VCs Target Silicon Valley’s LED Lighting Businesses

by | Jun 29, 2010

Venture capitalists invested $100 million in 14 LED lighting companies in the first quarter of 2010, up from $14 million in the same quarter a year ago, according to Cleantech Group, reports Reuters.

Leading the way is Silicon Valley, the U.S. technology capital. Alan Salzman, chief executive of Silicon Valley-based venture fund VantagePoint Venture Partners told Reuters that his company has $4.5 billion in committed capital in startups across different sectors, but lighting is the largest sector in its portfolio.

Investors are betting that LEDs will take hold with their long life and high energy efficiency benefits, consuming about 20 percent of the energy used by incandescents, despite their higher price tag, report Reuters.

The key barrier to the technology’s adoption has been pricing. Industry experts told Reuters that LED lighting needs to cost under $10 for the market to take off.

Investors expect that the cost will fall as LED start-ups reach scale and the technology advances. As an example, cited by Reuters, start-up Lemnis Lighting initially priced its LED bulbs at about $50 six months ago, which now cost $25. The company expects pricing will fall below $10 in the first half of 2011.

Pike Research expects LEDs will account for nearly half of the $4.4 billion U.S. market for lamps in the commercial, industrial and outdoor stationary sectors by 2020.

Retail giants like Wal-Mart and restaurant chains such as Starbucks, Red Robin and Yum! Brands are already making the switch to LED lighting to reduce energy costs.

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