Cleantech, Greentech reports show drop in venture investments as Google enters VC space

Separate reports issued by the Cleantech Group and Greentech Media Research show a drop in clean technology venture-capital investments for the first quarter of 2009. Cleantech estimates about $1 billion was spent by global VCs across 82 companies in the sector during the quarter, while Greentech Media puts the figure at $836 million wrapped up in 59 deals.

Both firms note that solar start-ups garnered much more funding than any other category, with Cleantech's report showing $346 million invested in solar and Greentech's figures closer to $357 million for the sector during the period. The largest solar investment beneficiaries were polysilicon producer Norsun, CPV leader SolFocus, service oriented Solar Power Partners, and TFPV startup Sierra Solar Power, according to Cleantech's findings.

Although the level of investment has decreased markedly compared to last year--in the Cleantech report, it's down 41% versus the previous quarter and 48% versus the same quarter in 2008--both organizations note that there is still a significant amount of VC funding in renewables and other greentech going on, although the amounts are more in line with what was invested in 2007.

"It’s important to put these numbers in perspective," said Ira Ehrenpries, general partner at Technology Partners, of the Greentech Media report. "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 cleantech sector. We still see a lot of money flowing into the sector, but investors are getting more discerning and are concentrating investments into the best companies."

"Cleantech financing is moving into a new phase, characterized by diversified funding sources, as the global recession and liquidity issues impact venture investors," noted Brian Fan, senior director of research for Cleantech Group. "Venture funds continue to invest significant sums, albeit at a slower pace and smaller scale than in the past two years."

A new face on the venture-capital scene has a very familiar name. Google has confirmed the launch of a dedicated VC arm, Google Ventures, led by managing partners Rich Miner and Bill Maris. With at least $100 million in spending money, the unit has targeted cleantech as one of its key areas for funding, with investments that could run from modest seed-level plays to amounts in the tens of millions of dollars.

The company says it will partner with other VCs or strategic investors, keeping its eye on "generating long-term financial return." Despite earlier funding of cleantech companies (including eSolar and Bright Source) by other parts of Google, the company says that the new VC arm will be its "primary vehicle for venture-style investments."