The Cleantech Valley Of Death
Green Chip Stocks
If you’re like many cleantech startups right now, you’re looking atyour funding goals and your funding level, and you’re seeing a sizablegap. For most companies, venture capital and angel investing hasn’t come back in 2010 as we had hoped. So what should you do?
Investors and start-up often talk about a place called the Valley ofDeath. On the near side of the valley of death is safety: Your companyis small, but relatively stable. There is less risk, but your prospectsfor growth are much lower because you need funding to reach a criticalmass and gain some momentum.
On the far side of the Valley of Death is also stability. This is the oasis that companies find after they’ve hit their funding goals, andthey can focus on the blocking-and-tackling execution of creating asuccessful business.
Located between these two stages of comfort, the Valley of Death is a limbo stage. You can’t stay on the safe side of the valley forever, and you’ll need to grow to survive. And to achieve this growth, you’ll need funding. And there’s the catch: You’ll be far less risky to investorsonce you’re on the other side of the valley, and you’ve proven that your company is viable and profitable. The Valley is one, big Catch-22: Youneed funding to grow, but you need to grow to get funding.
There are a lot of cleantech companies in the Valley right now. Forall the hoopla that the Tesla IPO created earlier this summer, fundingfor the non-superstars is still sluggish.
So if you don’t get funded in the second half of this year, what should you be doing?
First, you should invest the rest of 2010 in relationships. When themoney comes back, you’re going to want investors to know who you are,and what you do. Go to conferences. Network. Understand that it’s a long game.
Second, consider looking at a merger. If there is another company,competitor, or group which is complementary to yours, it might makesense to join forces. There are companies with money in the treasury,which may not have everything they need to service their customers, andyou might have that missing link for them.
Next, broaden your horizons. In my state, Colorado, we’ve had anumber of government deals announced in the last couple of months.Promising start-ups such as ION Engineering and ADA EnvironmentalSolutions received a combined $14 million for carbon capture technology. Just days before that, Abound Solar announced $400 million in loanguarantees from the federal government.
The Valley of Death is a dark, lonely place. But it can be crossed.Realize that it won’t happen all at once, and start planning yourcrossing today.
**Michele Ashby is the CEO of MiNE LLC, which is hosting theModern Energy Investor Forum (MEIF) from Sep. 22-25, 2010, in Denver,Colorado. The Modern Energy Investor Forum is the premierinvitation-only conference for clean technology firms and investors.
Cleantech Valley Of Death: A Survival Guide originally appeared in Green Chip Stocks. Green Chip Review is a free 2x-per-week newsletter, is the firstadvisory to focus exclusively on investments in alternative andrenewable energies.
Green Chip Stocks Editors & Contributors
Jeff Siegel
Jeff Siegel is the managing editor of Green Chip Stocks, an independent investment research service that focuses exclusively on renewable energy and organic and natural food markets.
Nick Hodge
One of the bright young minds in today's cleantech industry, Nick is putting his knowledge of nascent green markets to use in several ways... Nick is the co-author of a best-selling book and has interviewed dozens of times for TV and Web; his keen insight, uncanny foresight, and global contacts have led to double- and triple-digit wins for his readers, time after time.