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Bangalore: Once the glory of every Venture Capitalist, today it has become a pain in their heart. For Venture Capitalists, once who thronged into clean technology, they now need to rethink on their strategies and find ways to move out of the field altogether. With financial crisis bringing more risk to new technologies, early stage investors, like angel investors, families or government grants, are less interested towards funding startups that need large amount of cash to bring their products to market.
Even VC firms are showing least interest towards funding these companies requiring huge capital for survival and revenue generation. They say that the investment policy in clean tech is quite different from that of other fields and needs different game plans to work on as that of the IT industry. "The R&D needs more investment than any other department in the clean tech segment. The investment is not sure of getting a good return in terms of commercialization and viability. This restricts the VCs to invest in the segment," says Gaurav Shah, CMD and CIO, India Social Fund.
India is more conservative in terms of investment in clean tech. It is more energy driven, may be solar or wind. Even some VCs and angel investors lack the kind of understanding from technology incubation perspective. One of the other reasons of concern for the VCs who are getting out of clean tech is that such companies are taking longer to innovate around energy and materials than they originally expected it to be. Many clean tech companies take a long time to go IPO and forces the VCs to rethink on their strategy, as they are not able to make good exit from the company and make handsome profit.
"We have made considerable investment in Clean Tech, but are stuck to rethink on the entire investment process as we are not getting viable return from them. No one can deny their idea from being great, but such long involvement with high risk is rather a matter of much concern," says Amit Paul, Asst. Vice President, SIDBI Venture Capital Ltd.
VCs fund these startups expecting exits in four to six years through either IPO or sales to make a profit on their investment. But some companies take their own time, forcing the VCs to rethink on their strategies and investments. Some clean tech startups are waiting for their exits, but there is little enthusiasm in the public market for such companies these days as they are facing sheer competition from Chinese rivals.
Clean tech products foresee lot of demand in the future with people trying to spend less on energy and transportation and becoming more aware about the role of clean tech in protecting the environment. VCs are ready to fund such companies but are bringing in corporate partners to fund along with them so as to share the burden and risk instead of taking upon their own shoulders.
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