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A variety of investment financing mechanisms are available to DE businesses seeking to expand their operating capital: venture capital; informal investors ("business angels"); bank and debt financing; and the stock market.
Venture capitalists are becoming increasingly interested in energy companies. According to Clean Energy Trends 2004, a report by Clean Edge Inc., U.S. investments in clean energy technologies were roughly $428 million in 2003, a tenfold increase from 1997. While the U.S. venture capital market as a whole shrank from a peak of $103 billion in 2000 to $18 billion in 2003, investments in clean energy technologies grew as a proportion of the overall market, doubling from 1.2% in 2000 to 2.4% in 2003.
The Clean Edge report also finds that total global venture investments in new energy technology companies in 2003 equaled more than half a billion dollars, with approximately $100 million raised for non-U.S.-based firms. Nearly half of these deals were for distributed generation and energy storage technology companies.
With no interest and no requirement to repay, the stock market is perhaps the ultimate solution to business financing needs. A DE company first works with a team of underwriters on the initial public offering (IPO). The underwriters then work with regulators to determine the initial price and, in some states, verify the financial or technical viability of the company.
To learn more about investment financing options, visit the following links:
- Clean Edge Inc. publishes several free reports on clean energy market trends.
- Cleantech Venture Network publishes the quarterly Venture Monitor, which tracks investments in a wide range of "clean" technologies, including distributed energy.
- Resource Dynamics Corporation publishes a free bimonthly electronic newsletter, DG Monitor, that includes the company's DG Monitor Index. This index tracks the stock market performance of more than a dozen distributed energy companies.
- "Alternative Energy: Want the Last Laugh?", BusinessWeek Online, June 2003 — Describes opportunities for savvy investors.
- Bridging the Valley of Death: Transitioning from Public to Private Sector Financing, May 2003 — Energy entrepreneurs must make the leap from public sector financing to private sector funding to succeed. This paper explores financing disconnects and suggests remedies. (PDF 638 KB) Download Acrobat Reader.
- "Cogeneration and Distributed Generation: A Good Investment?", Cogeneration and On-Site Power Production, March-April 2002 — This article describes what investment banks look for in new technology products, examines investment opportunities in the DE market, and explains how investment banks make their investment decisions. Although investment banks typically focus on businesses that are widely represented in the stock market, the fledgling energy technology industry, which is substantially unquoted, is nonetheless of interest.
- "Matchmaking: Linking DE Firms and Investors", CyberTech EnergyPulse, August 2003 — An excerpt: "Entrepreneurs need financial backing, and investors need information about which technologies have the potential to be tomorrow's winners. These two communities require a credible information broker to bring them together. In established markets the capabilities of the players are well understood but, in the market for distributed energy, the players, technologies and services are in flux. How can investors learn about new DE firms? How can entrepreneurs sell a compelling vision of the future of their company to investors?"
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