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For Bruce Pasternack, a partner with CMEA Capital, the government stimulus funds were a welcome shot in the arm for VCs, helping them take some of the risk out of backing cleantech startups. “We have a new partners, and that’s the Department of Energy,” he said while attending the State of Clean Energy: Global Challenges and Opportunities conference this month, according to VentureBeat.
But now that U.S. Department of Energy (DOE) stimulus funding has practically dried up, venture capitalists can’t count on more government-induced tailwinds to propel their cleantech ambitions. So, how are they coping? I’d say pretty well, if you factor in an encouraging string of early 2010 deals that culminated in this week’s massive $350 million round of financing snagged by EV infrastructure firm Better Place and headed by the HSBC Group. And don’t forget Bill Gates’ role in pushing the Khosla’s green-tinted fund to the $1.3 billion mark.
Want more proof? Despite the fact that overall cleantech investment took a bit of a breather in the final quarter of 2009, VCs are signaling a reinvigorated sense of confidence in the space. Take, for instance, the panelists at the Dow Jones Private Equity Analyst Outlook in New York; the DOE stimulus outlays are already disappearing into their rearview mirrors.
VentureWire reports that investors are currently scouting out opportunities, particularly in smart grid infrastructure. EnerTech Capital managing director, Tucker Twitmyer, also sees “a huge amount of activity on the strategic side,” noting that larger corporations are on the hunt for cleantech firms to acquire. This is good news for investors eyeing an exit, “whether or not the capital markets rebound” concludes Hovey Kemp of Goodwin Procter LLP, a partner in the law firm’s private equity division.
More information about the VC community’s appetite for cleantech emerged from a Thomson Reuters survey looking into China’s impact on the scene. China loom larges over any talk of the global economy, especially now during the World Economic Forum at Davos. Here at home, President Obama singled out China as one of the countries vying for cleantech dominance, to the detriment of American industry and competitiveness, during his State of the Union address this week. American investors, on the other hand, see things differently.
According to the Thomson Reuters survey, cleantech VCs plan to boost investment in 2010; compared to the 117 new cleantech investments made throughout 2009, this year we’ll witness up to 140 such deals — the lion’s share of which will go to U.S. companies. The reason, at least according to Arch Venture Partners co-founder and managing director Robert Nelsen, boils down to U.S. innovation. “China and Europe are doing well developing markets and applications, but we still own the fundamentals,” Nelsen said.
Many of his fellow VCs share the sentiment. Among those polled, 88 percent pointed to the U.S. as the best place to base a cleantech firm. VC optimism in a healthy U.S. cleantech market right here at home seems undiminished.
Does that mean 2010 will be a gangbusters year for cleantech? Let’s just say that we’re off to a very encouraging start. Consider this: Barely a third of the way into the first quarter, and U.S.-based cleantech firms have already raised over $500 million, half of the $1 billion invested globally during the same dismal quarter a year ago. Not bad, wouldn’t you say?