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July 22nd, 2008

Video & Story: How to fix a broken venture capital model

Abstract:
Entrepreneurs in nanotechnology, cleantech, and renewable energy fields are experiencing the same kind of problems in venture capital financing experienced by the semiconductor and IT industries for the last decade. At the Nano Renewable Energy Conference July 22, Lux Research president Matthew Nordan offered ideas on how to make startup financing work again.

There is no longer a simple linear path from angel investing to venture funds to initial public offering, Nordan said. Today, it is more common to require a level of growth equity or private equity funding before an IPO, since VCs are not prepared to extend funding into the hundreds of millions of dollars.

At the same time, the new business model for emerging technologies requires more investments and gestation times in excess of a decade before profitability. Nordan said that in the energy and cleantech fields, venture funds have responded by specializing.

Funds such as Rockport and Kleiner Perkins Caufield & Byers invest in early-stage technology, while Riverstone and FourWinds invest in deployment of semi-mature technologies. Only a few funds like Vantage Point try to span the gamut of development and deployment. And a new model of "clear-cutting" VCs, exemplified by Khosla Ventures, represent funders of last resort.

Source:
eetimes.com

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