Biochems: the darling of cleantech investment

Private funding for biochemicals firms is holding firm, despite waning interest in clean technology as a whole, according to Lux Research (New York).

U.S. venture investments in biobased chemicals and materials are, so far, on pace to meet last year’s total of $806 million, Lux says. Other clean technology markets have not fared so well since the 2008-09 recession. Alternative fuels investment fell 5% in 2010, and venture funding for smart grid, energy storage, and electric vehicles fell 43%.

“We’ve seen a lot of areas of cleantech investment go down in the last year, so the fact that biobased chemicals and materials funding is still robust is a nice surprise,” Mark Bünger, a director at Lux, told CW. Some of the decline in clean tech investment can be attributed to the economy, but there has also been waning interest in new technologies from the venture community, Bünger says.

He expects venture capital in biobased chemicals to peak in 2-3 years. Biobased chemicals and materials, while far from dead, is already a mature market, and start-ups and investors each need to retool their strategies. “The industry no longer offers daredevil innovators grand challenges that attract risk capital and venture finance,” Bünger says. “Its challenges today lie in day-to-day dilemmas of running a mature, mundane business, and the payoffs are more predictable.” The industry is now highly relevant to corporations, regulators, and consumers, he adds.

For more on venture investment in biochemicals and materials, see CW‘s Green Chemicals: Coming to a Supply Chain Near You


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