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Summary:

Earlier this week figures from the latest MoneyTree report found that VC funding for web startups has reached a 10-year high. Contrast that with the funding figures from Dow Jones, which found that venture investment in the energy sector dropped by more than half.

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Earlier this week figures from the latest MoneyTree report found that VC funding for web startups has reached a 10-year high. Contrast that with the latest funding figures from the Dow Jones VentureSource, out on Friday, which found that venture investment in the energy sector dropped by more than half.

Dow Jones reports that startups in the “energy and utility industry” raised $566 million in 29 deals, which was less than half the amount raised by energy startups in the second quarter of 2010. Clean-power companies were responsible for $540 million and 27 deals out of that total, according to Dow Jones.

Clearly generalist venture capitalists that had dabbled in energy investing over the past couple of years have shifted away from energy. Earlier this year Mass High Tech published a report that studied 10 venture firms that made five or more new cleantech deals between 2003 and 2008 and then completely pulled back from new cleantech investments after 2008.

Corporate investors are moving in, partly taking up some of the drop in energy investing. Jessica Canning, the global research director for Dow Jones VentureSource, was quoted in the release as saying, “As fewer venture dollars are committed, we see energy companies raising funding from corporations, the government and other types of investors.”

The amount of new corporate investors in greentech is one bright spot in energy investing. Last month natural gas company Chesapeake Energy announced that it plans to invest up to $1 billion into technologies that can use natural gas instead of oil. NRG Energy, ConocoPhillips and GE announced a new $300 million back in January. GM launched an inaugural $100 million auto-tech fund last year. Intel Capital has been investing in tech, including solar and energy efficiency, for years, and oil companies like Valero, BP, Chevron and Exxon have all made small investments into mostly biofuels.

While generalist VCs are moving away from cleantech, a variety of investors are doubling down or are creating new types of funds, like moving to later-stage investing or focusing on the intersection of IT and green. Former First Solar CEO Michael Ahearn has a new $300 million fund; Silver Lake recruited Adam Grosser, Cathy Zoi and Raj Atluru for its inaugural Kraftwerk fund; and big players like VantagePoint Venture Partners, Khosla Ventures and Kleiner Perkins continue to invest.

Image courtesy of PinkMoose

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  1. This is an exceptionally interesting article Katie. When you look at the technology trends and what is becoming the commonplace (being able to do more using the web) and more and more people working from home, I would put forward the proposition that the web start-ups are, in fact, a green investment. Cloud Computing and all that it allows companies / individuals to do…it’s just the beginning :-)

  2. Katie Fehrenbacher Friday, July 22, 2011

    @David, I completely agree with you. Cloud computing itself can save billions in energy costs, according to some studies, http://gigaom.com/cleantech/cloud-computing-could-lead-to-billions-in-energy-savings/

  3. Lucian Armasu Friday, July 22, 2011

    I believe Facebook’s hyper inflated valuation helped all the other web companies’ valuations to rise. When Facebook’s valuation will start crashing down (my guess is well before IPO), all the other web valuations will start dropping, too.

    Cleantech is in it for the long haul. With or without a valuation boom, cleantech investments will continue to rise over the years.

  4. Ignacio Gonzalez Friday, July 22, 2011

    Agree with Lucian on the long term perspective. And, if we were to actually put a price on carbon through legislation, investment would go up even further. This, to me, is the key to the puzzle.

    Katie, you forgot to include Shell in the biofuels investment list by the majors :) , especially Shell’s recent venture in Brazil. Shell is also investing in carbon capture and sequestration (CCS), although some would say this is not “clean tech” since it is still allowing for use of hydrocarbons, but nonetheless is part of many other solutions toward cleaner energy.

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