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Venture capital withdraws from cleantech boom

Colorado investors many be interested to learn that the deployment of clean energy technology is facing a decline in venture capital deals and funding. The national trend in cleantech funding showed a 30 percent drop in funding over a five-year period ending in 2016, according to a new report from the Brookings Institution. Cleantech is an umbrella term for several sectors, such as solar power and energy storage. The loss of funding for these sectors is hitting new business ventures harder, and some regions are faring much better than others.

The Brookings report on cleantech's access to venture capital found that only 13 percent of total funding went to early-stage companies in 2016. Though the loss is national, a few regions are still seeing significant investments. Companies in San Francisco, Boston, San Jose and Los Angeles are taking over half of the funding pie.

The author found it unsurprising that investors are steering away from high-risk business ventures. Instead, investors are putting their money into established cleantech companies that are already or nearly profitable. There is wisdom in this trend as 2006-2011 data shows about $12.5 billion in seed capital losses. Early stage companies looking for an alternative source of funding are less likely than in the past to find it from government or corporate investors.

New business ventures always face an uphill battle when it comes to funding, and sector trends coupled with historical losses can make this a triple whammy. Despite the obstacles, Denver owners can still find success by establishing a personal reputation and writing a business plan that covers all the bases. An attorney versed in business and commercial law can also help by spotting pitfalls in regulation changes, advising on business formation options and providing the legal guidance that safeguards investor capital.

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