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Posts Tagged ‘venture capital investment’

photo: Todd Woody

I wrote this story for Grist, where it first appeared.

The anemic economic recovery may have hit the dog days of summer with consumer spending and factory orders slowing, but the new energy economy continues to surge, according to a report released Tuesday by Ernst & Young.

Venture capital (VC) investment in renewable energy, electric cars, energy efficiency, and other green technology jumped to $1.5 billion in the United States in the second quarter of 2010, a nearly 64 percent spike over the second quarter of last year. Green tech investment now has returned to the record levels of the third quarter of 2008, before the global economic collapse shut down the VC’s ATM.

So where’s the money going? Between March and June, at least, investors hitched a ride with startups developing electric cars and the infrastructure to support them. Better Place, the Palo Alto company building electric vehicle charging networks around the world, snagged $350 million. Fisker Automotive, a Southern California startup building a sexy and pricy plug-in hybrid sports sedan called the Karma, scored $35 million, according to the report.

Solar remains a hot opportunity for venture capitalists, with nearly $439 million invested in the second quarter, a 183 percent increase from the year-ago quarter.

It’s no coincidence that the beneficiaries of investors’ largesse are also those startups that received federal loan guarantees to build big solar power plants. (Raising additional capital usually is a requirement for obtaining such federal loan guarantees.)

BrightSource Energy, for instance, secured a $1.37 billion loan guarantee from the U.S. Department of Energy to build its first solar power plant, now undergoing licensing in California. It then quickly raised $180 million from investors.

VCs also continue to pour cash — nearly $200 million in the second quarter — into energy efficiency startups, which tend to be far less capital-intensive than renewable energy companies.

So it’s a good time to go pitch that great green tech idea you’ve been kicking around, right?

Not necessarily. Ernst & Young notes that nearly 59 percent of investment in the second quarter went to so-called later-stage startups that are well on their way to rolling out products.

In other words, venture capitalists seem to be more interested in priming the pipeline for initial public offerings or acquisitions that will produce a big pay day than in financing what green tech investor Vinod Khosla calls “science experiments.”

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Along with the rest of the economy, venture capital investment in green technology has fallen off the proverbial cliff, according to a survey released Wednesday by market research firm the Cleantech Group.

Global investment in renewable energy, electric cars and other green tech dropped 48% to $1 billion in the first quarter of 2009 from the previous year and fell 41% from the previous quarter. (Global here being defined as North America, Europe, China and India.)

The survey, conducted with Deloitte, found that the size of the average round of funding also crashed, from $20 million in the fourth quarter of 2008 to $12.3 million in the first quarter.

Solar captured the biggest chunk of VC cash at $346 million, with the money going to companies like concentrated photovoltaic startup SolFocus and Norwegian polysilicon maker Norsun.

“Venture funds continue to invest significant sums, albeit at a slower pace and smaller scale than in the past two years,” Brian Fan, the Cleantech Group’s senior director of research, said in a statement.

North America remains the epicenter of green tech investing, with nearly two-third of all of investments in the first quarter.

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