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Venture Capitalists Flock to Green Technology


By: Ryan J. McCarthy
Mansueto Digital Network
March 28, 2006


Companies producing environmentally friendly technologies are attracting more
and more investment, according to a new report.

As the nation’s energy crunch lingers on, small businesses in search of venture
capital are finding it’s a good time to be green.

The money invested in North American companies producing green technology rose
35% in 2005, to a total of $1.6 billion, according to a new report by the
Cleantech Venture Network.

In the fourth quarter of 2005 alone, green technologies, or “cleantech,made
up 10% of all North American venture capital investment, totaling $502 million
-- an 18% increase from the previous quarter.

“If you go back and look at the history of growth of emerging technology, like
nanotechnology, cleantech is similar,said Craig Cuddeback, senior vice
president of Cleantech Capital Group, an Ann Arbor, Mich.-based firm that
organizes the Cleantech Venture Network. “But cleantech is broader than that.
All the major energy companies are playing in this space now.

Crediting an increased national awareness for cleantech -- which includes
industries such as alternative energy, nanotechnology, water purification, air
quality, and agricultural methods -- Cuddeback predicted that the recent strong
growth may be part of a coming investment stampede in environmentally sound
companies.

Although the report indicates that most of the “cleancompanies attracting
venture capital still hail from the energy industry -- 35.6% of the total money
invested -- large investments were also made in companies specializing in green
materials and nanotechnology used in industrial and consumer electronics.
“If people take the word ‘clean’ too seriously or too literally, they will miss
a whole slew of opportunities,said Rodrigo Prudencio, principal at Nth Power,
a San Francisco-based venture-capital firm focused on the energy industry.

Prudencio pointed out that clean technology as a concept includes anything that
efficiently uses energy. His firm closely watches small businesses devising
nanotechnology and material electronic innovations, which can be found in
everything from electrical plants to cell phones.

“We’re very focused on small companies that will move faster than large
companies with these solutions,Prudencio said.

Proven venture firms like Kleiner Perkins Caufield & Byers, which gained
notoriety for funding Internet boom standouts like Google and Amazon, are moving
fast to snatch up clean and green innovators. The Menlo Park, Calif.-based
venture-capital powerhouse announced in February the creation of a $100 million
fund for backing green technology companies.

Cuddeback predicts the growth in green technology investment will continue to
skyrocket. Cleantech Venture Network projects that North American green
technology companies will require $3.4 billion in capital backing between 2006 and 2009.





 

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