Thursday, 02 April 2009 15:53

Clean Tech Understimulated, Venture Money Down 48%

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Though comparable numbers are not yet available for other venture capital sectors like software and biotechnology, both The Cleantech Group and GTM Research calculated drops in green tech funding to $1 billion and $836 million, respectively. The Cleantech Group says that's a 48 percent drop over last year.

After a banner 2008, clean tech funding took a nasty dive in the first three months of 2009, dropping to under $1 billion, according to two research firms.

The differing numbers reflect the slightly different methodologies and types of companies that are included in their analyses, but the main takeaway of both reports is the same: Green tech is getting hit by the broad economic downturn and lack of investment money, and not even the stimulus money pouring into the field has been able to stem the tide.

"Venture obviously is down, it's tough times for startups looking for capital," said Brian Fan, head of research for The Cleantech Group. "Government is stepping in in a big way, but it doesn't quite fill the gap."

For a U.S. economy devastated by its dependence on the largely depressed finance, insurance and real estate sectors, green tech could be just right for what ails it. By producing new exportable technology, wind turbine makers, solar panel builders and other types of companies could create a new industrial base for America. But to replace one G.M., or even one Lehman Brothers, renewable energy, smart grid and green home companies are going to have to grow fast. And dessication of the funding pool isn't going to help that happen.

Still, on a slightly longer time scale, green tech funding is far more accessible than at almost any time in the last 25 years. According to The Cleantech Group numbers, the $1 billion pulled in from January through March is more than the total venture capital investment in green tech in 2005.

"It's important to put these numbers in perspective," Ira Ehrenpreis, a longtime green tech investor and booster at the firm, Technology Partners, said in a statement released by GTM Research. "The $800 million of investment this quarter is more capital than has been invested annually for most of the years that we’ve been investing in the clean tech sector."

But while the broad economic trouble is clearly playing a role in the funding trouble, venture capital firms are changing the way that they invest in the space.

"Venture funds in the last year have really learned that the clean tech space is not like software," Fan said. "You can get a software company from zero to IPO with $50 million. That's one round [of financing] in green tech."

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Clean Tech Understimulated, Venture Money Down 48%

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