Wednesday, January 28, 2009

Cleantech Already Doing Well, Expects to Reap Federal Benefits

Recently, I have been working with an entrepreneur that is investing heavily in a bio-energy concept. He is a firm believer that, in light of the winds of political change, businesses in the cleantech sector -- e.g. bio-energy -- are likely to have a decent chance of success.

I find it hard to disagree with him. Cleantech has been on a bit of a roll the past few years. As I mentioned previously, clean-tech was one of the few venture capital sectors that saw an increase last year. Further, in my first post to this blog I speculated that the cleantech model favors the larger venture capital funds raised in recent years. Moreover, the federal stimulus package currently being worked on by President Obama and the U.S. Congress may well contain additional incentives for cleantech venture capitalists and entrepreneurs.

The New York Times recently broke down last year's venture capital investments into cleantech as follows:

Investors put $4.1 billion into 277 clean-tech start-ups in 2008, 52 percent more than they invested the year before. Seven of the top 10 biggest deals of the year were in this sector. Still, by the end of the year, venture capitalists’ newfound caution affected clean-tech companies, too. In the fourth quarter, investment fell 14 percent from the third quarter to $909 million.

Venture investors continue to favor solar energy and photovoltaic companies, which received $1.8 billion in 2008 — nearly half of the money that went to clean energy companies. The top three deals were Nanosolar, a solar-cell maker that raised $300 million; Solyndra, a photovoltaic solar company that raised $219 million; and SolarReserve, which builds utility-scale solar power plants and raised $140 million.

Start-ups that make energy from other sources, including ethanol and nuclear energy, were next, getting $561 million, or 14 percent of the total. Companies that recycle chemicals and solid materials brought in $304 million, or 7 percent. Battery start-ups received $224 million, or 5 percent. That will likely rise this year, as lithium-ion battery makers are receiving increased attention from investors and car companies.

In addition to these large private sector investments, current discussions between President Obama and the U.S. Congress contemplate that "about $60 billion will be applied toward promoting clean, efficient "energy independence" and creating jobs in the process." This is heartening news to venture capitalists and entrepreneurs in the cleantech industry, as the recent fall in oil prices has dampened somewhat the near term appeal of certain cleantech efforts.

While the government's initial stimulus discussions have focused on smart-grid components, solar panels, electric cars and green building materials, there is no reason to believe that the largess will not extend to other cleantech fields such as bio-fuels.

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Dividends and Preferences by Hank Heyming is licensed under a Creative Commons Attribution 3.0 United States License.