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Clean Tech Venture Investment Declines, USDA Supports VC-Backed Clean Tech Firms

October 24, 2012

Clean Tech venture investments declined in the third quarter of 2012, according to the MoneyTree report released on Friday by PricewaterhouseCoopers (PWC) and the National Venture Capital Association (NVCA). The numbers reinforce the current trend of decreasing investment in clean tech companies and projects and the inherent challenges of VC backing in the sector. However, many are attributing this drop to a shift in the focus of clean tech investment by private and public entities rather than complete disenchantment in the promising sector.

A total of $791 million was invested in 58 deals within the clean tech sector covering industries in alternative energy, pollution and recycling, power supplies, information technology and conservation, according to the PwC/NVCA MoneyTree report. This is a 20 percent decrease in dollars from the second quarter, mirroring separate findings by Bloomberg New Energy Finance released earlier this month that indicate global investment in clean energy also saw a 5 percent drop from the second quarter and a 20 percent drop from Q3 2011. With their need for sizable capital investments and difficulty in scaling, traditional clean tech ventures face an uncertain future in securing investment from both public and private funding sources. In addition, the failure of VC-backed solar company, Solyndra, and negative politics surrounding green investments has not helped the clean tech cause.

Despite the significant drop in investments, the PwC/NVCA MoneyTree report also noted that three of the top ten VC deals in Q3 fell into the clean tech category, suggesting that there are still sizable investments being made into clean tech sector. Many are quick to note there is a certain breed of clean tech companies and projects that incorporate information technology, social media and/or big data gaining attention from venture capitalists and shifting the focus from traditional clean tech ventures. Martin LaMonica of Forbes notes that capital-efficient categories have grown within industries related to conventional fuels, transportation, and water and wastewater and that there is a focus on investments in improved energy and resource efficiency in business model innovations.

The same day of the PwC/NVCA MoneyTree report release, the USDA announced awardees of its latest round of funding to total $107.5 million in loan guarantees for VC backed rural clean tech projects in AZ, CA, NM, GA, IA, KS, ND and WI, several of which are related to smartgrid technologies. There is no doubt the clean tech sector has suffered since the 2008 recession, but the slowing investment suggests a growing focus on nontraditional clean tech ventures within public and private funding sources as a part of a transformative movement within the sector as a whole.

cleantech, venture capital, usda