October 2nd, 2008
Greentech Investing: Not So Fast
There’s an inevitable slowdown in venture capital investing and that’s not good news for Silicon Valley nor the Cleantech start-ups. Last quarter VC activity was about one-third of the same quarter last year. While economists claim there’s plenty of capital around, the investments being made are more cautious. In the UK one nationalized bank has begun to turn away investors because they can’t handle the inflow of money from private bank accounts. Ireland has now guaranteed ALL DEPOSITS in all Irish banks. That’s the level on insecurity abroad. In that atmosphere VC moves will inevitably be reduced and more conservative. As recently as two weeks ago the MSM found Silicon Valley untouched by the Wall Street and Washington fiascoes. Not so fast with those superficial assessments by reporters who never look below the surface. This is one nasty economic mess and all aspects of the U.S. economy will pariticipate to some degree.
Whenever you look at potential VC booms and busts you must consider the overall economic climate and mood. Economists are now talking openly about the RECESSION. The R-word naturally brings with it a damper on investing. Folks with lots of money tend to want to keep as much of it as possible if it doesn’t look like more is easy to come by. Think of it as capital hoarding. As a philosopher once told me, “Cash is your friend.”
There are a couple of counter-indicators. Not all is bleak for greentech companies that already have products on the market. The latest U.S. government plan to take over some of the debt and control of financial corporations includes measures that would continue tax rebates for wind, solar and other alternative energy applications. That’s a greentech positive. Recession will see much less overall capital spending by corporations and less spending by consumers but the feds’ tax breaks may increase interest in putting that limited capital into alternative energy upgrades.
Yes, oil prices now hover around $100. The gas is out of the gasoline prices, for now. But let’s recall where we were just two years ago. Energy has become a more expesnive commodity across the economy. The American media is swirling about in the political frenzy of a Presidential race. Elsewhere day-to-day news gets coverage. In the U.K. one survey just added another million people to the ranks of the nation’s energy impoverished, folks who can’t pay their energy bills. The issue of energy costs and “energy security” will continue to reverberate in ordinary households as well as the corridors of power. That will eventually translate into even more interest in alternative energy. But the immediate future will be stormy even if you are into wind power.
A newsman since 1969, Harry Fuller has worked for CBS, ABC, CNBC Europe, CNET and was founding news director at TechTV. See his full profile and disclosure of his industry affiliations.
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