Rob Day: January 20, 2010, 11:53 AM

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Major change in the cleantech VC industry… and over-experienced investors?

We're going to look back upon 2010 as a time of major change in the cleantech venture industry.

I haven't heard yet of many established specialized cleantech venture firms scaling back, but it will happen, starting this year.  Certainly there have been a few of the more fledgling efforts to create new specialist firms that have floundered due to the bad fundraising environment over the past 18 months.  And now we're seeing scale-backs at generalist firms (such as Atlas Venture, and Polaris which PE Hub is reporting is raising $500M for their sixth fund, versus $1B for their last one).  As generalists shrink their funds, some are doing more cleantech, but many are going "back to their core" in IT, etc. 

In the Boston area alone, I know of at least a half-dozen VCs who were doing cleantech when I moved out here, who are now either not doing new cleantech deals, or had to change firms, or are not even in the venture capital business at all anymore.  There have been a couple of additions to the community in the meantime, but not enough to make up for the exodus.

This means there are potential gaps in the marketplace (early stage cleantech venture capital in New England is starting to seem especially scarce, for example), but in this fundraising environment, not many new efforts are able to launch to fill in the gaps.

Meanwhile, as we've talked about here for a while now, lots of investors are continuing to re-evaluate the way the venture capital model has been applied to cleantech overall.  Some of this will result in new thinking and new approaches.  Some of which will work and some of which won't.

But overall, it just feels like a time of serious transition.

I'm at the Clean Tech Investor Summit on the west coast this week.  It'll be interesting to see how much my Boston-based perspective is reflected in the cleantech venture community out here...  If I can, I'll try to tweet a bit from the proceedings.

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And speaking of cleantech investors, here's a good interview with Chuck McDermott, one of my favorite guys in the business.

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And speaking of venture capital [total data wonk alert here, read on at severe risk of additional boredom], I saw an interesting article on PE Hub talking about one investor's study purporting to show that venture capitalists with less than 10 years' experience do better -- the implication being that there's a level of experience VCs may get to where they actually become WORSE investors. 

The article says that they examined nearly a thousand VCs' track records, and then looked at the 35 who had produced a "good track record".  Of those 35, the VC who did the study says, "more than half of them have been in the industry for 10 years or fewer".  I love numbers, so this caught my eye.

So first of all, if you look over the track records of 945 VCs and find only 35 with "good" track records... talk about an indictment of the industry. 

Secondly, what proportion of those 945 VCs had been in the industry less than 10 years?  If it's anything close to or more than 50%... have we really learned anything?

And finally, what about the fact that in the beginning of the last decade, a lot of VCs' track records followed the industry's overall collapse in IRRs?  Point being, there may be some underlying factors here having nothing to do with age or experience.

I'd love to see the actual study, obviously it looks interesting but I also have a lot of questions...