We would be hard-pressed right now to find a studyindicating a positive trend in any sector of the economy for the pasttwo quarters, an observation you’ve no doubt made for yourself sinceDay One. Still, the bad news is sometimes tempered by the good, as anApril reportfrom CleanTech Group, a market research firm, shows: while the combinedclean-tech venture capital investments in North America, Europe, Chinaand India plummeted 41 percent from the last quarter of 2008 to thefirst quarter of 2009, most of the renewable energy investments thatdid occur went into solar. The news is a bit old (the report wasreleased April 1), but I’m of the opinion that a dose of optimism nevergoes stale.
The combined $1 billion raised in the periodending March 31, 2009 across the 82 companies surveyed was a staggering48 percent lower than the sum raised in the same period last year,which ought to come as a surprise to nobody. There were also no large($100 million-sized) deals this quarter, according to the report. Yetwith the U.S., Germany, Japan and other G20 nations injecting federal stimulus moneyinto renewable energy, it’s a relief to see that the gradual movementtoward increased energy efficiency, though slowed down—like nearlyevery other sector of the economy—hasn’t lost too much steam.
Compared to all the other renewable energies,funding for solar power came away with the least damage, with biofuelscoming in at a distant second ($96 million):
During the first quarter solar companies againgarnered the most attention, capturing $346 million, or more thenone-third of the quarter’s total venture investment. Norsun, aNorwegian polysilicon producer, raised the most in a $72 million roundled by Good Energies.
The reasons for this are manifold, according to a BusinessWeek article discussing the report:
That shows VCs are turning away from more mainstreamcleantech projects — such as wind energy — in search ofsecond-generation technology, like concentrated solar and biofuels. Inpart, this trend represents cleantech’s maturing: venture capitalistsmoving from one, well-developed, technology to another, more immature,one in search of a larger rate-of-return.
But it also shows the way VCs are investing has changed. A couple ofyears ago, funds would have been willing to spend millions — on theirown — in untested sectors, betting the farm that their investment wouldpay off. Now, venture capitalists are more cautious, often investingwith other funds in industries, such as solar, that are supported bylucrative, government-backed incentives.
Inevitably, VC cleantech investment will pick up as the globaleconomy gets back on its feet. But in the meantime, investors are beingcircumspect where they put their money. To win backing, says onecleantech entrepreneur who declined to be named, it’s all about makingyour business work. “Money is out there, but only for projects thatmake financial sense,” he says.
As we’ve noted before (orAdam has, to be more precise), solar can make sense, even in toughtimes—and not just for the behemoth company sitting on its giant cashpile.