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Developing Countries: Not a Mere Market, but a Source of Venture Capital for Cleantech Startups

It is getting more and more difficult for American and European cleantech companies to raise funding.  Today, one can rarely find such massive investments from venture capitalists as it was possible in the early days of cleantech rush. A lot of cleantech investors have lost their money and many of them have left the sector. Unfortunately, for every success story like Tesla Motors, there has been a large number of other startups that filed for bankruptcy or can’t operate without subsidies. As the result, those VCs who continue to invest in cleantech companies have become much more cautious and, normally, limit their investments in early-stage startups.

At the same time, in developing countries, investments in energy and cleantech sectors are increasing significantly.  Moreover, a growing number of VC funds from BRIC countries, is looking for opportunities to invest in American and European energy and cleantech startups. Today, China and India are facing an increasingly growing internal energy demand. Within the next few years, they are going to need more power that can provide available supply of fossil fuels. So, there is a huge potential for large-scale development of alternative sources of energy in these countries. Brazil and Russia, in their turn, need to increase efficiency in energy production and use. Both economies largely depend on the export of natural resources, which become much harder to extract. Today, these countries are looking to update their infrastructures and, thus, offer plenty of open fields for technology ventures to play in.

At the same time, in developing countries there is still a significant lack of local startups and breakthrough technologies. That’s why investors from BRIC countries are looking for Western startups, which they believe will have huge potential on their local markets. In this context I would like to present a list of main venture capital firms from BRIC countries that are focusing on energy & cleantech sectors and making investments outside their own countries. There is, however, a clear disparity within BRIC countries in term of investments in cleantech startups. It is first of all China and then Russia that are leading in a number of funds and investments in cleantech sector, both locally and overseas. In India and Brazil there are few cleantech venture capital firms and all of them stay local at this moment. (N.B. Here I’m focusing only on local VC funds and don’t cover notable U.S. and European cleantech VC firms operating in BRIC counties).

China

GSR Ventures is a venture capital firm that invests primarily in early and growth stage technology companies with substantial operations in China. Its portfolio is largely consists of clean technology, alternative energy, new materials and energy efficiency startups.  (Overseas investments: Boston Power, SEEO, Silevo, Liquidity).

Keytone Ventures was formed in 2008 and acquired a portfolio of seven investments from Kleiner Perkins Caufield & Byers. The firm is making investments ranging between US$5 million and US$10 million in cleantech, semiconductors, microelectronics and the Internet sectors. (Overseas investments: LP Amina, NanoH2O).

DT Capital Partners provides growth capital to early and expansion stage companies in the cleantech, advanced manufacturing, retail and healthcare sectors in China and overseas. (Overseas investments: Prudent Energy).

Tsing Capital is the first pure play cleantech venture capital firm in China, operating since 2001. It focuses on making investments into companies in environment protection, renewable energy, new materials, energy efficiency, waste treatment, and clean productions. (Overseas investments: Phononic Devices).

Qiming Venture Partners invests in young, fast-growing companies in the Internet, IT, healthcare, and clean technology sectors. The company currently manages four funds with over $1.2 billion in assets. Qiming has invested in over 70 companies, including many successful IPOs and M&A transactions in both the US and China. (Overseas investments: LanzaTech, PowerGenix).

Russia

Bright Capital is a venture capital firm that has invested in a broad range of breakthrough and disruptive technology companies. It mainly built its portfolio in the energy, cleantech, efficiency, water, advanced materials. (Overseas investments: Epuramat, Aquion Energy, LUXIM, Transphorm, SuVolta, Ogin).

I2BF Global Ventures is a cleantech venture capital firm, which focuses on innovative and competitive companies in the clean technology community. (Overseas investments: Scifiniti, GMZ Energy, Primus Power, Edeniq, ACAL Energy).

Russian Venture Company was established by Russian Government. It is one of Russia’s key tools in building its own national innovation system. The fund is focusing on information technology, life sciences, semi-conductor and alternative energy/clean technologies. (Overseas investments:  Bright Source Energy).

India & Brazil

As it was noted earlier, Indian and Brazilian cleantech venture capital firms are now focusing only on their local startup community. The most active VC firms investing in cleantech sector in India are Infuse Ventures and Ventureast; in Brazil – Antera Asset Management, DGF Investimentos and Inseed Investimentos.

Today, developing countries offer not just a huge market, but are also becoming a promising source of venture capital. Moreover, startups from Western countries are quite often put on a pedestal by investors from developing countries. Companies can attain higher valuation and get better deals than they would get in the U.S. or Europe. Startups can also benefit from venture capital firms’ network, which is often a key point for market penetration in developing countries.

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