VC spells out clean tech investment check list
Speaking ahead of this week's European Tech Tour for venture capitalists, Bernard Vogel explains what investors are looking for in clean tech firms James Murray, Asia BusinessGreen, 09 Jun 2009
BusinessGreen.com: The European Tech Tour Association is to have its first dedicated clean tech event this week. How will it work? Bernard Vogel: The Tech Tour is a not-for-profit organisation for venture capitalists (VCs) such as myself and entrepreneurs. It runs match-making events that bring together technology startups and potential backers and we will be running our first clean tech event in Geneva on June 17 and 18. We had applications from around 300 clean tech companies and we whittled that down to 25 companies that will present to an audience of 150 VCs. What types of companies will be presenting? The aim is to get representatives from a wide range of countries and technology areas. Energy generation is obviously the most high-profile clean tech area, but we are also looking at lighting, recycling, fuel cells and batteries and smart-grid companies. Why now? The tech tour has been going for 10 years and last year we clearly saw growing interest in clean tech investment from the VCs who are involved with the organisation. Clean tech is now the second largest investment category after biotech for VCs so it felt the right time to run a dedicated event. The number of clean tech investment funds has more than quadrupled in the past five years. Why is there so much interest in the sector? We see good investment returns and the potential for even bigger returns. The regulatory changes and demand for clean energy that are out there means there is now the opportunity to build really big firms. We are also now seeing good, experienced entrepreneurs and executives coming into the sector, many of them from the IT industry, which wasn't always the case in the past. There has been a clear improvement in the quality of the management teams. What are VCs specifically looking for in a clean tech investment? We are always looking for three things: a unique technology, a focus on a big market, and a good management team that can deliver success. Increasingly we are seeing all three of those characteristics across a wide range of clean tech firms. And yet VC investment in clean tech fell by almost 50 per cent in the first quarter of the year. How concerned are you about the impact of the recession? I'm very optimistic. There was a pause in investment during the first quarter, but that was due to investors worrying about where the whole world was going. Energy, which fundamentally is what most clean tech is about, is a long-term need and in the long term we will see continued growth. There are also a lot of
upsides already evident. Obama has provided a huge boost to the clean tech sector, the EU now has ambitious climate-change plans, and at the end of the year we will hopefully get a global deal at Copenhagen. All of this points to clean tech being a great market for the next five years. People working on capital intensive wind farm projects are suffering because of the economy, but there is still going to be strong interest in good new technologies and a lot of VCs recognise that this is a good time to invest. Which sectors do you think are the most attractive? Some commentators have said that the established wind and solar industries are overheated and investors can get better returns from less glamorous technologies. It is more about finding the right companies than looking at sectors. For example, there is a lot of investor interest in solar. It is a market that is going to be growing at 30 per cent a year and if you back a competitive company you are going to have a very attractive investment. There are a lot of interesting investment opportunities across a wide range of clean tech sub-sectors. Bernard Vogel is co-founder and managing partner of venture capital firm Endeavour Vision, which focuses on clean tech and technology investments.