Delays in raising venture capital funding are threatening an opportunity for the West Midlands to get ahead in the race to bring the next generation of solar power technology to market.

Scientists at the University of Warwick have launched a spin-out firm which produces the so-called third-generation of solar cells so light-weight and flexible they can be grafted onto paper-thin material and used to charge mobile phones when on the move.

But the university’s spin-out arm Warwick Ventures, which started the firm Molecular Solar to commercialise the university’s research into photovoltaics, said the recession has seen potential funders “pull in their horns” on high-risk very early-stage ventures like this one.

It has warned other countries might get a head start in the race to bring the solar technology to market in a multi-billion pound industry which is currently growing at around 40 per cent a year.

Warwick Ventures director Dr Ederyn Williams said although the companies in the university’s spin-out portfolio which were launched a few years ago had still managed to secure funding during the recession, the environment for new spin-outs was far harsher, with nervous investors preferring the more established firms.

“It’s a very tough time to do a company of this sort – a high-risk, high-reward sort of company,” said Dr Williams.

“There were times when people would have just been all over something like this, but they have drawn their horns in and are looking for safe bets.”

Despite this, the other “baby” company in Warwick Venture’s portfolio at the moment GoHDR, which has developed software to make High Dynamic Range television easier to adopt, is finding it easier to raise finance because of the lower risks associated with software development and the lower sum it is looking for.

Although Warwick Ventures is confident Molecular Solar will eventually get the £5 million investment it needs to get the technology off the ground and bring it to a market-ready stage, it warned the delays in finding venture capital backers could put the UK on the back foot – and risk losing the market to companies based in Germany, the US or Asia.

“The Americans are putting huge amounts of money behind solar power,” said Dr Williams.

“It’s like VHS and Betamax – there’s not just one solution – it’s who gets there first.”

Molecular Solar chief executive Tim Jones, a professor of chemistry at the University of Warwick, said there was money earmarked from the local regional development agency Advantage West Midlands (AWM) for the firm, but that it could not access it because it was contingent on finding other backers.

“We have a grant from the Technology Strategy Board and AWM but some of that grant money requires matched private funding, for example the £100,000 from AWM requires matched funding from the private sector so we can’t currently claim it,” he said.

“It’s limiting our rate of progress – that money would essentially employ people to work for the company.”.

If the company were to reach its £5 million investment goal, Prof Jones said it could employ 16 people and generate wealth for the region by licensing out the technology to manufacturers in areas like mobile phones or photovoltaic tiles.

“The R&D would be done here so there is a high skills base – that value is at the front end, which is what we want to do,” said Prof Jones.

“But it’s a very fast moving field and a lot of people are investing in it.

“There are lots of clever people around the world – the danger is another company will get their first and the technology and the West Midlands will lose out.”