When it comes to greentech investments, Canada’s no slouch. With vast natural resources, a government that encourages research, and its proximity to the U.S., investors have lots of opportunities. We sat down with David Berkowitz, who leads cleantech investment for Canadian VC firm Ventures West, to discuss the Canadian cleantech market.
Earth2Tech: It seems like with an increase in angel funding and lower startup costs, it’s hard to find IT investment opportunities that are big enough to interest VCs. Is that something that makes cleantech more appealing?
David Berkowitz: We see a big opportunity in the cleantech space. There are some terrific market drivers. On the IT side of things, opportunities are less capital-intensive and maybe better suited to angel-type investments. But we don’t see that on the cleantech side of things. Green tech is tougher for angels because it’s more capital-intensive, so investors need deep pockets. Ventures West needs like-minded syndicate partners across several rounds.
E2T: Is cleantech new for Canadian investors?
DB: We’re not new to this market. I’ve been investing in it for 10 years and Ventures West has been investing in Ballard and others since the 80s. The difference is that opportunities that seemed like a good idea then can now get to market more easily. There aren’t a lot of big Canadian players in venture capital. The Canadian VC market is changing dramatically as some LPs are getting out of the asset class.
E2T: What is it about Canada that makes it a good place for cleantech startups?
DB: Canada is on the forefront. We have an energy and resource background, and three of the biggest utilities in the world, which encourages research and gives us local expertise and talent. But this isn’t about a Canadian market. The markets for cleantech are rarely close to home. It’s a global market: the U.S., China, India, and Europe. Europe and the U.S. have been much more aggressive than us in the past few years.
E2T: What about Canada’s cleantech market compared to the U.S.?
DB: In the U.S., competition for deals is driving high valuations. We have seen Series A deals with pre-money valuations over $70 million! We think that U.S. investors can come to Canada and find equally good opportunities at lower valuations.
E2T: Does the Canadian government help or hinder things?
DB: It’s easy to do business here, and Canada has several programs to encourage cleantech development, such as the SDTC program, as well as SRED tax credits to encourage R&D spending. Governments around the globe are looking at British Columbia in particular because the province recently announced the first big carbon tax in North America.