Nearly 74% of surveyed investors, entrepreneurs, industry leaders think cleantech investment will increase over next five years; 40% think federal government's role in funding cleantech innovations will shrink, while 18% think it will grow
PALO ALTO, California
October 14, 2011
– Only 18 percent of clean technology executives and investors think the federal government will play a larger role in funding clean tech innovation in the future, while 40 percent believe the federal government will play a smaller role, and the remainder (42 percent) believe it will remain relatively unchanged. This is according to a survey of 128 clean tech industry leaders conducted last week by Cooley LLP.
An overwhelming majority (74 percent) of respondents, which included investors, entrepreneurs, and other thought leaders, believe that both interest and investment in clean tech will increase over the next five years. Yet, an even higher number (79 percent) see significant challenges to their companies or investments achieving desired near- to mid-term growth and profitability.
The top challenges cited by U.S. clean energy and technology company leaders include access to capital (79 percent) and weak economic conditions (63 percent), followed by the need for stronger public policy and incentives (39 percent) supporting the United States' position as a global clean tech leader.
"Our survey confirms there is an overwhelming belief by clean tech investors and entrepreneurs that private sector investment in clean tech will continue to rise. I believe that this studied enthusiasm is based on the fact that we are still just at the beginning of a multi-decade energy transformation," said Tom Amis, co-chair of Cooley's Clean Energy & Technologies practice and based in the firm's Washington, D.C. office. "Yet, the near term certainly presents some challenges for both investors and entrepreneurs."
The foremost factor named as critical to driving new clean tech investment is the need for an increase in high-value exits, such as IPOs, mergers, and acquisitions (35 percent). This was by far the major factor for investors (62 percent). Entrepreneurs voiced their number-one potential driver as an increase in oil and gas prices (29 percent), which would enhance the value of cleaner and more energy efficient products, followed closely by a new round of high-value clean tech company exits (27 percent), and major technological breakthroughs (25 percent).
"At this point, VCs and other investors have put a lot of money to work in clean tech and are still waiting for those investments to mature as exits to enable them to fund the next generation of clean tech innovation," said Cooley partner Gordon Ho, based in Cooley's Palo Alto office. "In the near term however, the slow economy and uncertainty around government support makes selling products and raising capital particularly challenging. That said, the funding landscape is evolving, with existing and new sources of money available. The questions are how much and for which deals."
There was across-the-board agreement that two of the most exciting clean tech investment opportunities lie in the areas of battery storage (64 percent) and energy efficiency/management (52 percent). Favored selected investment opportunities also included solar and smart grid infrastructure (both 26 percent), and advanced biofuels and advanced materials chemicals (both 20 percent).
Nearly three quarters (73 percent) of respondents believe that for the United States to remain competitive in clean tech, the federal government needs to provide more tax credits and incentives, and increased energy-related legislative mandates (cap/trade).
Investors, executives and entrepreneurs surveyed saw the clean technology and renewable energy sector playing at least a moderate (57 percent) or significant (25 percent) role in U.S. job creation over the next five years, and a more significant role (64 percent) in the next ten years.
The survey was conducted at Cooley's Fourth Annual Clean Energy and Technologies Conference held last week in Silicon Valley. This year's conference brought together clean technology entrepreneurs, venture capitalists and other industry professionals to address critical clean tech issues, opportunities and vehicles for financing the myriad of renewable energy solutions now in the market.
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