Venture Capital Shifting To Clean Tech And Globalization


The recession is doing more than slowing the pace of investing at venture capital firms in the United States.

It is shifting their focus to clean -tech, where they see larger opportunities, and turning their attention abroad for creative companies and money to fill out their new funds.

These trends are not new. They have been playing out for nearly a decade as the high-tech industry, the traditional venture investing ground, has matured and growth slowed.

But the great downturn of 2008-09 is accelerating the changes as a Darwinian survival instinct grips an industry already suffering from a multi-year slowdown in public market IPOs.

For many VCs, the difficult economy has brought a cold splash of reality. Limited partners in the United States were already cautious about the venture business and are now almost certain to reduce their investments in venture funds over the next three or so years. That is driving many funds overseas for capital.

According to a survey by the National Venture Capital Association and Deloitte Touche Tohmatsu, more than half of firms expect to have more limited partners from outside their home countries.

And while half say they will invest in fewer startups because of the worldwide downturn, roughly the same percent say they will increase investments in Asia. Forty-three percent see higher spending in India while just 17 percent plan to fund more companies in North America.

At the same time, nearly two thirds of VCs intend to increase their investments in clean-tech companies during the next five years. Many figure it will be where the real money is made.