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VCs rethinking strategy for Cleantech in India

As Panchabuta has earlier opined, investors have also shown a lot of interest in the cleantech and clean energy space.

According to data from Venture Intelligence, $1.5 billion has been invested by venture capital and private equity firms into clean energy  developers from 2008 to date. Indian Cleantech sector  has witnessed an investment of about $465 million from 2008.

According to VC speakers on the Cleantech panel at Venture Intelligence’s APEX conference earlier this year, “Cleantech in India, still remains at a nascent stage where venture capital funds traditionally have not been able to find investable deals and the models for cleantech investments in India still need to be figured out. “

“Clean Energy has witnessed steady investments into IPP’s and 2010 was a record year with half a billion dollars invested. The appetite for investments into Clean Energy is still high, but companies have not been able to scale as much as there is capital available. Clean Energy still continues to be among the top three areas of interest for investments when we spoke to a number of funds and their limited partners,”said Arun Natarajan, CEO of Venture Intelligence.

According to reports, for Venture Capitalists, once who thronged into clean technology, they now need to rethink on their strategies and find ways to move out of the field altogether. With financial crisis bringing more risk to new technologies, early stage investors, like angel investors, families or government grants, are less interested towards funding startups that need large amount of cash to bring their products to market.

Even VC firms are showing least interest towards funding these companies requiring huge capital for survival and revenue generation. They say that the investment policy in clean tech is quite different from that of other fields and needs different game plans to work on as that of the IT industry. “The R&D needs more investment than any other department in the clean tech segment. The investment is not sure of getting a good return in terms of commercialization and viability. This restricts the VCs to invest in the segment,” says Gaurav Shah, CMD and CIO, India Social Fund.

India is more conservative in terms of investment in clean tech. It is more energy driven, may be solar or wind. Even some VCs and angel investors lack the kind of understanding from technology incubation perspective. One of the other reasons of concern for the VCs who are getting out of clean tech is that such companies are taking longer to innovate around energy and materials than they originally expected it to be. Many clean tech companies take a long time to go IPO and forces the VCs to rethink on their strategy, as they are not able to make good exit from the company and make handsome profit.

“We have made considerable investment in Clean Tech, but are stuck to rethink on the entire investment process as we are not getting viable return from them. No one can deny their idea from being great, but such long involvement with high risk is rather a matter of much concern,” says Amit Paul, Asst. Vice President, SIDBI Venture Capital Ltd.

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