Hobbled by Recession, Cleantech Still Takes the Investment Crown

Venture investors love cleantech, to the point of investing more there than they do any other industry, including biotech and the internet. That's the latest word from the Cleantech Group and Deloitte, which track investments in the sector on a quarterly basis.

Granted, the word "cleantech" has come to encompass a lot. The third-quarter study includes a breakdown of investments by three sub-categories. Solar won out with $451 million, while transportation (including batteries and biofuel) took $383 million and green building materials brought $110 million. The other $646 million of the $1.59 billion total poured into a bunch of other ideas, like geothermal and wind.

Laudatory statements aside, cleantech is still going through a rough period. The study notes that investment is up 10 percent over last quarter, when transportation took the most funds, but down 42 percent from the same quarter last year. Ouch.

Looking at the Cleantech Group's release (they're also running a Q&A this morning) it appears that only a few top venture firms are particularly active.
Intel Capital, which has the hefty backing of Intel to keep it in funds, led the pack with six deals. The other three listed as having the most deals are Kleiner Perkins, New Enterprise Associates and Braemar Energy Ventures -- all top names in the venture community.

So what about the VC firms without a big name? Most of them are suffering through a squeeze on funding; if they had the money, they'd probably be investing it. Rob Day, a VC who blogs about the industry, wrote a few weeks back that he's not seeing his peers out and about looking for investments, which probably means they're staying in and just trying to keep their existing companies above water.

The pension and equity funds that keep VC firms alive will likely start feeling a bit healthier in the wake of the financial services industry's revival, but it will take time.

Meanwhile, the Fed's stimulus package is hurtling toward the end, with only about 18 months left. Hopeful firms will likely feel the effects of the tap shutting off before it actually does. Many funding programs have end-dates, and competition for grants and loans is fierce. Some are also warning that there won't be any more government largesse forthcoming.

But hey, at least cleantech gets a nice new title as King of VC. And the future is never certain -- if the climate talks at Copenhagen result in any real action by governments to limit CO2 emissions, a new wave of funding should result.