2008 – 2010- Global financial crisis - wealth destruction, complex debt holdings, toxic assets, Lehman Brothers collapsed, Merrill Lynch sold out, redundancies, uncertainty – investor confidence reached the lowest.
However, the downturn in public market investment did not extend to early-stage technology. Capital investment from private investors grew by 60% from $11.1bn to $17.7bn- of which 2/3 was invested in new equity. As history has shown in time of deep financial crisis investors are looking for long-term fundamentals. Indeed, they are searching for the next boom. From that point, it is important to notice that technology revolutions take place every 50years. The IT revolution started at the beginning of the 60s therefore if we follow the 50 years’ trend, we can definitely conclude that 2010/2011 is the starting point of the eruption phase of the next technology revolution. Out of the turmoil, Investors unveiled a great enthusiasm in the field of cleantech – Biotech, Energy, environmental and climate change-Why?
1. Reduce global warming and climate change2. Offset rising energy costs caused by resource attenuation
3. Secure energy autonomy
Global markets are slowly emerging from the recession and one of the biggest challenges remains access to capital. Consequently, energy markets across the world are strongly competing for new investors. However, despite the small number of investors, funds topped $7.9bn. According to financial analysts, during the year of 2008, clean energy VC and PE investors invested almost 85% of their total capital allocated to renewable with China and The United States for top two locations. China has already invested a massive amount of money - $232bn of which 30% went to green/projects/ infrastructure/subsidies that sold power for wind. And by 2012, The United States will have doubled its renewable energy generating capacity. Financial support given by governments are beneficial only in the short run because the industry needs to decentralize and diverge so as to succeed on its economics.
Despite a very challenging period, innovation has and will always be a fundamental driver of the industry. Innovation remains strong and, earlier raised capital from some funds remains to be invested. The number of clean companies that were considered weak copycat investments is folding to give place to strongest portfolio companies and as a result a higher quality of funds delivered by VC and PE. Cleantech research and innovation are at a very early stage therefore in order to secure a high return VC and PV must diversified their portfolios of technologies. In addition, a lot of VC and funds plan renewable to count for at least 22% of their portfolios. The strongest companies will grow fast and become leaders in the industry. The main goal and focus of both VC and PE investors is to find bargain investment and profit when the global economy recovers. Capital constraints are applying further pressure on funds with companies near exist and a sudden increase in IPO market which was non-existent.
Despite a very challenging period, innovation has and will always be a fundamental driver of the industry. Innovation remains strong and, earlier raised capital from some funds remains to be invested. The number of clean companies that were considered weak copycat investments is folding to give place to strongest portfolio companies and as a result a higher quality of funds delivered by VC and PE. Cleantech research and innovation are at a very early stage therefore in order to secure a high return VC and PV must diversified their portfolios of technologies. In addition, a lot of VC and funds plan renewable to count for at least 22% of their portfolios. The strongest companies will grow fast and become leaders in the industry. The main goal and focus of both VC and PE investors is to find bargain investment and profit when the global economy recovers. Capital constraints are applying further pressure on funds with companies near exist and a sudden increase in IPO market which was non-existent.
The year of 2009, saw a drastic decline in VC and PE investments but a strong performance of approximately $30bn was the result of high cost of capital for project developments. The record of fundraising and investment capital from closed funds and confidence in the potential offered by the clean energy industry, the number of entrepreneurs is increasing in renewable especially in solar and energy efficiency sectors.
A compulsory factor of economic growth is a secure, clean, affordable, reliable and most important sustainable energy supply. Some critical factors are encouraging the development of renewable energies such as global warming, explosions in population growth in some part of the world (i.e. China, India…), increasing energy demand, rising in prices and most important an unequal distribution of resources. At some point there will be a shortage of energy such as oil or gas therefore the use and development of renewable energy have been introduced and recognized as being beneficial on many levels. A very high percentage of investors are still not fully aware of the potential huge financial gains they would benefit from renewable/cleantech energy. Other barriers such as import tariffs, technologies, and insecure investments result in a very low use of renewable energy.
In order to surpass these barriers, it is extremely important to educate the public, stakeholders as well as encouraging firms such as banks for instance to switch their focus to drive sustainable economic growth worldwide. New challenges such as global warming or shortage of energy linked in some ways to the exploding growth of worldwide population require new focus.
