Sustainability risks and opportunities for businesses are increasingly relevant. However, why has venture investment shy away from Green-tech? The discussion about cleantech investment decline and the reluctancy of institutionalized venture funding to invest in capital-intensive cleantech and startups in this sector has been a hot topic this past year.
What does the future of cleantech funding hold? Is the investment mood changing? The NextWave conference explored Green-tech investing and brought together investors, limited liability partners, entrepreneurs, and other stakeholders in a day-long discussion of the changes and opportunities around reshaping investments in the cleantech landscape. Greentech Media organized this first ever event.
Between 2005 - 2008 venture investment in cleantech has grown significantly, especially in solar. $ 25 billion of venture money went into new business in the past nine years. At the same time, the make up of investment has changed mainly to follow up funding and growth portfolios versus initial investment stages. Further, the return on investment in cleantech was relatively poor, there were too few exits, and many startups failed. In 2013 almost all investment in Green-tech has been in follow up businesses.
The problem is not innovation; new ideas in Green-tech are abundant. Energy companies usually need more time to mature, are usually capital-intensive, and carry a greater risk than a software service, an Internet platform, or mobile applications: think Solyndra versus Instagram. However, there were a few successes, such Tesla Motors, Nest (Smart Thermostat), First Solar, oPower, and more. But these were exceptions. In fact, investors reacted predictably to the risks they foresaw.
Moving from a pessimistic outlook to an encouraging view, venture capitalists are more optimistic these days. While positive returns on investments in Green-tech innovations have been scarce in the past, the mood is changing and a new wave of investors and entrepreneurs are taking fresh approaches to cleantech sectors, exploring new investment models and sources of capital. The investors who spoke at the event said they were changing their definition of what constitutes innovations and adapt by offering different investing models. For example, the hybrid approach provides the capital and also project coaching and support. Another approach is targeted acquisitions. Some investors look at the breakdown of each cleantech sector into sub-fields. For example, energy efficiency can involve software service or apps as a sub-field and also the engineering services or operations as separate. At the same time, the speakers called to entrepreneurs to incorporate different business models to build their companies, for example, the idea of borrowing the ‘lean startup’ model into cleantech hardware.
More good news?
Worldwide, the clean technology market today is worth more than $ 2.7 trillion a year. According to a Roland Berber Strategy Consulting report it is expected to grow to $ 5.7 trillion by the 2020s. The report found that this acceleration is expected to occur regardless of potential ongoing global financial turmoil. In the past five to six years the clean technology market has grown at an average of almost twelve percent a year, in spite of the worldwide economic and financial crisis in recent years.
Read more about the Roland Berber Strategy Consulting report below.
1. NextWave conference information by Greentech Media (GTM): click here.
GTM website: http://www.greentechmedia.com/
2. Up-coming GTM events and conferences: http://www.greentechmedia.com/events/conferences
3. Click on the Roland Berber Strategy Consulting report extract.