LOOKING TO
ATTRACT
in order to make prudent decisions on what
companies have the brightest outlook for
the long term,” said Tracy Lefteroff, global
managing partner of the venture capital
practice at PricewaterhouseCoopers.
Life sciences, with 28 percent of all
investments, saw investing dip 15 percent,
down to $8 billion from $9.3 billion in
2007. However, the number of deals
dropped only 3 percent, from 883 in 2007
to 853 in 2008.
“Well, no one is necessarily immune
to the recession,” Mendell said. “The most
direct impact that the recession has had
on venture capital is what we call the exit
market.”
When a venture capitalism firm puts
money into a project, she explained, it funds
that project for five to 10 years; after that,
the company exits onto the public exchange
or through acquisition by another company.
But the current economy has created fewer
opportunities in the exit market.
“Now, many companies aren’t able to get
out of their (investment) portfolios,” she
said. “That’s the most immediate impact.
“Venture capitalists are still investing,
but there’s pressure to invest at a somewhat slower pace.”
BY LAURA S. MARSHALL, FEATURES EDITOR
If you want venture capital this year,
it would be wise to consider going into
clean technology. “The area that is
growing most is clean technology,
which includes alternative energies like
solar, wind, biofuels; conservation companies; even companies extending life of batteries,” said Emily Mendell, vice president
of strategic affairs at the National Venture
Capital Association (NVCA) in Arlington,
Va. The NVCA is an advocacy group for
entrepreneurs and innovators whose members consist of approximately 450 venture
capital firms in the US.
Venture capital investments were down
overall in 2008, marking the first yearly
decline since 2003, according to the 2008
“Money Tree” report, produced by Price-
waterhouseCoopers LLP and the NVCA
based on data from Thomson Reuters. The
$28.3 billion invested in 3808 deals represents an 8 percent decrease in dollars and a
4 percent decrease in total deals from 2007.
Fourth-quarter investments in 2008 totaled
$5.4 billion, which is the least amount of
dollars invested since the first quarter of
2005; it’s also 26 percent less than the $7.3
billion invested in 2008’s third quarter.
The 2008 fourth-quarter investment drop
affected sectors nearly across the board,
from life sciences to software to Internet
companies to media and entertainment –
most saw percentage declines in the double
digits for both dollars and deals.
“At this point, venture capitalists are
doing what everyone else is doing: assessing and reassessing their capital outlays
and each and every investment carefully
Green-powered growth
In spite of all this, investments in clean
technology grew more than 50 percent
last year.
“That area is growing exponentially,
despite the recession,” Mendell said. “For
instance, in 2008 venture capital firms put
about $4.1 billion into clean-tech companies – that’s up from $2.7 billion in 2007.”
Indeed, seven of the ten largest deals of
2008 took place in the clean-tech sector.
Clean, or green, appears to be where
it’s at. “Clean tech is an area that’s been hot
for a little while,” said Mike Dauber, a senior associate in the Menlo Park, Calif., office
of Boston-based Battery Ventures. The firm
invests venture capital in Internet and digital
media, financial services and tech-enabled
businesses; software; semiconductors and
components; infrastructure technologies; and
communication services. “We’re careful in
[the clean-tech] space, too,” Dauber noted,
“but it’s certainly a market that’s going to
have potential going forward.”
There are a number of reasons why investors are excited about clean technology,
Mendell said. “For one thing, the government recognizes how important it is to
move these technologies forward – the
government is very supportive of these
