Cleantech Investment Overwhelmingly Energy Focused.
Yesterday, the National Venture Capital Association (NVCA) issued a press release highlighting the growth of "cleantech" investing by the U.S. venture capital sector (see Cleantech Venture Investments by U.S. Firms Break Record in 2007, November 28th, 2007). The sector invested U.S.$2.6 billion in 168 deals this year to-date (i.e. to the end of the third quarter), a significant increase over the U.S.$1.8 billion invested in 2006.
Noteably, less than one-half of this investment was in the U.S. with the three largest investments of the year-to-date in the Netherlands (U.S.$500 million), Brazil (U.S.$200 million) and China (U.S.$118 million).
The technologies that the VC's were chasing were largely related to alternative energy and power supplies, accounting for almost 95% of the total invested. Solar energy was the most popular target, with U.S.$665 million directed at 35 deals.
I first came across this announcement in a post to the Wall Street Journal's Energy Roundup Blog (see VC's Get Clean, November 28th, 2007). Noteably, the WSJ's writer highlighted comments in the press release attributed to Mark Heeson, President of NVCA, cautioning venture investors.
"... as has been demonstrated in the IT and life sciences arenas, investing in new technologies can be fraught with pitfalls and is not for the inexperienced or the faint of heart. Prudent, long-term investment in cutting-edge technologies has been the hallmark of venture capital in the past and should be the mantra in the Clean-Tech space as well. Short term 'tourists' should steer clear."
While I couldn't help but think of the dot.com bubble when I read the words prudent and long-term, I think this is a good warning for all who would invest in the sustainable energy arena. The caution simply reflects the risks associated with investing in the small caps and start-ups that make up much of this sector of the energy investment universe (and a warning I've given before, see The Bumpy Road For Small-Cap Investing, October 29th, 2007). End of reality check.
While U.S. venture capital is the largest single source of venture investment today, it is far from the only source. I would be interested in finding statistics for global cleantech venture investment, to the extent there is an organization that has been able to compile this. Any suggestions?