What will happen in 2011?
Former Cleantech Group director Dallas Kachan, who recently began his own consulting company Kachan & Co., writes in a new blog post that the cleantech sector “will continue to attract high levels of investment and foster innovation in new, unexpected areas” next year.
- Markets have been correcting themselves in 2010.
- Valuations are returning to rational P/E [price/earnings] multiples.
- Price signals are emerging again after massive government investment in cleantech.
- Early stage deals seem to be returning.
- Corporate investment is flowing.
- New funds are increasingly being announced.
Kachan outlined nine predictions he expects to happen next year.
- Sustained worldwide venture capital investment. The need for greater efficiencies, energy independence and climate change will drive investment. “”We predict these drivers - particularly the real or perceived scarcity around oil, rare earth elements and other commodities — will be felt even more acutely in 2011,” he writes.
- Corporate and non-institutional capital will slowly replace venture capital. Large corporations will continue to form or expand corporate venture arms, driven by returns and social responsibility benefits, at a scale of billions of dollars.
- Early stage venture investments will return. Data from the later months of 2010 shows an increase in early stage deals. Investors are relying less upon federal government grants and loans, which tend to benefit mature companies. ”[It] will return to what it does best: seeking out emerging early stage technologies and teams that promise good multiples,” he writes.
- Energy efficiency shines. Continued investment and corporate activity on the smart grid and other means of efficiency are on tap next year, only just beginning in Q3 2010. The interest: It’s not nearly as capital-intensive as other schemes. The problem: many startups won’t make it.
- Biofuel investment returns. As crude oil gets more expensive, interest will return for biofuels, specifically the drop-in variety. And since the EPA lowered cellulosic ethanol volume requirements, 2011 might be its last hurrah. “We saw [it] disappear from headlines in 2010,” he writes.
- Nuclear power returns — overseas. The nuclear industry will begin “cautiously testing new science after decades of relative inactivity,” thanks to thorium fuel initiatives, waste disposal and new micro-reactor designs, he writes. But it’s happening in Asia, Europe and Canada — not the U.S.
- Recycling and mining will attract more investment. The economics of recycling and recovery of trace materials will be more commercially viable because of the rising price of commodities. (Example: in 2010, the price of gold doubled; silver tripled.) And it’s not like there will be fewer lithium batteries in the trash, either.
- Natural gas rivals solar and wind. Renewable natural gas from inexpensive feedstock can be transported in existing pipelines. It’s “clean,” but still cheaper than solar and wind. (It’s also inherently more reliable, and attractive as baseload power.)
- China becomes cleantech king. As the largest and fastest growing market, China’s where it’s at. if you’re not selling in China, you’re not in the big leagues, Kachan writes. “To ignore it out of concern about intellectual property or other costs of doing business will be to watch most of one’s addressable worldwide market disappear to competitors.”
The question, of course, is whether the greater global economy is stable enough post-recession to sustain this kind of activity.