VCs look to cleantech as saviour

European VCs are planning to ramp up their investment in cleantech companies over the next three years according to the Global Venture Capital Survey by Deloitte Touche Tohmatsu and the European Private Equity & Venture Capital Association.

Whilst the bulk of venture capitalists – 79% – expect investment levels to remain stable across all other industry sectors, 63% of global VCs and 71% of Europeans are looking to take advantage of new technology, growing consumer demand and increasing government support to invest in clean technologies.

The annual survey recorded over 700 VC opinions and found a majority – 51% – were cutting backing on the number of new companies they invested in and just 13% increasing.

There is also set to be a further shift towards later-stage investments until the exit market reopens – 36% of respondents intend to move in this direction in order to support existing portfolio companies. Six percent plan to move toward early-stage investing.

The survey also revealed a wider pessimism over the future of the venture capital industry. Eighty-eight percent of VCs expect commercial banks to decrease their commitment to venture over the next three years, 87% think investment banks will follow suit, 65% think insurance companies and 63% believe corporate operating funds will cut investment.

Governments are expected to up their exposure to the asset class however, with 54% of respondents of the belief that appetite amongst the political class is set to increase. Corporations and family offices (23%) and fund-of-funds (22%) are also predicted to raise their investment.

The role of government is crucial according to VCs. When asked which government actions would be most important over the next 12 months to help move technology forward, 66% cited the implementation of favorable tax policies; 40% believe that government support for entrepreneurial activity is important; 31% would like governments to encourage more active public markets; and 29% believe improved access to private capital sources will help better support innovation.

The best move a government could make would be to encourage institutional investors to invest in venture capital according to 58%, with 39% believing believe governments need to motivate endowments and family offices to invest in venture, 36% favouring a liberalization of tax policies, and 31% believe an increase in research and development funding would be favorable to the venture industry.