With Uncertain Financial Future, Cloudy Skies Ahead for American Cleantech

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With Uncertain Financial Future, Cloudy Skies Ahead for American Cleantech

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Friday, September 28, 2012 - 9:10am

Looking at 2011 VC investment figures, it seems like the cleantech industry in the United States is doing just fine. According to the Cleantech Group, a market intelligence advisory group based in San Francisco that has been tracking cleantech investments for the past decade, 2011 is the first year that saw more than $2 billion in cleantech venture investment in all four quarters. 4Q11 saw an impressive $2.21 billion in cleantech VC investments.[1]

But if you take a closer—and wider—view, the bigger story isn't all that great. For one thing, the numbers for seed-stage deals were flat as investor focus turned to re-investing in firms already in their portfolios, firms that needed later-stage growth capital. In dollar terms, the news for early-stage startups across all industries is even worse. In 2011, VCs invested just $919 million in seed capital in 396 companies, a decrease of almost 50 percent from the previous year. In fact, seed-stage deals were the only stage of VC funding in 2011 to experience a decrease in average size. On the other side, late-stage VC investments in 2011 experienced a 37 percent increase.[2]

TROUBLED TIMES FOR CLEANTECH VC

That change in focus is part of a worrisome trend: According to Third Way, a Washington DC-based think tank, there were twice as many late-stage deals than early-stage deals in the cleantech sector in 2010—the first time that late-stage financing overtook early-stage development since 1999.[3]

The trend has sounded alarm bells about the state of cleantech innovation in the United States: If VCs are targeting re-investments in portfolio companies, where does that leave innovative start-ups in dire need of financing? One concern is that without VC interest in committing seed money to new ideas, America's start-ups will look overseas for funding, leaving the nation in a cleantech innovation drag.

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Reynard is a Justmeans staff writer for Sustainable Finance and Corporate Social Responsibility. A former media executive with 15 years experience in the private and non-profit sectors, Reynard is the co-founder of MomenTech, a New York-based experimental production studio that explores transnational progressivism, neo-nomadism, post-humanism and futurism. He is also author of the blog 13.7 Billion Years, covering cosmology, biodiversity, animal welfare, conservation and ethical consumption. He is currently developing the Underground Desert Living Unit (UDLU), a sustainable single-family dwelling envisioned as a potential adaptation response to the future loss of human habitat due to the effects of anthropogenic climate change. Reynard is also a contributing author of "Biomes and Ecosystems," a comprehensive reference encyclopedia of the Earth's key biological and geographic classifications, to be published by Salem Press in 2013.