The once hot green tech sector has cooled down in recent months as venture capitalists shift attention to more internet-specific companies. According to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Association, second quarter investments in green tech were down by 23% in dollar terms from the first quarter. In contrast, investments in internet companies topped out at $2.3 billion, up 72% over first quarter investments.
The latest investment numbers reveal a higher propensity amongst venture capitalists to invest in innovative new online businesses such as LinkedIn, Groupon, and Pandora in search of quicker returns.
Any investment that did take place in the green tech sector emphasized existing companies, where the focus was on late-stage investments rather than seed money for new projects. The once booming solar sector took a back-seat recently, as investors turned to less capital-intensive ventures such as the energy efficiency industry. In particular, investors have been looking out for more “capital efficient” investments which require lower initial start-up costs. For instance, LED lighting can be cheap to make and sell, and can turn to a profit in a relatively short period of time.
Although the 2009 stimulus plan in the United States brought an influx of funding for scientific research in the renewable energy sector, the stalemate in Washington over national environmental regulations has stunted further green tech growth. However, as a recent article on CleanTechies pointed out, the clean tech industry is still in its infancy, poised to explode like the internet did 15 years ago.
Despite the growing drought in venture capital investments in the green tech industry, corporate investments are still going strong. A brief perusal of the latest green tech headlines reveals that some corporations are still investing big into either renewable energy or innovative new green businesses. Take Google, for instance, which recently announced plans to invest $280 million in Silicon Valley’s SolarCity.
Therefore, the recent trends in venture capital investments are just that: trends. The money will continue to flow where short-term profits can be made. However, corporations that are in it for the long hull, like Google and GE, recognize that the green tech sector will reap huge benefits over time.
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