Solar start-ups garner more than half of quarterly greentech VC investments, report says

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Solar start-up companies accounted for more than half of the $2.5 billion-plus in venture capital investments made in the final quarter of 2008, according to the latest Venture Power Report issued by Greentech Media. Twenty-nine of the 115 VC rounds completed during the quarter came from the solar sector, for a total of almost $1.336 billion, outpacing the next busiest sector–ethanol/biofuels/gasification–by a wide margin.

More solar deals closed in the fourth quarter than in the third quarter, which had 26 rounds. The solar total was heavily influenced by Solyndra’s massive fund raise, but even without that figure, the solar investing landscape was still very active and perhaps overinvested, the report says.

“Greentech VC investors remain optimistic on this sector and still have faith in the VC model, said Eric Wesoff, senior analyst at Greentech Media. “Investors continue to fund early stage deals as well as later stage deals. At least 30 of the 115 deals this quarter were seed stage or A rounds.”

“VCs are now digging deep in the greentech sector and looking outside traditional technologies at previously underinvested areas like energy storage, energy efficiency, recycling, water, cleaner coal, and green IT,” he added.

“VC investment in green energy technologies in 2008 exceeded $7.7 billion in more than 350 deals –more than double last year’s dollar totals,” Wesoff said. “We anticipate a slowing in the dollar amount but look for an increase in number of deals as investors back off from building solar and biofuel factories and look for more capital-efficient technologies and firms.”

“2008 marks the ‘end of the beginning,’ an end to the first few years of investment enthusiasm,” noted Eric Straser, a partner at Mohr Davidow Ventures and leader of its cleantech investment team. “In the next period, we’ll see investors focus on strong investor syndicates, management teams that have proven they can execute, and value propositions that can truly deliver differentiated economics to the world’s largest markets.”

Wesoff also believes that “early stage financing is still alive. VCs and angel investors are still investing in new innovative technologies. Not as much as in 2005 to 2007, but angel and Round A financings are still represented.

“Look for 2009 to be the year of smart grid, energy storage, and energy efficiency. We see investment numbers staying strong through 2009 as investors continue to nurture their current portfolio firms and look for new opportunities,” he concluded.

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