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Venture investment in greentech to rise this year, survey finds

Coming off a year that saw severely diminished venture investment and deal volume in 2009, the venture capital community appears optimistic that a rebound will occur this year, with a prominent focus on the greentech sector, according to a survey by KPMG.

In polling 200 venture capitalists, investors, entrepreneurs and bankers, KPMG found that 67 per cent of respondents indicated that they expect venture capital investment to increase in 2010 compared to 23 per cent in the 2009 survey.

Only seven per cent see a decline in investment levels coming for 2010 compared to last year when more than half (56 per cent) predicted a year-to-year drop.

While greentech investment declined more than 50 per cent in 2009 versus the prior year, the 2010 KPMG survey indicates that the greentech sector will be more attractive to investors this year. In fact, 77 per cent of those surveyed say venture investment in green technology will increase in 2010 compared to 2009, including 15 per cent who project investment to jump by more than 20 per cent.

"There is no doubt that the greentech sector remains an attractive investment area, but the difficult economic environment had investors operating in a cautious fashion in 2009," says Brian Hughes, KPMG partner based in Philadelphia and co-leader of its venture capital practice. "Our 2010 data shows that investors are more bullish in their investment projections, and with all the federal funding and programmes, the greentech sector will undoubtedly benefit from the improving investment environment."

When asked which sub-sectors of greentech would receive the most investment over the next two years, the responses indicate that venture investment is shifting more toward energy storage and efficiency and slightly away from renewables. Thirty eight per cent of respondents say the energy storage and efficiency sector will see the most investment – up from 33 per cent in the 2009 survey. Meanwhile, 30 per cent expect renewable energy to lead investment – a drop of six percentage points compared to last year’s survey.

With regard to where greentech investment will be spread geographically in the US, the west will dominate but the northeast and southwest are expected to see significant funding. Outside the US, venture capitalists expect greentech investment to be focused primarily in Asia, with Europe second.

In addition to the expected increase in venture investment for 2010, respondents in the KPMG survey agreed that the government will play an increased role in greentech activity. Sixty five per cent of those surveyed anticipate an increase of federal funding for greentech initiatives, and 92 per cent expect more public/private partnerships to initiate green projects.

KPMG conducted the survey in conjunction with AlwaysOn, the venture capital new media organisation.

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