Solar Panels by Flickr user Chandra MarsonoEnlarge Photo
The green technology investing boom has slowed. But if you ask investors, greentech isn’t disappearing, it’s just changing.
Between 2006 and 2007, cleantech and greentech emerged as hot terms in the investor vernacular. Startups focused on big-picture energy needs, including solar and wind power, pulled in huge investments, thanks in part to the rising price of oil. Government initiatives, along with venture capital, helped these companies grow quickly.
“Most of the investments were in energy production, focusing on increasing energy supply,” said Physic Ventures partner Andrew Williamson in an interview with VentureBeat. “These were capital-intensive investments in mostly solar, wind power, and biofuel commercial and industrial startups.”
But the demand for revolutionary energy technology startups has fizzled in the last few years. Solar production moved to China, and lower costs undermined United States manufacturing. The 2008 economic collapse hurt many industries, including greentech.
After the famous Solyndra bankruptcy in Fall 2011, public opinion of solar and other large-scale energy technology slumped and new companies in the field have struggled to raise capital.
“The solar space as a whole is so depressed and troubled,” Pangaea Ventures partner Keith Gillard told VentureBeat.
Less solar, more consumer tech
Since the 2008 recession, venture capital firms have refocused their funds away from solar and onto different areas of greentech. Physic Ventures has found success investing in consumer-focused green technology startups, as well as startups applying green principles to already viable technologies, such as cloud, mobile, and social.
Startups that take the latter approach have gained VC firms’ attention because their more-familiar business models can set them up for successful exits, says Williamson.
Business-to-consumer startups that focus on sustainable living, recycling, and collaborative consumption have also done well. Recycle Bank, which rewards people for doing green activities, and Energy Hub, a startup using cloud tech to manage home energy usage, are two examples of Physic-backed startups applying greentech issues to current technology.
2012 Ford Focus Electric, New York City, April 2012Enlarge Photo
Electric vehicle investments steady
While solar and wind energy funding activity has slowed down, electric vehicle investments have remained steady throughout the years.
“If you can have an electric vehicle where people don’t have range anxiety, the ultimate market impact will be enormous. There is a particular value for EV startups, because there is urgency and pressure in the market,” says Gillard.
In addition, startups developing longer-range batteries for electric vehicles have done well in raising capital, as well as generating revenue.
People want electric cars that can travel as far as the gasoline-powered variety, and that means car makers need better batteries. Pangaea Ventures has invested in two battery and energy storage companies, Envia and CNano.
Greentech funding to go on
Even though it has slowed down, greentech funding isn’t dying. Goldman Sachs announced a $40 billion fund for greentech investments, mostly earmarked for overseas energy companies.