Finding Opportunities in Cleantech Funding
By Anne Janzer
While venture funding for cleantech is crawling back up, funding is still scarce for early-stage companies, where the innovations of the future are waiting. According to the PWC Cleantech MoneyTree™ Report, Q2 2014, there was virtually no early-stage VC funding for cleantech in the first quarter of this year, and only a small uptick last quarter.
But at Greentech Media’s recent NextWave Cleantech Investment conference in Menlo Park, the overall message was one of opportunity and optimism. As the name indicates, a new generation of technologies and innovations is poised to drive the next wave of cleantech investment.
If you cannot wait for the funding pendulum to swing, the speakers and panelists shared a wealth of wisdom and advice. You can watch the archived sessions on the Greentech Media event site. Here are a few of my takeaways from the talks.
Joshua Green of Mohr Davidow Ventures suggests that the definition of the cleantech category is part of the problem.
As an investment category defined by purpose rather than technology, it is subject to unusual risks and challenges, including what he calls “non-related technology risk.” Cleanweb, solar, agricultural/bioproducts, waste management – these are all very different categories with little in common. Problems in one sector stigmatize the entire cleantech category. A better approach is to focus on specific sectors and differentiate them by factors other than their purpose.
Understand the VC
If you’re pitching VC firms for your startup, research the investor’s portfolios, expertise, and interest. Look for the ways that your startup may intersect with current hot topics, including:
- Internet of Things
- Big data
- Productivity and efficiency software
Also, be sensitive to the key concerns of the VCs, including the size of the addressable market. Investors are looking for capital-light innovations that promise significant disruptions to existing value chains.
Look beyond traditional venture capital
One session covered the possibilities of working with “family offices” and foundations – private firms managing funds for a single family. Many of these funds have a social or environmental component to their investment strategy. But do not mistake purpose-driven strategies with lack of financial rigor. These funds are typically run by experienced and savvy investors who will perform due diligence and expect performance.
These family offices often have resources and capabilities that the traditional VC does not – including more patience for growth in industries with longer cycles.
Focus on the customer
Scott McGaraghan at Nest Labs (acquired by Google) shared that company’s core strategy: be customer-centric and let everything else flow from that. Joining the company from a utility background, Scott found that the focus on the customer experience drove energy savings, and not the other way around.
Women needed …
The number of women attending the conference was lower than I hoped to see. Perhaps this is due to the conference’s slant on investing. According to the Stanford Technology Ventures Program, women represent only 11% of investing venture partners. (See the earlier blog post here on the Top 20 Women Cleantech Investorsfor inspiring models.)
An area full of possibility
If you’re looking for an opportunity to make a difference, cleanteach finance is an area filled with possibility. From the investor perspective, rapid growth in the solar industry is leaving room for new participants in specific regions and markets. Beyond solar, diverse startups are tackling problems ranging from the smart grid to human behavior. And if you’re one of those innovators, the investors at the conference outlined strategies for either getting funding today or preparing your business for the inevitable next wave of cleantech investing.
Anne Janzer is a marketing consultant and writer in the technology industry. Her clients range from technology giants to small startups, in industries including cloud computing infrastructure, energy and sustainability management, online collaboration, and security. She regularly shares her thoughts on content marketing in her blog Content Marketing for Technology.