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.
“In this environment, it pays to be either a very early stage investor or a very late stage investor,” said Steve Fredrick, general partner of Grotech Ventures. “The classic Series B round, where a business is still finding its legs and remaining capital requirements are at best an estimate, carries more risk given higher burn rates and the climate’s uncertainty around future financings. So we’re seeing reduced investment levels as firms either invest smaller sums in very early stage companies, or invest traditional sums in fewer and much later stage companies. The middle ground has been largely vacated.”
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.