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I wrote a story last week about San Diego’s growing clean tech industry and venture capitalists’ increasing interest in the sector.
This week, Genetic Engineering& Biotechnology News reported that this year’s second quarter venture investing in biotech has made a major downturn, falling by almost 50 percent from the first quarter, according to Thomson Financial. General market apprehensiveness was cited as a major reason for the decrease, but clean tech could be partly to blame also.
I should note that even with the decrease, the average amount invested in biotech remained relatively high — more than $10 million in the second quarter. Investments have ranged from $8.4 million to $11.8 million over the past six quarters, according to the report. Still, the decline in venture backing is significant, and, as I mentioned in my story, seems to be due in part to new investment interest in clean tech, particularly in San Diego.
Biotech investments are inherently risky because of their long return time. Investors who are nervous about the long-term in today’s economic climate are opting to wait for more certainty before investing or are investing more in non-biotech sectors such as medical devices, which have a shorter return time because firms can move products to market faster.
But while biotech has always lost funds to related industries with shorter return times, the emergence of clean tech and clean energy firms has introduced competition even for longer-term investment backing.
Clean tech has become an increasingly attractive alternative investment category to long-term investors looking to expand and diversify their portfolios as a way to increase the odds of earning profitable returns. As a result, dollars are being shifted from biotech to solar energy, wind power, biofuels and other clean tech sectors.
Basically, in addition to losing dollars to non-biotech firms, traditional biotechnology companies must now compete for venture capital dollars with clean tech companies, leaving industry insiders to speculate that biotech start-ups will emerge more slowly and worry that new drugs could take longer to reach patients.