'Green' proves to be a tough sell

Canada's venture capital community is far too conservative when it comes to putting money into “green” technologies, the head of a government-backed agency that funds clean-tech firms said Thursday.

Vicky Sharpe, chief executive officer of Sustainable Development Technology Canada, said venture capitalists still focus on traditional resources and telecommunications businesses, and appear fearful of new, environmentally friendly breakthroughs.

The problem with venture capitalists is they “want to make predictable money” rather than deal with risky innovations, Ms. Sharpe said in an interview.

“There is still hesitancy in the market.”

SDTC is a non-profit agency that manages $550-million in federal government funding set aside in 2001 to help pay for development work and demonstration projects in the clean-technology sector.

It has already given away $279-million worth of grants to 124 projects, and announced several more Thursday.

SDTC money helps projects move from the laboratory to a demonstration phase where they may be able to attract venture capital funding – what's known as “the valley-of-death funding gap,” Ms. Sharpe said.

Venture capitalists should be key players at the next stage, but because Canadian capital pools are relatively small compared with those in the United States, they tend to be more risk averse, she said.

And some venture capital firms don't feel capable of helping companies look at worldwide markets – often a key requirement for a clean technology to become a success, she added.

On top of that, “a lot of mainstream venture capitalists just don't know the [clean-technology] space and aren't seeing why they should take the risk.”

Still, there are a handful of creative venture capital firms in Canada that are enthusiastic about environment-related projects, Ms. Sharpe said. Some are even willing to invest money at very early stages, alongside SDTC.

Among those in that category: Vancouver's Ventures West Management Inc., Yaletown Venture Partners, also of Vancouver, and XPV Capital Corp. of Toronto.

John Coburn, XPV's managing director, said he agrees that most investors in Canada are very conservative, partly because they think they can make more money by investing in commodities, without taking on the risks associated with early stage environmental technology.

“Try to raise money for anything that doesn't have liquidity and some guaranteed return on funds and you've got an uphill battle,” he said.

Mr. Coburn was instrumental in building water purification company Zenon Environmental Inc., now a part of General Electric Co. Some investors who supported Zenon at early stages saw their money bloom by more than a hundredfold, he said, and that's what keeps him interested in the sector.

SDTC Thursday announced 11 new projects it is funding, to the tune of $30.3-million. Among the recipients are a Montreal company that is developing a system to capture and reuse the energy expended when a garbage truck puts on its brakes, and a Quebec City firm that is converting effluent from cheese factories into animal feed and heat.

While SDTC funds projects in a wide range of sectors, it is clear Canada has world-leading expertise in certain fields, Ms. Sharpe said.

One key strength is in the formulation of biofuels and the development of other biological conversion processes, she said.

Canada is also a leader in hydrogen technology, including fuel cells, and is advanced in developing techniques to decrease the environmental impacts of conventional oil and gas extraction, she said.