Green investments are slowly gaining traction as the need for new and efficient technologies in energy generation is rising. Many green companies don't have a proven track record in investments unlike traditional companies. Most of them are also in the pre-revenue stage in a company's life cycle because they are not earning revenue from their technologies.

Investors are aware of the risks involved in green investments. They may be afraid in investing money in a company with an untested technology. Green companies with technologies under development have high burn rates of cash. Early clean energy investors may lose their money before the green company can develop a marketable product. The worst case could be bankruptcy with investors declaring it as a bad investment.

Competition

A clean energy investment also faces considerable competition with others of its kind. Renewable energy companies are competing against other energy sources like fossil fuels and nuclear. Competition will also exist between other renewable energy sources. Solar cell technology is in direct competition with fuel cell technology. Corn-based ethanol does not only compete with gasoline but also with butanol and biodiesel.

Before investing in renewable energy, you need to have due diligence in evaluating each of the companies. To start off, you need to investigate the green company from business perspective. A good investor puts his money in good business opportunities. Be careful of investing in broad categories. The renewable energy label is often used loosely it is difficult to just look at the company at face value.

Watch Out for Exaggerations

Beware of a company bragging about statistics and big numbers. Some even claim they can capture a significant chunk of market share from a billion dollar industry. Do not be swayed by dazzling presentations and figures. You need to understand how the technology will be produced and sold commercially. It is also advisable to ask the company if it is able to tap foreign markets as well.

Companies claiming to have a wide array of green products and technologies must be treated with suspicion. A company with no specific focus on clean energy may not turn out to be a good investment. Actual product development is also another consideration in choosing a green investment. Avoid investing in companies with products still at the development stage. Wait until the company at least declares a reasonable time frame for completion. You can consider investing in clean energy stocks after you have seen results.

You also need to know how the green technology will fare with others in the industry. In the solar energy investment field, you have to consider if the company will produce silicon-based solar cells. If yes, the company must have a long-term contract with a silicon manufacturer. This will ensure a steady supply of silicon. If the company does not secure a contract, it might be affected by the price fluctuations of silicon.

Green companies should also be evaluated in terms of strategic partners. Smaller companies tend to find it difficult to penetrate large markets of renewable energy sources. Companies with strategic partners are on the right track to enjoy commercial success.

Quality of Management Team

A company's management team will determine its success or failure. Technologies based on the coolness factor and current trends are not exactly instant guarantees to success. An experienced leader in the company is essential to provide clear direction to developing green products. Growing a green technology business takes expertise and experience. A company with a quality management team should have the right balance between technical and business people. Technical experts like scientists and engineers do not understand the marketplace like entrepreneurs or business do. They are trained to be methodical but in the business world, this characteristic is useless in a dynamic marketplace. As a potential investor, you have to review the credentials of advisors and other board members of the company if needed.

Product Focus

Green investing is not all about flashy products. A new and better product does not mean guaranteed success in the marketplace. You have every right to be cautious before making an important decision to invest. You should ask the management team of the green company if the product will solve a problem. If the product addresses a need, it is something you should consider more carefully.

Before you find green energy companies to invest in, always determine the reliability and scalability of the product. The new technology could be about solar cells, biofuel or a product viable for the wind energy market. For example, many companies have constructed wind turbines with features like high ratio of strength to weight. The technology shows promise and could be a viable business for utility companies.