Bubble,” which was hosted by SDForum at the law offices of Pillsbury.
Though not all the panelists agreed that last year’s funding levels represented a bubble, most predicted that, going forward, other funding sources, such as from the federal government, strategic investors and project finance lenders, would take on a larger share of cleantech financing.
“Venture capital represents less than one-third of the dollars that are fueling innovation in cleantech,” said panelist Don Wood, managing director at
But while they welcome increased federal funding under the American Recovery & Reinvestment Act of 2009, several VCs said they’re skeptical that the money will go to companies with superior technologies.
Rather, they said, recipients are likely to be judged on who can claim to create the most jobs. Additionally, VCs said that there could be a bias to business plans that are highly capital-intensive, and therefore less attractive to VCs.
“We don’t want to make our investment decisions based on what some government bureaucrat thinks about increasing headcount,” said Robert Walker, a principal at
Matt Garratt, senior associate at
The stimulus includes generous sums for all things green, including solar farms, wind turbines, electrical grid updates, and weatherizing buildings. Some industry watchers expect to see upwards of $200 billion going into the space over the next two to three years.