Earth Day – The state of Clean Tech Investing

As the annual Earth Day celebration approaches it seems like a good time to reflect on the current state of clean tech investing. It should be noted that investors use several interchangeable terms to refer to the same investing space such as renewable energy, sustainable energy, alternative energy, green energy and green tech. The most recent report from PWC/MoneyTree on venture funding for clean technology companies shows a significant decline in 2012, both in terms of number of deals as well as total dollars committed. Specifically, the survey found a 23% decline in deals and 28% decline in dollar volume from the prior year. It should be noted that 2010 and the first half of 2011 were banner years for clean tech funding with the sector significantly outpacing the VC industry average in percentage growth. The surge in interest in Clean Tech was driven by numerous factors including growing environmental concerns, such global warming, as well as substantial increases in prices of traditional fuels such as oil and natural gas.

The general excitement in Clean Tech has been tempered as of late by several factors, most notably high profile failures of some major clean tech firms. The debacle of solar panel producer, Solyndra, marked the beginning of the current decline which has been followed by a number of smaller Clean Tech failures. The industry received more negative headlines this past week when electric car manufacturer Fisker filed for bankruptcy, wiping out hundreds of millions dollars of equity from premier VC firms like Kleiner Perkins and Palo Alto Investors. (For a complete history of the Fisker investments read the VentureBeat article entitled “The sad long history of Fisker Automotive”). Unfortunately, while the Clean Tech industry remains promising, investors are now painting all companies in the sector with the same tainted brush.

The reality is that demand for alternative energy sources will only continue to grow and the same factors that propelled the sector initially will likely accelerate this growth in the future. Outstanding opportunities for Clean Tech investing still remain and savvy investors will see beyond the demise of few over-hyped companies. This Earth Day let’s celebrate the environment and keep new opportunities in perspective.

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