Venture capital

China might be developing a green business constituency, but what about the US?

The American green business story has been dominated (in terms of PR, in any case) by venture capital, centered in California. Venture capital isn't necessarily the best model for funding renewable energy experimentation, for a variety of reasons, but it's an important part of the US investment landscape and it's where things have ended up centered around here. There were a bunch of news articles about it today, and it's a bit of a mixed bag.

This article reports that VC cleantech investment is up 54% over all from last quarter. (California got 56% of it, which is a majority, but less of a majority than last year. Relatively speaking, the southeast is growing faster than California, apparently.) That sounds kind of nice.

The same article also notes that energy efficiency dipped by 49%. That's not so nice. Energy efficiency is probably better suited to the VC investment model than a lot of the renewable energy technologies. It might be bad for the world, too. Efficiency isn't as sexy as something like solar, but it's an area with more low-hanging fruit in terms of fast emissions cuts. On the other hand, it's also a more mature field, so maybe it needs less VC right now.

Investment in storage is up, which is probably good for the world. Storage is one of those technologies that's key to making lots of other strategies work.

Finally, this article notes that generalist VC funds seem to be pulling back from cleantech; ongoing investment is largely driven by either cleantech-focused funds or follow-on investments in things generalist funds had already committed to. The article sums up the problem: "These 10 [generalist] firms (see table at the bottom) seem to have given the grand cleantech investing experiment about five years, and then realized it wasn’t for them — or at least wasn’t making them enough money at a fast enough rate. As most people who follow cleantech investing know by now, the timelines to exits and acquisitions seem to be consistently longer and require more capital than investing in information technology." Cleantech-focused firms, however, are "doubling down."

What makes this really interesting, though, is this: "There are also new firms emerging specifically focused on cleantech investing that are ready to learn lessons from the past and also structure deals in new ways. The article points out WindSail Capital, which plans to issue secured notes for cleantech startup assets, and is structured more like a hedge fund." This is something people have been talking about - and I've been wondering about - for a while. Given the fact that lots of conventional cleantech is difficult for general VC to grapple with successfully, everyone discusses that fact that "new investment models" are needed for cleantech. Are we finally at a point where we're going to be able to start talking about what those are and what works best, based on actual experimentation?