Wednesday, January 7, 2009

How Green Is The Valley?

If you believe the National Venture Capital Association's predictions for 2009, the answer is more-or-less "more-or-less". I'd better explain that.

In the sense that clean tech is one of the the few predicted growth areas for VC investing, the Valley is greening-up. Even with a reversal in the seemingly relentless climb in oil prices, green is still seen as good when it comes to spotting new opportunities to make money.

It's now perceived wisdom that Silicon Valley missed a trick a few years back when it ignored the fast growing need to have battery technology progress by leaps and bounds in order to fuel product advancements across a range of industries. After all, where would the iPhone be if you had to stick 4 D-cells into it to make it work? ("Nowhere", in case you need a clue.) Well, not this time, Bud, The Valley's got it covered. Or rather, will have it covered next year once VC's arm up with people who understand this stuff and who have enough operational experience to sort the wheat from the chaff. Regardless, clean tech is still hot, and we like hot.

However, the Valley is less green in the metaphorical sense that a) fewer overall bucks will be available to VCs to go out and invest with, and b) there is absolutely no sign that the IPO window will open any time soon, that corporate buyers will suddenly discover deep M&A pockets or that magic Web 2.0 dollars will ever again fall from the sky in a relentless rain of optimism. "Less money in at the front end as well as less money at the back end", in short. Unhappiness all round.

Other morsels, served here merely in the spirit of saving you the pain of downloading the .PDF, include:
- Semiconductor investing is dead. For.Get.It.
- Dollars will move from seed-stage to late-stage as everyone chases higher-quality combined with lower-risk investment strategies. It's that herd thing again. Most will do too little, too late.
- No one wants to travel so forget Europe, India and even China. Local is good. And by local I mean "can spit from the window and hit the CEO in question". Which is itself anyway likely to be another 2009 trend because ...
- Even current companies that are funded today are still going to find it much harder to get more money tomorrow. Companies will go from being teacher's pet to curse-of-the-class overnight. And then they will go out of business. Darwin is about to get proved right all over again.

Add it all up and where should you be targeting? The answer seems to be: at a late stage clean tech. company, focused here in the Valley, and doing well enough to not really need venture funding this year thanks very much.

Sort of hard to build an investing thesis out of that conclusion .... which means that the other sort of green that might be seen in these parts is around the gills of the junior partners in middle-league firms, or even lower-rung funds in their entirety, that suddenly find for them the VC business is no more; in short, it's time to dig out the copious weeds that have grown round here in the past 10 years so the whole Valley can be more verdant again sometime in the future.

Got a roto-tiller anyone?

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