If you're looking to bankroll a green-business revolution, boring old banks and the government are looking just as effective as flashy venture capitalists.
Tech investors from Silicon Valley to Shanghai are betting billions of dollars on breakthrough green technologies, with many hoping to repeat the success of Google or Amazon in the energy industry. It's a shift that has helped create the buzz around clean energy among entrepreneurs, politicians, and in industry.
But despite a lot of attention on high-risk ventures, experts say the financing engine for the clean-energy economy needs to be a hybrid, drawing on both venture capital and on more staid funding sources, many of which are hamstrung by the global capital crunch.
"Venture capitalists are critically important for starting new innovations and getting businesses incubated. But what hasn't happened to date is getting large-scale capital to help bring those businesses to commercial scale," said Bracken Hendricks, a senior fellow at the Center for American Progress think tank and expert on green jobs. "We need the policies and financial mechanisms to turn early start-up companies into global powerhouses."
Using a baseball analogy, venture capital is all about hitting home runs--one company could deliver 10 or 20 times the initial investment within five or seven years. To get that, venture capitalists traditionally seek out companies that have a proprietary technology that sets them apart from the pack.
But many businesses that create green collar jobs are not a clean fit with that high-risk, high-reward model. Although they still require financing, companies that manufacture wind turbines or do home energy audits, for example, don't require technology breakthroughs.
"If you care about investing in clean energy for job growth, venture capital may not be the way to go," said one investor who requested anonymity. "Government spending should be doing more to support service industries."
Government funding could, for example, be used to retrain tradesmen to retrofit commercial buildings to be more efficient, he said. Meanwhile, large-scale energy projects, such as a solar power plant, rely largely on bank-issued debt and, increasingly, government loan programs.
Running the numbers There are signs that entrepreneurs and investors in the green-tech field are getting a better grip on how to finance their ideas. The key is to pull money from different sources at different stages, say investors. … Read more