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VC's Not Yet Big on Cleantech

I think that within the next five years, 'cleantech' will be a significant investment sector.  I also think that it is a critical area for Massachusetts investment.  Massachusetts has the technology source (places like MIT), entrepreneurial talent, many industrial companies that have executives with skills to build manufacturing businesses (Millipore, Waters, etc.), and a trained workforce hungry for manufacturing jobs.

However, according to this report from Lux Research, VC's are not yet a significant funding source for cleantech start-ups.  VC's accounted for $2B of the $48B in cleantech funding in 2006, but that was more than double the dollar amount of 2005.  The balance of the funding comes from government and corporate investors.  VC's funded about one-quarter of the start-ups.

I expect this will change soon.  Unfortunately, many existing venture funds aren't looking actively in this space.  You don't see a lot of the 'usual suspects' as investors in cleantech companies.  These firms are going to have to dip their toes into these waters in order for them to position themselves for what is likely going to be a big increase in opportunities in this sector.


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