There are several reasons for the plunge in enthusiasm, including recent failures of some clean energy companies, such as Solyndra, Evergreen Solar, Beacon Power, and A123 Systems. Another reason for investor concern is the apparent lack of exits, which prevents investors from earning the returns that they expect when funding start-ups. Very few cleantech companies were bought out or went public in the last few years. As a result, only investors with passion, cash, and patience are willing to fund technologies that often require higher expenditures and longer adoption and commercialization time frames than those in other sectors.
Several companies from China have invested in U.S. cleantech companies in 2012. For instance, Wanxiang Group invested $420 million in GreatPoint Energy Inc., a developer of a coal-to-natural-gas technology. Zhongding Power, one of the largest automotive component conglomerates in China, signed an agreement with EcoMotors and is planning to invest more than $200 million in the construction of a clean combustion engine plant in Anhui Province.
Some U.S. venture capital and private equity firms remain active, but focus on more mature industries and companies, which are not involved in the redistribution of a new commodity, such as wind or solar energy. For example, several firms were involved in last year’s $18.2 million funding round for Next Step Living Inc., a home-energy efficiency firm in Boston.
Going forward, investors will continue to prefer business model innovation over the technical innovation and will veer toward smaller deals and more mature companies. According to several investors from Flagship Ventures and Esplanade Capital, besides energy efficiency and cleanweb, some technologies of interest will include renewable chemicals, agricultural and animal sustainability, gas to liquids, and green banking. Start-ups looking for funding have several options at their disposal. They can look harder for interested investors in the U.S., seek help from quasi-public organizations, including Massachusetts Clean Energy Center, search for investors in countries like China, or form strategic partnerships with large domestic Corporates.