Venture capital investments will slow in 2009, though greentech companies could grab more money than other sectors, according to a National Venture Capital Association survey released Wednesday.
Venture capital investments in U.S.-based companies are expected to reach $29 billion to $30 billion for 2008, and 92 percent of VCs polled expect a slow down in 2009, reported the NVCA. Sixty-one percent said the funding will fall more than 10 percent.
Venture capitalists have been opining about a lackluster new year since the financial market crisis really hit home with the fall of Lehman Brothers and other investment banks over the last four months.
Nearly half of the more than 400 VCs who responded to the NVCA survey believe investments for green technologies could grow more than other sectors. Life sciences companies also could get more money.
Some VCs in the greentech sectors aren't so sure. Rob Day, a VC with @Ventures and a Greentech Media blogger, says greentech investments could fall as much as 40 percent during the first half of 2009 (see Green Light post). Other VCs share a similar outlook (see VCs Predict Greentech Investment Slowdown).
Solar, wind and other renewable energy lobbyists are worried that the economic downturn will severely undercut growth, even though President-elect Barack Obama intends to pass greentech policies to create more jobs and support technology advancements.
Senate Majority Leader Harry Reid, D-Nevada, plans to introduce legislation to take the multi-year tax credits already in place for renewable energy development and give them all in one year, reported the Las Vegas Review-Journal.
Congress extended those tax credits in October, a move hailed by renewable energy advocates as a sure way to significantly boost solar, wind, geothermal and other alternative energy businesses for many years to come. The incentives include an eight-year tax credit that could cut the cost of building solar power plants by 30 percent.
But the financial market crisis and recession have prompted new lobbying efforts to get more federal help. Solar, wind and other renewable energy industry groups are now lobbying to get those incentives as direct payments rather than tax credits (see Industry Groups Call for Change in Federal Incentives).
Meanwhile, money for the semiconductor industry is likely to fall, according to 79 percent of the respondents in the NVCA survey. Wireless communications companies will less money than they did in 2008 as well, reported 60 percent of polltakers.
When they do invest next year, they are likely to put money in companies already in their portfolios as well as new ones, 53 percent of the VCs said. That could mean more and smaller funding rounds, the NVCA said.
Less money will go to seed and early-stage companies, most of the VCs said.
Not surprisingly, most VCs also expect to have a harder time raising funds in 2009. That's partly because institutional investors are likely to cut the amount they give to VCs to invest.
Many endowments and other primary sources of investment money have suffer a big decline already. Yale University revealed this week that its endowment, including securities and real estate assets, has fallen 25 percent since its current fiscal year began on July 1.