Echoes of the past for cleantech investors

For veteran investors, volatile market conditions and rising inflation are bringing up memories of Cleantech 1.0's bust era during the aughts.

Why it matters: Fund managers agree that time is of the essence in the battle against the climate crisis. But many are skittish of investing during turbulent times, with lessons still raw from the last industry-wide bust 20 years ago.

Flashback: Clean energy's infamous bust in the early 2000s likely stymied private investment in the industry — and kneecapped its growth — for decades.

• "It was really more of an opportunistic industry that was served mostly by governmental stimulus and intervention. It was artificially inflated," former Gartner analyst John Wheeler tells Axios.

What's happening: The energy and climate industries are coming off one of their best private funding years in decades, with roughly $40 billion pulled in by private companies in 2021.

• Some investors have told Axios in recent months that they feared many companies in the current cohort have — to Wheeler's point — artificially inflated valuations.
• "It's all been driven by this undercurrent of huge investment by funds or PE firms who are looking to invest in companies that are very climate-friendly as part of these ESG commitments," Wheeler says.

The intrigue: Wheeler, who also worked through the 2008 housing crash, likened some of the ESG credit ratings to ratings agencies' role in mortgage financing leading up to the 2008 crash.

The bottom line: "There is a tsunami that's coming. With a tsunami, the water rushes out and everyone is left exposed," Wheeler says.

💭 Our thought bubble: It's time for startups to hunker down with the funding they have in place, cut costs to reduce burn, and prepare for a lean few years ahead.