The Credit Crunch Is Hurting Cleantech

While there were a few reports out last week showing that venture investing in cleantech startups was at a record high in the first quarter of 2008, things weren’t as rosy when it came to private equity. A new report out from New Energy Finance says that despite a rise in venture funding for cleantech, private equity investment during the quarter was way down — as in a 64 percent drop from the first quarter of 2007, to just $878 million. That’s thanks to uncertainty in the financial markets and “the drying up of available credit.”

And it was equally bad for the public markets, which provided $5.2 billion in the first quarter of 2007 for cleantech — but a mere $807 million in the first quarter of this year. The Wall Street Journal’s Environmental Capital blog calls the effect of the credit crunch on cleantech a “sign the clean-energy sector is coming of age” and proof that the industry “no longer lives a charmed life.” Maybe so.

Biofuels had quite a rocky quarter when it came to public markets, with both Imperium and Renewable Energy Group pulling their IPO plans. With food-based fuels under fire and that cellulosic breakthrough still just around the corner, the biofuel sector will likely continue to go through growing pains.

Funnily enough, later-stage VC investments actually saw a significant increase, as financial uncertainty led companies that were looking to raise large late-stage rounds to venture firms and away from the public markets.

The silver lining of the report is that cleantech M&A was up significantly, with $7.7 billion in deals in the first quarter compared to $3.5 billion in the first quarter of 2007. The report says:

No doubt the impact of the credit squeeze meant that some companies became targets of corporate acquirers rather than private equity investors or the public markets.

Well, folks, you know where to focus those exit plans on.

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