Rebound!: Cleantech Becomes the Largest U.S. Venture Sector

Back in 2006 there was much cheering from the cleantech industry when cleantech venture investing became the third largest category, trailing information technology and biotechnology. Many wondered if it would ever hit the top spot. Well, we can now thank the recession and government funding for the category taking the lead for the first time: This morning the Cleantech Group has published numbers that say venture investments in cleantech startups are continuing to rebound and for the third quarter of 2009 have finally eclipsed biotech and IT investing in the U.S.

Much of that rebound had to do with government funding in the sector. As Dallas Kachan, Managing Director, Cleantech Group pointed out in a statement: “The largest deals in VC (Tesla Motors), PE (Solyndra) and the largest IPO (A123Systems) this quarter were all recipients of U.S. government funding.” The Cleantech Group says that clean technology venture investments for North America, Europe, China and India hit $1.39 billion for 133 companies, which was about the same as the second quarter of 2009, but up from the drop in the first quarter of 2009 and the last quarter of 2008. Analysts at Greentech Media found similar numbers with $1.9 billion in 112 deals in the third quarter of 2009 for cleantech venture investments.

On a conference call Kachan said that cleantech venture investing in the U.S. made up 27 percent of overall venture investing, while biotech made up 24 percent, and software made up 18 percent. However, it’s unclear if cleantech will remain at the top of the venture investing ladder, after the government funding drops off (see our The End is Near: How to Prep for Life After the Greentech Stimulus).

Like the previous quarter, transportation — vehicles, biofuels and batteries — remained the highest area of cleantech investment, with $383 million in investment, for firms like Tesla, Think Automotive and Amyris.

Solar investments followed transportation, with $253 million in investments, while green buildings had a surprisingly strong turn out with $110 million. My favorite portion is always the venture firms that were the most active and for the third quarter Intel Capital led the way with 6 investments, followed by Kleiner Perkins with 5, New Enterprise Associates with 4, and Braemar Energy Ventures with 4.