Cleantech Becoming ‘Third Leg’ of VC Investing Stool—But Just How Big is That Leg?

4/30/10Follow @bvbigelow

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venture investments in the U.S., found that $1.9 billion was invested in 186 cleantech deals in 2009. That’s less than half the $4 billion that was invested in 270 deals in 2008, according to the MoneyTree Report.

Dow Jones VentureSource analyst Jessica Canning said venture investments in cleantech last year totaled almost $3 billion and 223 deals. That was down about 45 percent from Dow Jones’ 2008 figure of $5.4 billion invested in 256 cleantech deals.

Despite the wide variations in data from different sources, however, it’s clear that venture funding for cleantech deals has become enormous. It’s safe to say that VC investing in cleantech is close to par with the billions of venture investments made each year in the life sciences and information technology, which typically rank as the biggest and second-biggest industries for VC investments—depending on the source.

The life sciences typically rank as the largest industry category in the MoneyTree Report, which said $3.5 billion was invested in 417 biotech startups in 2009. Dow Jones VentureSource, which usually ranks IT as the biggest venture category, said VCs put $6.6 billion into 849 information technology companies last year.

“I would say cleantech is the hot new investment area,” said John Taylor, the vice president of research at the National Venture Capital Association. “Not every company will be successful, but folks like Ira believe that if you are careful in picking out the real gems you can do very well.”

On a worldwide basis, the Cleantech Group says venture capital investments in cleantech totaled almost $5.7 billion in 2009. As big as that might seem, it represented a one-third plunge from the $8.49 billion that VCs put into cleantechs in 2008, according to Greg Neichin, a vice president in the Cleantech Group’s advisory practice. The sector has grown enormously in the eight years since the Cleantech Group was founded, said Greg Neichin, a vice president in the firm’s advisory practice.

“When the firm was founded, the team was very much focused on evangelizing the sector and explaining why investors, entrepreneurs, and corporations should care about cleantech,” Neichin said. “The real shift now is that the executives coming to us for research support are not asking ‘Should we be involved in cleantech?’ but rather, ‘We need to be active in cleantech; how do we succeed in the market?’”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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