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NVCA: Clean tech to get more VC funding

Posted: 01 Feb 2008     Print Version  Bookmark and Share

Keywords:venture capital  clean technology  semiconductor funding 

Venture capital dollars for clean technology will grow this year, but semiconductor funding will decline, according to a survey from the National Venture Capital Association (NVCA).

The NVCA study also predicts an improved climate for initial public offerings; further consolidation in the VC sector and continued reservations about investing in certain regions, including China. The survey, conducted in December, includes the predictions of more than 170 venture capitalists from across the United States.

"For venture capital firms, 2008 will be the year we begin to see larger funds raised at a faster pace, as many firms in the industry will focus on sectors that have increasing capital requirements, such as life sciences and clean technology," said Mark Heesen, NVCA president. The latter category encompasses technologies, including IT, designed for maximum energy efficiency and minimum environmental footprint.

High expectations
The VCs surveyed foresee moderate investment growth this year, with 71 per cent of respondents pegging the total investment level at Rs.78,956.78 crore ($20 billion) to Rs.114,487.33 crore ($29 billion). The average forecast is for a flat market of Rs.106,591.65 crore ($27 billion), but a quarter of the respondents predicted a VC investment market of Rs.118,435.17 crore ($30 billion) to Rs.153,965.72 crore ($39 billion) for 2008.

Some 80 per cent of the respondents believe the clean technology sector will attract higher levels of venture financing in 2008. However, 61 per cent also believe the sector will be overvalued this year, according to the NVCA.

Other sectors that should see investment growth this year include media and entertainment, biotech, and Internet-specific companies. Investment in medical devices and wireless telecom is expected to grow only moderately, with more than half the respondents predicting static or declining investment in those sectors.

Roughly, 49.7 per cent of the VC respondents predicted a decline in semiconductor investments, while 36.6 per cent projected a flat funding market for chip businesses and 13.7 per cent said they expect investments in the arena to rise. When asked about software investments, 21 per cent said they expect a decline.

Other results
Questions on international investing revealed continued concerns about certain regions. Thirty-seven per cent of respondents said they are "leery" about investing in South America, and 28 per cent are hesitant to invest money in China in 2008. Eastern Europe causes concern for 17 per cent of the venture capitalists surveyed.

Investors identify which regions make them "leery."

Other predictions are:

  • Most respondents believe the VC industry will consolidate further, with 57 per cent predicting the number of venture firms will decrease.

  • While 59 per cent are confident of further IPO market recovery, 22 per cent see flat IPO activity, and 19 per cent believe the market will weaken for venture-backed companies.

  • The venture community is split when it comes to how deal valuations in the acquisitions market will trend in 2008. Thirty-five per cent said valuations will be higher, 27 per cent think they will be lower, and 38 per cent expect them to remain the same.

  • Many survey participants foresee declines in the long-term performance of the buyout and hedge fund industries. Forty-three percent and 51 per cent predicted declines in those respective industries over the long term.

  • When asked about the state of the U.S. economy, 60 per cent said they believe it will decline, 21 per cent predicted it will stay the same, and 19 per cent are betting on an improvement. While the overall outlook is bearish, 60 per cent of the respondents expect the subprime-credit crisis will be contained this year.

- Mark LaPedus
EE Times

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