Green technology is rapidly emerging as the hottest investment sector for venture capitalists, with private sector closing $ 7.7 billion this year.
Investing in ESG (Environment, Society, Governance): Investing in the business plans of all media and all banks. The rush to what many call to match investment goals and values has led to a thriving new industry where money pops up like mushrooms after the rain. Greentech startups seem like a new dot-com company, and the danger of a bubble seems far away-for now.
Interestingly, just a few years ago, things were very different, like Scott Patterson in The Wall Street Journal. I got it In a recent article. For the past decade, he wrote that investors have withdrawn from the green energy technology space after several notable demises in 2011, one of the solar company Solyndra and one year later of battery maker A123 Systems. I am.
From today’s point of view, this is ancient history. Well, without some sort of breakthrough, such as batteries, solar technology, or hydrogen, a week is almost gone. Most of these breakthroughs are related to cost and efficiency. These are two things that can guarantee a long product life. Still, most of these breakthroughs never reach the consumer. They never leap beyond the so-called valley of death between the lab and the market. Especially when it is difficult to get it due to lack of funds.
Venture capital funds are changing this, citing data from the private capital markets research provider Pitchbook, written by WSJ’s Patterson. Venture capital funds are expected to complete $ 7.7 billion worth of green technology transactions this year, according to PitchBook. This will increase from $ 1 billion 10 years ago.
It’s not just venture capitalists.JP Morgan earlier this month Release Three new sustainability investment funds instead of one. This was just the latest move in a hurry to set up a clean energy investment fund to take advantage of investors’ growing motivation for the environment, society and governance, commonly known as ESG.
The demand for new investment opportunities by a new generation of investors is one driving force for this trend. Another more important impetus is government support for low-carbon technologies. The European Union has linked its post-pandemic reconstruction financing program to government commitments to invest a solid portion of its funding in low-carbon energy. This is effectively an open invitation to anyone doing something with Green Technology. The Biden administration has also opened the US federal wallet for Greentech startups.
Now the EU and the US are discussing what they are call Green Technology Alliance. In a joint statement, the two sides said, “By 2050, we will have a net-zero greenhouse gas (GHG) economy and will set an example by implementing their respective strengthened 2030 targets.”
With such solid support, investing in green technology is much less risky for investors … what seems to be a breakthrough in the lab, but never crosses Death Valley. However, this is a risk inherent in startup investments.
Recently, there have been some examples of this risk becoming apparent in EV spaces. First, EV and hydrogen car startup Nikola suffered a significant drop in stock prices as a short-selling report revealed that its CEO was exaggerating the progress of its flagship model. rice field. The revelation also required Nicola to make a huge deal with GM.Recently, another EV maker, Lordstown Wobble The company was on the verge of collapse as the company ran out of funds before commercial production of endurance trucks began.
Not only in the EV space, but in other green technology fields as well, more startups will go bankrupt if their products fail to respond to the hype. But at least now, unlike a few years ago, they have a wealth of money available. Then it was the buyer’s market. Now it is the seller’s market and buyers are eager to participate in the energy transition. How long does it take for the situation to escalate into a bubble? It depends on how many Solyndra and A123 systems are there.