Q&A: European venture to outperform in cleantech area

US venture has the track record, and Asia the allure of an emerging venture market, so what's the appeal of European venture?

Having worked in Silicon Valley in the 1990s, where venture returns were tremendous at those times, it should come as no surprise that the US market has of course dominated the long term, return statistics. When the IT bubble burst in 2000, the European venture industry had just begun to come into its own. And now more recently, the global crisis has hit, which of course has affected everyone. It would be easy to dismiss Europe in the midst of this turbulence, but I don't believe that is right.

It is a fallacy to think that Silicon Valley can be good at everything; every venture community will have their niche or area of expertise. A lot of wireless technology or smart card technology, for example, has come out of Europe. Certainly, one of Europe's main areas of excellence can be cleantech. The entrepreneurs are there, the society overall supports it, the regulatory framework and government funding facilitates growth, and there is also venture capital to fund these companies. An excellent combination!

Will cleantech be the saving grace for European venture returns?

I think that European venture has the opportunity to outperform in the cleantech area, yes. At Environmental Technologies Fund, for example, we particularly look at investments in technology related to demand efficiency. Scarcity of resources and a wish (and need) to improve companies' performance and operating profits, creates a demand for this type of technology. As Europe has a long history of manufacturing and system building, this is a natural focus for European innovation.

Speaking of cleantech sub sectors, which are most promising in your opinion?

There have been a lot of investments into technology to create renewable energy alternatives; wind and solar power particularly. I think investors are now looking to the demand side: how do we conserve energy in various systems? Is there room for improvement and more efficient use of energy? How can we build cleaner and greener processes? Can we use our scarce materials more wisely and cost effectively?

Nujira, for example, produces power amplifiers for base stations, mobile phones, and TV broadcasting, which can reduce power usage by up to 50%. Previously, this would have been classified as a communications technology business, but now it can be also rightfully classified as a cleantech business - their main purpose is to reduce energy consumption.

Overall, we look at game changers - companies that will set a new environmental standard and provide the technology and innovation to reach that standard. They should also produce returns for our investors!

Do you have any investments in the Nordic region?

Yes, in 2008 we led a $20m series-C funding round for Chemrec, a Swedish biorefinery technology company alongside existing investors Vantage Point Venture Partners and Volvo Technology Transfer. We also recently backed a Norwegian business, Kebony, which has developed an alternative material to tropical hardwood. In short, it can treat a fast gowing, softwood so that its porperties resemble that of a hardwood - no more cutting down old growth forests!

Finally, will LPs abandon European venture funds?

We are all aware of the global cash crunch, which has affected all assets classes, buyout and venture alike, across regions. I don't think this crisis has deterred people from investing in innovation. However, LPs will become more selective. They will back good fund managers who invest in the most innovative companies. Funds must of course work closely with their investors, as they seek to nurture great entrepreneurs. Venture funds must put the capital to good use, grow leading companies, and exit those companies over time - this will determine if they can raise new funds.

 

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• Topics
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• Early-stage
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• Cleantech