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Monday, Nov 9, 2009Cleantech, investor beware and do your homework
Posted by dgore
EXPERT ALERT/OPINION
Cleantech – new technology, products and services that reduce or eliminate negative environmental impact — is increasingly viewed as possessing high growth potential among venture capital providers. Indeed, despite the recession, venture capital investments in cleantech were more than $8 billion in 2008. And with the Energy Department recently announcing $3.4 billion in smart grid grants, funding a large range of green technologies, more startups will jump on the cleantech or green technology bandwagon.
According to Professor John Shearer, Entrepreneur-in-Residence at Pepperdine University’s Graziadio School of Business and Management, investors should be wary of investments in cleantech. The would-be investor would be wise to do their research to determine if certain companies really are green.
According to Shearer, the problem stems from hype surrounding the definition, with segments labeled as sustainable energy, cleantech, and greentech all claiming the same turf. Often, Shearer notes, if there is a published investment and as long as there is a green background on the corporate website, the company is automatically counted as an investment in the green industry.
Such overstating makes cleantech a dangerous place to invest, especially for the less sophisticated investors who do not have the resources to thoroughly evaluate the underlying business models and technologies.
Despite this, Shearer foresees that the long-term investment strategies being implemented by VC firms like Khosla Ventures, VenRock and Technology Partners, to name a few, will have major economic impact. He believes that the broad category of cleantech is a long term play. The biggest wins will be realized by those who had the foresight to invest in the disruptive innovations such as nanotechnology and basic materials in prior years. Translated, that means the investment life-cycle is longer than most traditional VC funds are set up to handle.
Journalists interested in any VC-related stories and would like to use Professor Shearer as a source or if you have questions about other Pepperdine Graziadio School of Business and Management sources, contact us.
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