US clean-tech VC investment bucks downward trend
London, 8 May: US clean-tech venture capital (VC) investments were up 18% to $571.6 million in the first quarter of 2008, bucking a gloomier trend for overall VC investment, according to an Ernst & Young report. Overall investment fell by 7%, to $6.5 billion, in the first three months of 2008, compared to the same period last year said the report, which is based on data from Dow Jones VentureOne.

More than three-quarters of the clean-tech investment was in three sectors: 31% in alternative fuels, 26% in energy and electricity generation and 20% in energy efficiency. The fastest growing segments were power and efficiency management services (up 454% year-on-year to $66.5 million), efficiency products (up 148% to $49.5 million) and solar (up 136% to $132.4 million).

The report also noted a shift from early-stage deals, which fell to 37% of total clean-tech investment from 51% in the first quarter of 2007, to later-stage financings, which were up to 43% from 24%.  This reflects the maturing technologies in the clean-tech industry, the report said. 

According to Joseph Muscat, Americas director of clean-tech and venture capital at Ernst & Young LLP, “Clean-tech is enabling the business response to climate change. The fundamental challenges that corporations face today related to carbon emissions, energy costs and resource scarcity will continue to provide opportunities for innovative clean-tech solutions.”

“While solar and biofuels investments continue to grow, we're observing increased investments in efficiency-related technologies as VCs balance their renewable energy portfolios with companies that have a shorter prospective time to exit. Efficiency technologies are less capital intensive than renewables, which enable more venture capitalists to participate in the clean-tech industry,” Muscat continued.

This analysis agrees with first quarter figures released by New Energy Finance (NEF) in April, which show first-quarter VC investment in clean energy globally up to $1 billion from $668 million year-on-year. The quarter saw a big increase in later-stage deals: London-based analysis company NEF claimed that this was because companies unable to secure finance from the volatile public markets have turned to venture capital instead.

The US-based Cleantech Group also reported positive first quarter figures in April for North America, Europe and Israel, showing clean-tech investment up 42% to $1.25 billion. The most active VC groups during the first quarter were Khosla Ventures, closing nine deals totalling $205 million, and New Enterprise Associates, Kleiner Perkins Caufield & Byers, Element Partners and Israel Cleantech Ventures, each funding four.