The venture-capital industry is less a harbinger of things to come for the clean-tech industry than it used to be.
In the early years of this century, private money from venture investors helped defined which companies lived and died, which expanded and which did not.
Markets for solar panels, biofuels and smart meters have grown substantially since then. Market-place demand, economic trends and government spending now wield bigger influences on company prosperity.
So the news Monday morning that venture industry fundraising has swooned will have less impact on clean-tech companies than it would have four years ago. But it is still not good.
The National Venture Capital Association and Thomson Reuters announced that the amount of money going into new venture funds fell 49 percent in the second quarter to $1.9 billion. The quarterly total is the lowest since 2003.
Clearly the industry succumbed to the financial turmoil stirred up by the debt crisis in Europe and the corresponding fears of a slower United States economy. NVCA President Mark Heesen says the fund raising trough is likely to continue through the year.
The challenge for venture firms is they raise their money from big pension funds, endowments and financial houses that are sensitive to changes in the broad investment environment. Add that to fears of a continued slow IPO market, from which venture funds make money – and the mixture is catatonic.
A few successes in the IPO market could change this. If Tesla Motors holds onto a gain, or Amyris gets a warm reception, big money could loosen up.
But on the present course, there will be less money for clean-tech companies and more willingness to invest in smaller rounds.
Is this a sign of a long-term change in venture capital? Probably not. Is it a sign of short term slowing of investments. Yes.
TechPulse 360
Mark Boslet