Clean-Tech Bubble? How Cliche

from the here-we-go-again dept

There’s no debate that the clean-tech sector has been enjoying a surge of interest from the venture capital community. Wired magazine takes a quick look at some recently released data that shows that clean-tech investments by VC have surged to new heights in 2007. The article notes that clean-tech dollars are closing in on the amount invested in Internet start-ups which, naturally, raises the specter of everyone’s favorite B-word: Bubble. Yes, the accelerating rates of VC investment into clean-tech companies might chart something like late-90s VC Internet start-ups. Yes, 2008 may indeed bring some clean-tech “venture flameouts” reminiscent of Webvan and eToys. Overall, though, using the history of the Internet sector as a yardstick (let alone a forecasting tool) for clean-tech is naive. The article does steer away from this analogy to some extent: on the whole, clean-tech companies will be measured the old fashioned way, in revenue dollars rather than in clicks, page views, or eyeballs; clean-tech companies are generally trying to capture pieces of some very large existing pies, rather than define and create new markets for themselves; and clean-tech businesses look more bricks-and-mortar than Internet in terms of infrastructure requirements.

Digging a bit further into the numbers provides some insight into whether or not VC firms are looking at clean-tech as the Internet-boom redux. While clean-tech VC dollars are closing in on the amount invested in Internet start-ups, the number of companies funded with those dollars is much fewer (168 deals over three quarters of 2007 compared to 195 Internet deals in the third quarter of this year alone) and the value of those deals is substantially bigger (upwards of $11MM on average, compared to $5-6MM avg. for Internet companies). The number of new Internet companies getting funded far exceeds new clean-tech businesses, meaning much of the clean-tech money is re-investment in existing companies. In this light it’s fair to say that the growth in VC dollars for clean-tech is more indicative of a maturing sector than of a bubble buildings to a burst. A few billion dollars seems to be a reasonable investment toward trillion dollar opportunities. But if I start seeing beige-and-white box vans driving around San Francisco again, and sock puppets on TV, I’ll start getting worried.

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Comments on “Clean-Tech Bubble? How Cliche”

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Jon L (user link) says:

Hard Assets vs. No Assets

One other element of note in the clean-tech funding strategies is that a great many of the investments are going into prototyping and *actual hardware* instead of lines of code that are supposed to turn into paying users or paying advertisers by magic.

While some clean-tech startups are software-centric, that’s not the case in the majority.

So in the overall picture, I would expect *more* $$$ to flow into ventures that require real assets than I would expect to flow into two kids coding in their garage:)

green economical nature (user link) says:

Hydrogen Bubbles in the Sunshine

The Internet bubble and the new energy technology sector could share the same irrrational exuberance, investment before profit and so on, but the industries are so different.

Digital technology should be profitable from early on, when the overhead costs are low, you don’t need a distribution infrastructure, and you aren’t competing with viable established industries.

Green renewable energy is something that requires a lot of steel and concrete to build, profits aren’t expected up front, the physical infrastucture is where the tech gets a foothold.

Still, IPOs are exciting.

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