Venture capitalists expect green technology to grow faster than traditional areas of VC investment in the coming years, according to the 2009 Global Venture Capital Survey of 725 venture capitalists sponsored by Deloitte Research and the National Venture Capital Association. More than 60% of participants expect investments in green tech to increase over the next three years — twice the level of optimism expressed for most investment categories. More than 35% of respondents indicated that medical devices also offer growth potential, but only 22% were bullish about software, 15% about telecommunications, and 6% about semiconductors. “The venture capital community continues to glom onto truly groundbreaking technologies and is starting to leave the technologies they believe have done as much as they can,” says NVCA president Mark Heesen.

Despite the optimism, early forays into green technology have revealed some of the financing challenges. For example, energy-related businesses are expensive to commercialize. Over the past few years, some VCs have put tens or hundreds of millions of dollars into solar or biofuels companies — a great deal more than the typical IT or social-networking investment. Since VCs don’t expect to have more money to invest, small companies and their backers need to partner with large companies, such as utilities or fuel refiners, to bring their technologies to market, according to survey respondents.

Overall, about half of the respondents called the current economy a “terrific” time to invest in promising entrepreneurial companies, with slightly fewer than half calling 2009 a “fair” opportunity. Most respondents are optimistic that the second half of 2009 will see a higher level of investment after a sharp drop-off in the first half of the year. Overall, however, the VC industry is contracting. Large funds — those with $500 million or more under management — are generally shrinking. Only smaller funds — those with $99 million or less under management — are growing. Funds in the Americas (excluding the U.S.) and Europe expect the greatest growth, and investors expect to spend more money outside the U.S. in developing markets such as Asia-Pacific and Latin America.

Go to: CNET News

Posted June 17th, 2009 under Tech Transfer

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