| SAN FRANCISCO
SAN FRANCISCO Egged on by $100-a-barrel oil and
consumers going green, venture capitalists plan to pour ever
more cash into environmentally friendly technology this year,
prompting talk of a bubble reminiscent of the dot-com era.
Some 61 percent of 170 venture capitalists reached by one
survey said they believe the inflow of venture dollars into
"cleantech" would overvalue the sector, even though many remain
convinced of its long-term potential.
Too many dollars chasing too few deals -- especially in
areas most likely to catch the eye of investors -- has led to
overvaluations, said Rodrigo Prudencio, a partner at Nth Power,
an energy technology venture capital firm.
"We're certainly seeing some evidence of overheating in the
market where the dollars got invested in solar and biofuels,"
he said. "But it's too early to tell whether or not that
creates something pandemic across the cleantech sector."
Four out of five U.S. venture capitalists expect cleantech
to attract higher levels of venture funding this year compared
with 2007, according to an annual survey by the National
Venture Capital Association (NVCA), a trade group.
Last year, cleantech received $2.6 billion, or roughly
one-tenth of all U.S. venture money invested, a whopping 341
percent increase from cleantech investments in 2000.
The upswing will continue this year amid hype around smart
cars, green buildings and technologies that use the sun, wind,
corn and water to generate power.
Pricier oil and growing worries about global warming have
spurred the search for alternative technologies, analysts say.
Dan Pullman, a principal at boutique investment bank
McNamee, Lawrence & Co, said greater consumer awareness and the
absence of marketable, affordable clean technologies that
people can employ in their own lives creates the long-term
opportunity for VC funds. Currently, there are only about 42
U.S.-listed companies making a cleantech product.
"We haven't all traded in our cars for Priuses yet,"
Pullman said, referring to Toyota Corp's hybrid car.
Venture capitalists backing cleantech entrepreneurs have
sensed that opportunity, which Morgan Stanley analyst Dave
Edwards estimated at a conference last month will be a market
worth $1 trillion in the next 25 years.
"Some of the smartest people in the industry are betting
huge amounts of money" on cleantech now, said Steve Bengston,
director of emerging company services at
PricewaterhouseCoopers. "And they expect to make a 10-to-1
Yet venture capitalists predicted information technology
would still be the biggest draw in 2008, after accounting for
nearly half of U.S. venture capital investment last year.
The tech sector remains sizzling hot, especially for
interactive Web applications, amid rumors of top-dollar buyout
talks for social networking sites like Facebook and LinkedIn.
"The turnaround time for tech deals is less, and it appears
that many of these companies need less money, and can present
... a very handsome return," said NVCA President Mark Heesen.
Analysts likened venture investment in cleantech to the
life sciences sector, because both have similar gestation
periods and high failure rates. Life sciences, including
biotechnology and medical devices, have a longer history in the
VC world and get about one-third of venture dollars annually.
Half the venture capitalists surveyed expect investment in
medical devices to be static or fall in 2008. But Alex Zisson,
partner at life sciences VC firm Thomas, McNerney & Partners,
said stem-cell therapy, the human genome project and an aging
population will maintain VC interest in life sciences.
Of the $30 billion or so of U.S. venture investment that
analysts expect in 2008 -- roughly on par with 2007 levels --
China may get as much as 10 percent, some VC players suggest.
Chinese entrepreneurs received only $206 million of the
$7.1 billion of venture capital invested in the third quarter,
but PwC's Bengston said it would be a hot sector for 2008.
(Editing by Braden Reddall)