It’s an odd position that Indian clean technology entrepreneurs find themselves in. On the one hand, these early-stage entrepreneurs need money to develop the technology. On the other, their funding requirements are too small for the investors looking to deploy capital.
Entrepreneurs in the clean technology sector require anywhere between $250,000 and $2 million (Rs1-8 crore) to seed the early stages of research and development.
Yet, the few but increasing number of investors in this space are looking to finance projects (in companies as established as Suzlon Energy Ltd or Praj Industries Ltd) that are greater than $15 million and more realistically around $50 million.
Clean technology is a catch-all phrase that includes any energy, water, agriculture, transportation and manufacturing technology that reduces waste or makes emissions less toxic.
Pankaj Sehgal, director of technology investments at Sun Group, said that India has a “significant gap” in funding available for the earlier stage companies, causing a dearth of research and development activity.
His comment was part of a discussion panel at the first India Cleantech Forum. The panel included Mark Nydam of PCG Asset Management Llc., Jaisingh Dhumal, chief manager in the Technology Finance Group at ICICI Bank, Debashish Majumdar, chairman and managing director of Indian Renewable Energy Development Agency Ltd, and Suneel Parasnis, country director of New Ventures India.
The dilemma: The few but increasing number of investors are looking to finance projects in companies as established as Suzlon Energy Ltd that are greater than $15 million and more realistically around $50 million. Photo: Santosh Verma/ Bloomberg
While there has been greater activity in private and public loans for this sector, the generally perception is that it is angel or seed funding that is needed to catalyse the entrepreneurs’ ventures. But panellists said that given the sector’s nature and the low level of funding needed, perhaps the government should take a stronger role in helping clean technology entrepreneurs.
Nydam, managing director of California-based PCG, said the situation is similar in the US. “There is not really enough capital in the sector and it is not really well organized unlike a lot of other... sectors like biotech or IT, where there’s well established angel networks and sufficient funding.” Yet he said the more established firms are able to get larger ticket project finance.
Sehgal agreed that the US situation was similar, but added that the gap is wider in India because there are even fewer ways for entrepreneurs to meet investors and there is less comfort in India in giving up equity stakes.
New Ventures India has been one of the groups trying to change this by bringing entrepreneurs in clean technology and investors together since it launched as a public-private partnership in March 2006.
Schwarzenegger to visit India in Nov
California governor Arnold Schwarzenegger, who leads a team to Andhra Pradesh in November, will bring their interest in clean technology. California leads in environmentally conscious practices in the US. As told to Mint on the sidelines of a Delhi conference, Schwarzenegger and his group plan to visit the CII-Sohrabji Godrej Green Business Centre, which won an award from the US Green Building Council. His delegates may be looking for investments in clean technology or opportunities to license relevant products.