The End of Cleantech?

I met recently with an entrepreneur.  Great pedigree, multiple start-ups, and prior “big time” VC backing.  Someone whom I’ve known for a long time and greatly respect.

He has spent the past four years in Cleantech with two start-ups.  He’s now throwing in the towel.

He said that Cleantech was a very promising sector when electricity costs were rising over 10% a year and was a fast-growing cost item, second only to health care. Today? He thinks it is game over for most Cleantech start-ups. There simply isn’t enough customer interest in new technologies. Energy is once again cheap.

He thinks the Great Recession has dampened energy consumption, but most important, the natural gas glut, that has come out of nowhere, has fundamentally altered the economics for a while.

At Kepha, we’ve never invested in Cleantech. We didn’t understand it and we didn’t want to get into it when so many VCs were. It felt like a swimming pool that was becoming very crowded.

Now that VCs and entrepreneurs are shying away from it, we’ll give it a second look.

3 thoughts on “The End of Cleantech?

  1. Jo – FWIW, while it’s clear that 1) lots of generalist VC’s jumped into cleantech unprepared and 2) the space is struggling in various ways, I think the general story about what’s commonly called the cleantech “bust” is likely overstated.

    I say this because a) cleantech has held steady at 15-17% of VC investment from 2007 to 2011.
    b) it’s not clear performance has been much worse than VC overall
    c) VC interest in the sector is evolving with some sectors that are a better fit attracting more attention

    As always, nice post.

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