Some six months ago, the venture capital community saw 2009′s cleantech investments as having about as many storm clouds as Sand Hill Road in July — which is to say, very few. With the economic downturn, though, the outlook has changed, as a growing portion of VCs, corporate executives, entrepreneurs and bankers in the cleantech sector expect to see venture capital investment decline this year.
In a survey of more than 300 people in that group, conducted by the audit, tax and advisory firm KPMG last month and released today, 26 percent said they expect investment to decrease, jumping from only 1 percent anticipating decline back in September — two months after we reported on why it was still a great time to be a clean technology company seeking funding. Despite the surge of government support for cleantech in the stimulus, President Barack Obama’s preliminary budget proposal and an expected energy bill, the economic downturn has spurred more clean technology players to see the glass half empty.
In the broader economic landscape, however, cleantech remains a bright spot — in part because of allocations in the stimulus package. More than half of respondents — 53 percent — still expect to see VC investment in cleantech increase in 2009. That’s down from 93 percent with that outlook back in September, but still the majority.
As much as 90 percent of those surveyed anticipate an increase in federal funding for cleantech initiatives (makes us wonder about the other 10 percent). KPMG reports that fully 84 percent of the latest survey group said they expect overall 2009 investment (not just venture capital) in cleantech to increase by 10 percent or more from 2008.
By contrast, only 40 percent of respondents in the September survey expected to see gains of that size. KPMG partner Brian Hughes is siding with the more bullish survey respondents. “Our data showed that while investors are less aggressive in their investment projections,” he said in today’s release, “greentech is likely to be one of the few sectors that will see an increase in venture capital investment in 2009.”
Of course, not all cleantech sectors have the same appeal. Based on the survey, KPMG researchers expect top priorities of the Obama administration — renewable fuels, including solar and wind, and energy storage technology, such as fuel cells and batteries — to draw the most venture capital investment during the next two years.
The KPMG survey released today reinforces a point made by PricewaterhouseCoopers in a report we covered last month — we’re in for a shakeout, but opportunities remain for the strongest players. Like today’s study, PricewaterhouseCoopers had some gloomy numbers, and warned of a “raft of potential bankruptcies” if the government didn’t provide swift and aggressive aid. At this point, federal funds are on the move in a big way — and it looks like venture capital could follow suit.
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