Are Venture Capitalists Like Canaries in the Coal Mine?
Venture capitalists like to position themselves as being on the vanguard, the cutting edge of “new new thing”
Still, when the Dot.Com bubble burst, so too did many internet-only venture funds. But it is not in this way that VCs may serve as “canaries” or indicators of which markets are on the verge of truly becoming the next “new thing.” Because VCs try to minimize their risks, they follow herding strategies that closely mimic the Fast Second strategy we’ve outlined here before.
It is when VCs start piling into an area that it gains a certain market legitimacy, and a mass market trend begins to emerge (though, as with the first round of internet ventures, that legitimacy can be stretched beyond the breaking point by the kind of irrational exuberance that makes even the most cautious of investors anxious to get in before it’s too late).
This week, the Kaufman Foundation”s Public Forum Institute points to a trend among venture investors to invest in “clean” technologies and sustainable businesses. They define clean technologies as “a series of technologies that allow us to make more valuable use of natural resources and to reduce ecological impacts of this use. Thus, fields as diverse as manufacturing, energy, agriculture, logistics, and information technology, can have strong “cleantech” components. “
You can learn more about the Cleantech Venture Network here. But the real question is, are we starting to see a “piling on” trend in the VC markets that would serve as an indicator that our pursuit of green and sustainable technologies here is the right direction to pursue?
March 20th, 2006 at 2:40 am
Guv,
Yes, the “our” refers to Northeast Ohio’s efforts to develop green technologies. But since the markets for these technologies (or rather, for the products produced that use these technologies) are global, not local, the “piling on” that interests me extends well beyond our own local VC community (which is still way too small for my tastes, and even theirs–see the report on the need for more early stage capital in our region at www.nortech.org)
And so you see I also agree with you completely about “the more pertinent question.” Lots is going on, but lots more needs to happen.
March 20th, 2006 at 11:34 am
Chris,
I’m guessing and hoping the “our” in your last paragraph pertains to Cleveland, yes? Outside of the Maple Fund, I am not aware of any VC Fund that targets “CleanTech”.
As far as CleanTech representing the next pile-on opportunity for investors — why wouldn’t it? If CleanTech is even remotely related to Natural Capitalism, the technologies and practices developed for doing business will save tons of $$ because they directly address external costs - environmental and social costs for example. Consider how much environmental litigation would be lessened by simply removing petrol-based pesticides from mass-agriculture or removing VOC’s from paint. I’m not sure these examples even represent low hanging fruit, but you get the picture. How can investments in CleanTech not be a success?
I suppose that question is based on one’s defintion of success, which is precisely where CleanTech may differ from Natural Capitalism.
In my mind the more pertinent question is, how can this region get onboard with CleanTech as the resulting products are certain to have global appeal. We have the proficiency in manufacturing and polymers, but what is our motive? I would humbly suggest that we begin thinking about the critical natural resource due north of our fair city.