Finding the clean tech money
Green tech financiers share tips for spotting sustainable start-ups.
DAVIS, Calif.--What kind of clean tech product will thrive over the long term?
"Something that doesn't defy laws of physics, and there are plenty of those," said Rodrigo Prudencio, a partner with Nth Power LLC. The venture capital firm helped Evergreen Solar and Imperium Renewables to get off the ground.
Nobody at the AlwaysOn Going Green conference was making bold predictions about what might become the Google of green tech, but the sector is expected to continue expanding at a rapid clip.
Clean tech companies receive the third largest amount of venture capital, a staggering increase to $2.4 billion last year from $917 million in 2005, according to research by Clean Edge. Ninety percent of venture-backed, green tech companies that made initial public offerings last year are listed on the Nasdaq market.
"There will be new ways to squeeze that last bit out of a kilowatt and new ways to create that kilowatt," said Steve Eichenlaub, managing director of Cleantech Investments at Intel Capital. He and other investment experts offered these tips:
- Don't burn out by shooting for every initial public offering. "You still have to be careful," said JonCarlo Mark, senior portfolio manager at CalPERS. "There will be money lost in certain technologies and investments, but there's a need to diversify from fossil fuels."
- Although unglamorous, technologies that improve energy efficiency, from manufacturing plants to workplaces to homes, will be in high demand as businesses and consumers seek to reduce expenses and carbon emissions. "All companies making incremental improvements in the energy economy are gonna move the needle," said Prudencio.
- Renewable sources of energy that don't lean on government subsidies or tax incentives look promising.
- Think globally, far into the future. For instance, the need for water filtration and treatment will balloon as the world's population exceeds 8 billion within the next decade, and more people migrate to coastal regions.
- "Climate change aside, anything that takes hazardous waste out of the market is gonna be a huge market for investment," said Keith Casto, a partner of Sedgwick, Detert, Moran & Arnold who heads the law firm's international climate change practice. Companies that use recycled components in manufacturing can save money they might otherwise spend on a dwindling supply of raw materials.