Have VCs decided that saving the environment is a bad idea? According to an article in today’s Mass High Tech entitled “Cleantech-focused funds take over as general VCs back off cleantech” , there’s plenty of evidence to say they have. Look at the chart to the left. MHT asked Dow Jones VentureSource to identify 10 VCs in MA, Palo Alto, and NY who made more than 5 cleantech deals in 2003-2008. Now, look at new deals in 2009-2010. How many? Zero! Now that’s flat-lining. There’s some consolation in the 25 follow-on investments for 2009-2010, but that’s only 43% of the total of 58 new deals in 2003-2008. (For some reason, the chart doesn’t show the totals. This is a strange omission; including them is a no-brainer to me.)
So why the precipitous drop in VC funding? Galen Moore offers some interesting hypotheses and I won’t waste time summarizing them here. Being involved in the clean/green energy space myself, I’d say the biggest reasons are: (1) VCs haven’t identified the “home run” deal; (2) investors got spooked with the global economic crash in 2008 and needed to stick to their knitting; (3) customers represent growing markets but they’re not mature enough to enable VCs to see a profitable exit strategy.