Love the One Youre With: As Venture Investing in Web Grows, Cleantech Investing Slows

Investing can be sort of like high school: you get dumped by your first love (the web) so you hit on a lesser alternative (clean tech) until the first one comes back.

Venture investing data are confirming some worst fears in the clean tech industry: trend lines suggest that VCs were dabbling in clean tech because they didnt have anywhere else to put their money, not because they really believed in the economics. Now that social IPOs like LinkedIn and Zillow are putting up big numbers, the VCs are returning to their first love.

Despite brave statements to the contrary about the future of sustainable investing, the scale of returns from social media and related web investments simply dwarfs clean tech. On top of that, most VCs come out of electronic engineering and software design so that is what they know best, as well as what made them their money and reputations. This is not to say that clean tech will not have its day, but the data make clear that day is not today. JL

Katie Fehrenbacher reports in GigaOm:

Earlier this week figures from the latest MoneyTree report found that VC funding for web startups has reached a 10-year high. Contrast that with the latest funding figures from the Dow Jones VentureSource, out on Friday, which found that venture investment in the energy sector dropped by more than half.

Dow Jones reports that startups in the “energy and utility industry” raised $566 million in 29 deals, which was less than half the amount raised by energy startups in the second quarter of 2010. Clean-power companies were responsible for $540 million and 27 deals out of that total, according to Dow Jones. Clearly generalist venture capitalists that had dabbled in energy investing over the past couple of years have shifted away from energy.
Earlier this year Mass High Tech published a report that studied 10 venture firms that made five or more new cleantech deals between 2003 and 2008 and then completely pulled back from new cleantech investments after 2008.

Corporate investors are moving in, partly taking up some of the drop in energy investing. Jessica Canning, the global research director for Dow Jones VentureSource, was quoted in the release as saying, “As fewer venture dollars are committed, we see energy companies raising funding from corporations, the government and other types of investors.”

The amount of new corporate investors in greentech is one bright spot in energy investing. Last month natural gas company Chesapeake Energy announced that it plans to invest up to $1 billion into technologies that can use natural gas instead of oil. NRG Energy, ConocoPhillips and GE announced a new $300 million back in January. GM launched an inaugural $100 million auto-tech fund last year. Intel Capital has been investing in tech, including solar and energy efficiency, for years, and oil companies like Valero, BP, Chevron and Exxon have all made small investments into mostly biofuels.

While generalist VCs are moving away from cleantech, a variety of investors are doubling down or are creating new types of funds, like moving to later-stage investing or focusing on the intersection of IT and green. Former First Solar CEO Michael Ahearn has a new $300 million fund; Silver Lake recruited Adam Grosser, Cathy Zoi and Raj Atluru for its inaugural Kraftwerk fund; and big players like VantagePoint Venture Partners, Khosla Ventures and Kleiner Perkins continue to invest.