Venture capitalists appeared to defy expectation in the fourth quarter by cutting back on clean tech investments despite an infusion of government capital.
With the federal government pouring billions into green tech firms developing advanced batteries, solar cells, electric cars and smart-grid technologies, venture capitalists were expected to follow suit. Private money was supposed to follow public, giving a boost an industry that hopes to wean the nation off energy generated from fossil fuels.
But an early look at the investment figures show otherwise. The National Venture Capital Association and Dow Jones VentureSource will release their market assessments in several weeks. But Greentech Media offered a first take on Thursday, and the picture wasn’t pretty.
Venture firms invested about $910 million during the fourth quarter, down from $1.9 billion in third quarter and $1.2 billion in the second. First quarter investing during the height of the recession was $836 million.
The weak quarter suggests continued uncertainty at venture houses such as NEA, Khosla Ventures, Kleiner Perkins Caufield & Byers, Foundation Capital, NGEN Partners and Draper Fisher Jurvetson, among the nation’s top green tech investors.
In a press release, Greentech Media tried to put a brave face on the results. It pointed out that overall investing for the year came to $4.85 billion, down from $7.6 billion in a record 2008, but that the total number of deals in 2009 – 356 – actually grew.
It also pointed out that solar deals again captured the interest of the moneymen, attracting almost a third of the dollars. Next in line were biofuels companies, which took in $976 million.
But the weak quarter will put pressure on the sector in 2010, if it hopes to regain the momentum it saw in 2007. Many venture capitalists cite green tech as the most attractive opportunity around. But that excitement hasn’t yet translated into check writing.
For that to happen, the price of oil may need to inflate another $20 or so. Or at least VCs need to believe it will.
