The venture capital community is not worried about a greentech investment bubble, and expects investment in the greentech sector to increase in 2009, according to a recent survey by the U.S. audit, tax and advisory firm KPMG LLP.
In polling 301 venture capitalists, corporate executives, entrepreneurs and bankers, KPMG found that 91% of respondents indicated they expect venture capital activity in the greentech sector to continue rising in 2009, compared to only 76% who indicated the same the previous year. In fact, some 50% of respondents say investment activity in greentech will increase by 20% or more over 2008 levels, while another 34% expect investment levels to increase by 10-19% range.
According to the KPMG study, 67% of respondents say the focus on greentech is a sustainable investment cycle, not another investment bubble.
"There is no doubt that the greentech sector is very active with many companies receiving significant funding," said Packy Kelly, KPMG partner based in Silicon Valley and co-leader of its venture capital practice. "Our data showed that investments are being made across all sub-sectors of the greentech space"
When asked which sub-sectors of greentech would receive the most investment over the next two years, the responses indicate that investments will be diversified. 15% of respondents say energy storage (fuel cells, batteries, etc.) will see the most funding, followed by clean coal and wind with 14% each. Alternative fuels and solar rounded out the top five with 11% and 10% respectively. Interestingly, when asked what will become the dominant clean-air energy source in the next 20 years, 39% of venture capitalists say solar, 27% say nuclear and 18% say wind.
53% of respondents to KPMG’s survey expect end of year crude oil prices to be higher than $120 per barrel–only 13% expect oil prices to drop below $100. Moreover, 47% of respondents feel that oil prices won’t peak until after 2010, while 24% expect we will see the peak in this second half of 2008. 14% think the peak will come in 2009.
With regard to where greentech investment will be spread geographically in the United States, 60% of respondents say it will be directed toward the West, followed by 14% for Southwest, 13% for Midwest, and 9% and 4% for the Northeast and Southeast respectively.
Outside the U.S., and beyond China and India, venture capitalists expect greentech investment to be geographically diverse, but Brazil, selected by 28% of respondents, and Israel, 27%, are the clear areas of opportunity. Russia (11%) and South Korea (10%) were the only other countries to top double digit response rates.
"As with any good long-term investment strategy, diversification is essential," said Brian Hughes, KPMG partner based in Philadelphia and co-leader of its venture capital practice. "With technology innovation taking place across the globe, venture capital investors are focused on capturing emerging-market opportunities."
KPMG conducted the survey in partnership with AlwaysOn, the venture capital new media organization.
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