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Venture Capital Flowing to Green Building Materials Sector

According to the Associated Press (via Forbes), during the last two quarters of 2006, several venture investors, including DFJ Element, NGEN Partners, Nth Capital, and Rockport Capital Partners, backed a variety of companies producing sustainable construction materials. NGEN, for example, led the Series B round last August for Hycrete, Inc., a Jersey City, New Jersey-based concrete company that manufactures a water-resistant concrete admixture which makes poured concrete more durable. By using the product, developers can obviate the need for toxic coatings or other treatments for foundation systems.

Venture investors have clearly been encouraged by various reports about the future of green building. For example, in June of 2006, the National Association of Home Builders predicted growth in the residential green building market to balloon from $7.4 billion in 2005 to between $19 billion and $38 billion in 2010. In the AP article, Peter Grubstein of NGEN hesitates to call green building a “revolutionary” business, but concedes that “there are evolutionary changes in a large market that is ready to change.” Nancy Floyd, managing director at Nth, notes, “one of the most exciting things that has changed in the last twelve months has been the customer pull for green products.” Michael DeRosa, managing director at DFJ Element, makes the observation that green building is “at an inflection point where things are making sense and are going beyond a few commercial and government buildings. . . . [y]ou used to have to make the trade-off between green vs. cost, but now you can have energy efficiency using recycled or green materials at cost parity or even better, and with better functionality.”

Despite the relatively low sex appeal of the green construction materials market (as compared with clean energy investments, etc.), investors- both individual and institutional- will undoubtedly position themselves at a competitive advantage by aggressively seeking out companies that produce sustainable building products.

2 Responses to Venture Capital Flowing to Green Building Materials Sector

  1. Guest April 23, 2012 at 11:56 am #

    Aside from VC, one other strategy I’ve seen is for large Green companies to try and partner with startups, e.g. licensing or joint-development agreements vs. direct investment. One large company doing this is Saint-Gobain, the large French construction products company through their External Venturing unit. Dow and GE are also pretty active in this space, and better than the VCs, these guys understand the end markets vs. just have money.

    • Stephen Del Percio April 28, 2012 at 2:24 pm #

      Thanks for the comment. Feel free to send me an email (stephen@gbNYC.com) and perhaps we can chat further.

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