First published in Cleantech magazine 2012, Issue 5. Copyright Cleantech Investor Ltd.
Cleantech funding – certainly for early stage companies – is becoming increasingly difficult to secure. Venture capital investors are more risk averse than they were and many are restricting their investments to later stage opportunities.
The risk profile of venture capitalists (VCs) is determined in part by their own investors – the willingness of their backers to fund the higher risks entailed in investing in early stage technologies – and clearly their funders have not been immune to the global recessionary environment. The appetite of VCs for new investments is also determined by their ability to secure successful exits for their existing portfolio companies. In the current tough economic conditions, a stock market IPO is out of the question for all but a few high-flying cleantech companies. Industry sales are an increasingly common alternative these days, evidenced by a rise in merger and acquisition activity in the sector. However, the danger for VCs is that they fail to achieve a sufficient return on a trade sale – with implications for the performance of their funds and, in turn, their ability to raise further funds.
Corporate venturing is proving more and more popular and we are increasingly coming across deals by the venture capital arms of the likes of Siemens, BP and Bosch. However, the corporate route is not for all cleantech start-ups.
The market for cleantech venture capital will inevitably improve if – and when – we see a recovery in the global economy. In the meantime, however, the onus is increasingly on institutions such as the UK’s Technology Strategy Board and its international counterparts to fund early stage innovation. This special fuel cells issue includes a Cleantech Infocus supplement highlighting the work of the Technology Strategy Board in the fuel cells and hydrogen space. Case studies of companies which have successfully worked with the organisation clearly demonstrate the advantages of its particular approach to funding innovation. It is to be hoped that there are enough private sector investors out there to provide the matched funding needed for future financing rounds by the Technology Strategy Board and to ensure that innovation in the cleantech sector continues.
Anne McIvor - Founder and CEO, Cleantech Investor, October 2012
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