Do VCs Belong In Cleantech? Maybe

Plenty of people over the last couple years have said not — that VCs don’t like to stick with investments that take a lot of money and time, that they don’t understand the issues, that they don’t know the ways of Washington, D.C., that they’re too used to cranking out IT startups according to a fast-growth, low-investment formula that worked well in Silicon Valley when times were good.

Mike Kanellos over at GreenTech Media says they’re wrong. (Disclosure: I used to work with Mike at CMP Media). In a long post this week, he cites several high-profile, clean-tech disasters but then lists all the reasons why VCs are good for clean tech: they can be good at commercializing software startups or R&D projects that need smaller amounts of capital to get started; they’re used to soothing egotistic founders (or replacing them if they get too annoying); they know how to find exits for companies — and in clean tech, there will be lots of mergers and acquisitions.

There are several VCs who have clean tech investments that appear so far to be thriving, despite the hassles caused by the recession and the uncertainties created by federal stimulus money.

(As the CEO of Miox — which makes generators that disinfect water — told me this week, “When I look at customer and say, ‘You can save money, this pays for itself,’ that’s an easy conversation to have, even in a downturn. But when somebody says to me, ‘I’m waiting for stimulus money,’ there’s no response.”)

But I think the true test of VCs’ ability to handle clean tech is yet to come, as AltaRock Energy’s suspension this week of its multimillion-dollar drilling project for geothermal energy shows. (See my previous post).

Clean tech is in its infancy, and it’ll be years before we see how some of these projects — now barely more than science projects — turn out, and how good their investors are at handling failure.