Live Blogging OG09: Cleantech VC Panel Insightful, Sobering

Posted on 07. Nov, 2009 by in Design & Culture

2_half_fullOGOG’s Cleantech Venture Capitalist breakout session, led by John Babcock, Partner at Rustic Canyon Partners and Colin Bryant, VP at Paladin Capital Group, was a sobering reminder that not only did cleantech VC funding take a big hit in 2009, but that cleantech VC may never be quite the same.

Babcock and Bryant make their money by asking the tough questions, and frankly, by saying “no” many more times than “yes.” So they need to lean towards the pessimistic side in their analysis. But while both men do believe cleantech has a bright future, as Bryant said there may be a new “new normal” for cleantech VC, one where companies need a much clearer route to profitability (and thus a clearer exit route for VC funders).

According to Bryant, a consensus is growing that cleantech is unlikely to have the same returns on investment as other high-growth sectors like technology. The regulatory environment remains challenging as well: projects and even whole cleantech sectors can still depend on whether a national or local government passes a specific rebate or regulation. And the entire industry is waiting for Congress to act on cap-and-trade or some other far reaching environmental plan that will provide a true cost for fossil fuels, and even the playing field for renewables and efficiency measures.

Efficiency, in particular, remains attractive to VCs. A product that reduces energy consumption, whether in your house, car or elsewhere, even if only incrementally so, is more likely to attract capital than, for instance, a renewable energy system that will depend on a host of outside factors for profitability. This was a trend also mentioned at the OCTANe automotive cleantech panel OppGreen attended last month.

The answer to whether this new “new normal” is indeed so will have to wait until OG 2010.

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