Cleantech VCs ready for 2008

According to the National Venture Capital Association (NVCA), VCs are going to continue to pour money into Cleantech areas beyond solar and biofuels. There will be consolidation, more venture-backed IPOs and an eventual over-valuation of the sector. See the NVCA Report.

Will the sector really become over-valued though? With global demand increasing everyday from the emerging market – notably the drastic increases seen in the middle classes of India and China – it is very hard to state exactly where an upper boundary exists. Growth these days is not limited to the US, but it is measured in a global framework that is only beginning to be defined by newer business trends and strategies.

Global warming and energy reserves continue to be an issue that becomes more evident everyday. Until realizable change is evident, the cleantech market will continue to grow and expand at obscene CAGRs. We are only at the dawn of a new era in renewable energy and cleantech; hang on for the ride.

India Update: Finance Bill 2007

Some changes are going to happen in the finance communities in India. Their Finance Minister, Palaniappan Chidambaram, recently presented the Finance Bill 2007. PricewaterhouseCoopers put out an extensive report discussing the implications for Ireland, but also discusses many of the changes affecting overseas investments among other tax and investment changes.

India’s venture capital scene is highlighted by a tax pass through status eligible to foreign and domestic funds, as discussed in The Financial Express. What does this mean? It means that they are exempt from tax on income from investments in venture capital undertakings. However, this is not the case for all industries. This tax pass through is only applicable to investments in the IT, biotech and nanotech industries.

Another article in The Financial Express highlights a new clause put into Finance Bill 2007 surrounding gas distribution networks.

“A new clause (vi) inserted in sub-section (4) of Section 80-IA provides that any undertaking carrying on the business of laying and operating cross-country natural gas distribution network, including gas pipelines and storage facilities being an integral part of the network, will be eligible for deduction under the section if it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation established constituted or constituted under any Central or state Act…” (Full text available at The Financial Express)

It isn’t surprising to see the Indian government giving special provisions to gas distribution networks. At the rate business enterprise and consumer wealth is growing in India, much more energy is needed; a more comprehensive network of gas distribution will be required to get the energy where it needs to go. This is backed by a huge demand in automotive vehicles. A news report from Hindu Busines Line mentions that Hyundai Motor India realized a 74% increase in domestic vehicle sales during February 2007 compared to the same month last year. This is complemented by a 60% increase from Honda Siel Cars India (HSCI), and an 81% increase from General Motors. Nice trend. Where are you putting your money?

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Indian Billionaires

There are 946 billionaires in the world, that’s a lot. As far as developing nations are concerned, China is projected to boom before India. But, interestingly, India leads Asia billionaire club with 36 billionaires; comparatively Japan has 24 and together Hong Kong and China have 41. In today’s economy, those with money – make lots more of it!

A problem in Canada is that there aren’t enough High Net Worth individuals backing venture funds to infuse capital into start-ups and growing companies. In the US, there isn’t that same problem; in California there is over US $13 billion in venture funding to businesses and much of it originally came from those high net worth individuals.

So … what does this mean for Chindia? Well, if these billionaires setup more venture funds in India, my bet is that you will start to see a lot of high-tech companies emerge and compete internationally to fuel the Indian economy. Will China be left in the dust?