Cleantech Industry Facing Financing Challenges
Cleantech is one of the country’s most rapidly evolving markets, but faces a number of challenges in securing financing for growth. This is one of the conclusions of a recent forum organized by Ernst & Young . Results of the forum have now been published in E&Y’s quarterly Cleantech Matters.
Noting that, “as this industry matures, it is apparent that the scale of most cleantech projects is far larger and more capital intensive than that of other early-stage high-growth industries, such as software or medical devices.”
costs… generally exceed the scope of traditional venture capital financing
These two factors — scale and required capital — have brought about significant financing challenges for the industry.
Some of the key findings of the forum:
- There is a financing gap for entrepreneurs between raising venture capital and accessing public markets.
- Though capital is available, project financiers are risk-adverse and generally only fund proven technologies.
- Cleantech companies incur large costs building and scaling production facilities and revamping existing distribution infrastructure.
- New financing needs are breaking the paradigm as larger funds are required for later stages. These needs are usually beyond the scope of traditional VC deals.
The report recommends several key strategies for cleantech firms getting over their financing hurdles, including:
- Focusing on securing customers
- Assuring investors about warranty issues
- Using all public funds available
- Recognizing that cleantech is a “replacement technology.” Most products have to push out products with established market shares.
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