Global venture capital investment in clean technology soared to a record $8.4 billion in 2008, but there could be signs of a slowing trend, according to two reports released this week.
“In 2008, there was a quantum leap in talent, resources, and institutional appetite for clean technologies,” said Nicholas Parker, executive chairman of the Cleantech Group, in a statement. “Now, more than ever, clean technologies represent the biggest opportunities for job and wealth creation.”
The research firm said the 2008 total, up 38 percent from $6.1 billion in 2007, is the seventh consecutive year of growth for clean technology venture investing, widely seen as an indicator of overall investment patterns in the sector.
Solar startups, especially those focused on thin-films, concentrated solar thermal and solar services, attracted the most investment: $3.3 billion, or 40 percent of the total. Investors also showed enthusiasm for next-generation biofuels technologies, like algae and synthetic biology, making it the second largest clean-tech sector with $904 million, or 11 percent of the total.
Wind and smart grid startups, which aim to make the electric grid more robust and intelligent with digital technology, pulled in the third and fourth largest investments with $502 million (6 percent) and $345 million (4.1 percent), respectively.
U.S. companies continued to grab most venture investments raising $5.8 billion, or 68 percent of the global total, up 56 percent from 2007.
European and Israeli companies raised $1.8 billion, or 21 percent of the global total, up 43 percent from 2007. Germany and Israel had the most significant country growth in the region, with $383 million (up 217 percent) and $247 million (up 224 percent), respectively. Large solar deals led the investments in both countries.
Chinese clean-tech companies raised $430 million, or 5 percent of the global total, up 22 percent from 2007. Solar accounted for 60 percent of the total, reflecting the continuing migration of solar module manufacturing from Europe and the United States to China, according to the report. But government policies in support of adoption of clean technology, such as emission reduction targets, are also driving growth.
But there wasn’t investment growth in every country. Indian companies raised $227 million, or 3 percent of the global total, down 20 percent from 2007. And Canadian companies brought in $159 million, or 2 percent of the global total, down 58 percent from 2007.
The Cleantech Group found that global venture investment in the fourth quarter was $1.7 billion, down 35 percent from the third quarter and 4 percent from the year-ago period.
The research firm Greentech Media found a similar downward trend, although not as dramatic. The firm announced on Monday fourth-quarter data showing that venture capital investment in clean technologies reached $2.5 billion, a modest decrease from what the firm said was a previous quarter total of $2.9 billion.
Greentech analyst Eric Wesoff said he expects a slowing in total investment in 2009 primarily because of broader troubles in the economy.
“There is optimism in this sector but there is also uncertainty in terms of when the economy will turn around and restore the viability of the VC model,” Mr. Wesoff said.
Despite a slowdown, he predicts 2009 will be the year of smart grid, energy storage and energy efficiency. These sectors are more capital efficient than building large solar or wind farms and better lend themselves to the VC model, Mr. Wesoff said.
According to the Cleantech Group, the five most active clean-tech venture capital firms as measured by disclosed financing rounds were: Khosla Ventures (21), Kleiner Perkins Caufield & Byers (18), Quercus Trust (16), Rockport Capital Partners (13), and Draper Fisher Jurvetson (13).