In today’s economic conditions (2009), we often hear about the scarcity of funding for start-ups including the clean-tech industry. I attended a clean-tech panel hosted by sdforum (http://www.sdforum.org) which explored the alternate funding strategies for start-ups in this space. The panelists represented Silicon Valley Bank, Venrock, TriplePoint Capital and Clean-tech Circle.
The funding scenario: There has been a rapid decline in global clean-tech funding. There were too many clean-tech companies funded in the past and the funding pace has tremendously slowed down in 2009. It is a choppy market for angel funding and angel investors have retracted from funding long-cycle R&D projects. Some companies are getting Venture Capital funding, although the competition is stiff and the bar is set high. Companies need to have compelling business plans and strong differentiation from their competitors.
Cleantech industry scenario: The industry is attracting great talent from other industries for its growth and expansion in the next several years. The solar industry has reached its capacity limit with too many players competing in this space and consolidation is expected over the next several years with a few prominent and emerging leaders in the industry. The geothermal area is still risky to be funded and is in infancy stage now. On the other hand, biofuel industry is backed by the Government to grow over the next decade and the market is infinite for companies in this space. Companies like Chevron, Shell and BP are well positioned to invest in cleantech projects. Samsung is the latest entrant into the Solar field with its solar powered phone with other similar companies expected to join.
Alternative funding sources: The stimulus money from the Government is creating some impact on the funding scene. Capital intensive companies seek Government funding from the Dept of Energy, Solyndra received $535 million loan guarantee in March. Venture Capitalists seem to have stronger relationships with the Government for funding cleantech projects. Municipal Funding is an alternative funding source for cleantech startups to explore. The panelists agreed that European Utility companies are good to partner with for cleantech investments.
It was an interesting panel shedding some optimism on obtaining funding in this gloomy economy and highlighting the alternative sources of funding for cleantech startups. It was clear that biofuel companies with Government backing have tremendous growth potential in the next decade.
