One of the questions that have been raised about the global cleantech industry is whether venture capital funds can finance companies in the field, and bring them to an exit.
According to an annual report from accounting firm Ernst & Young, in collaboration with VentureSource, in contrast to previous years where the level of investment in cleantech firms rose significantly, in 2010 there was only a moderate rise. It is likely that the situation reflects investors' thought process - on one hand, they see potential in firms and want to invest in them, and on the other hand they recognize that the venture capital model can't really do that.
According to the report, the total venture capital investment in cleantech in the US grew only 8% in 2010 compared with 2009, to reach $4 billion (compared with 3.7 billion in 2009).
Despite the small rise there are encouraging signs. Lighting Science Group is looking to raise $150 million in a Nasdaq IPO. This comes a week after biological and biochemical fuel developer Gevo raised $104 million in its successful IPO.
For Israeli companies the figures are somewhat smaller. In 2010, $108 million was invested in cleantech companies., compared with $98 million in 2009.
Ernst & Young Israel cleantech sector head Itay Zetelny says that the character of local cleantech investments in 2010 shows a slight, not significant, improvement. He says it also shows the maturity of the local industry.
Zetelny: "A major portion of the overall amount went to companies at advanced fund raising stages. The average amount raised rose from $2.5 million to $4 million."
Zetelny adds that alternative energy and solar energy continue to attract most of the capital, with more than 80% of investments.
What's ahead for Israel's cleantech industry in 2011?
"In 2010, part of the funds that specialize in the sector invested the money they raised for their first funds, and began new funding rounds. Currently it appears that the fund raising is proceeding nicely. With that, there is only a small amount of money available to companies in early stages or who have to move to production or project stages.
"Various government funds, specifically those of the Office of the Chief Scientist - who in 2010 increased the amount aimed for the industry, provide a partial solution to the shortage. Yet the need to increase the financing by the government is still crucial, especially in light of the reduced amount of private financing, and the great interest in the industry, which continues to germinate new companies."
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2011
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