Clean-tech investing surpasses telecom, medical devices

Data shows that venture investing in clean tech jumped 78 percent last year to $2.9 billion, with forecast to grow to $19 billion by 2010.

Recently published research confirms what any venture capital investor would tell you: clean tech is hot.

The Cleantech Network and Environmental Entrepreneurs (E2) published a report summary on Tuesday finding that VC investment grew 78 percent in 2006 to $2.9 billion. Most of that money went into energy-related technologies.

That investment growth is anticipated to continue: the report expects numbers to climb to $19 billion by 2010.

The authors cited a few reasons for the investment boom in clean, or green, tech: concerns over global warming, higher energy prices, improved technology and changing public policies.

A lot of the money spent in venture-backed companies last year went to a handful of energy companies. With funding, those companies were able to ramp up their businesses from technology pilots to full-scale productions. A collection of solar and biofuel companies--Cilion, AltraBiofuels, Bloom Energy, Renewable Energy Group and Nanosolar--accounted for $600 million of investment in 2006.

Although there is clearly a bull market in clean tech, there are regular concerns over a bubble, particularly in solar and biofuels as well. There is also the concern that lower energy prices could make alternative energies and fuels less economical.

Last year's investment bump pushed clean tech over medical devices--at $2.67 billion--and telecom at $2.82 billion, according to the report, citing National Venture Capital Associations (NVCA) numbers. The rate of growth in clean tech last year was substantially faster than both.

By comparison, software and biotech still pull in the most venture money--at $5.25 billion and $4.92 billion respectively.

Surveying the VC data for all industries since 2001, the report's authors conclude that clean tech has got a good track record when it comes to investment flow.

"While U.S. venture capital investments as a whole were off by 33 percent in 2006 compared to 2001, investments in American cleantech companies were up 243 percent in that time--more than two and a half times the growth rate of the next strongest industry (electronics/instrumentation) over that period," it said.

This year is starting to see a few stock market entrances in electricity demand management and in biofuels. The success of these initial public offering companies and the level of activity in mergers and acquisitions will help determine whether the clean tech VC spending will continue.

 

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