While the overall amount of commitments made in venture capital funds are on track to drop dramatically year-over-year, the share of investments made in cleantech-focused funds will likely stay about the same as last year.
That was the general consensus from limited partners speaking at last week’s Financing the Cleantech Vision conference in Palo Alto, Calif. The conference was hosted by Venture Capital Journal, an affiliated publication of PE Week. The panelists, representing fund-of-fund investors and LP advisors, said that although the fund-raising climate will continue to be difficult for emerging managers over the next couple of quarters, experienced investors will continue to be able to close funds.
“The bar has been raised substantially,” said Tom Bratkovitch, director of LP Capital Advisors.
Bratkovitch added that although overall fund-raising in the first quarter showed a substantial drop from a year ago, it was largely a reflection of the bearish climate of the latter half of 2008, when most potential LPs performed due diligence on those investments. In the latter half of this year, he says, fund-raising numbers will be more illustrative of fund investors’ current mindset.
What’s that likely to look like for cleantech? These days, “everyone’s being a little bit cautious across all asset classes,” said Georganne Perkins, managing director of Fisher Lynch Capital.
Perkins added that she expects cleantech-related investments will account for about 15% of all venture allocations this year.
While cleantech’s slice of venture investment is nearly three times what it was five or six years ago, it’s not likely that pace of growth will continue over the next couple years, said Lisa Edgar, a partner at Paul Capital.
“There’s some discussion of it being about one-third of the capital,” Edgar says. “I don’t think it’s going to be that high, but it’s going to be meaningful.”
The demand for cleantech has recently helped enable some firms to raise follow-on funds.
For example, Radnor, Penn.-based Element Partners closed its second fund with $486 million in capital commitments in March to focus on later stage cleantech deals. The firm raised $284 million for its prior fund, which closed in 2006.
Late last year, VantagePoint Venture Partners raised just over $444 million for its VantagePoint CleanTech Partners II Fund, according to Thomson Reuters (Publisher of PE Week). For its prior cleantech fund, which closed in 2006, the San Bruno, Calif.-based firm raised just $100 million. —Joanna Glasner