I came across this post on GreenVC.org from Rob Day an investment principal at @Ventures about what's wrong with cleantech venture capital right now. The presentation is included below, but Day summarizes the trends he sees as follows:
- The shift to larger and larger funds.
- The related shift to later-stage investing.
- The related shift into capital-intensive subsectors and business models within cleantech.
- The mismatch of investment concentration with the geographic dispersion of cleantech innovations and innovators.
- The concentration of venture capital investments into just a few subsectors, while the lion’s share of subsectors receive much less attention (much less dollars) from investors.
From flipping through the presentation itself, a few other things stuck out to me (in my own terms):
- VC's don't know what businesses will work and which don't work (i.e. provide a good return). There just haven't been enough exits yet.
- Exit have been trending towards M&A's rather than IPO's. This is the case across the board in VC.
- Although cleantech has many different segments (e.g. transportation, water, energy storage, etc.) across many different markets (e.g. personal, residential, industrial, government, etc.), yet VC's have been putting all their money into only a few subsectors.
I also came across an interview with Steve Jurvetson from Draper Fisher Jurvetson about DFJ's focus on cleantech these days. Jurvetson seems to agree that certain areas are over-funded right now, like some biofuels for example. He also agrees to stay away from investments that are overly capital intensive. Day was arguing that venture firms should focus on finding investments that fit the existing VC model rather than redefining the VC model to fit with the higher capital requirements of some cleantech ventures.
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