Cleantech investment declines in Q3, “There’s been a bubble”

Preliminary third-quarter results for cleantech venture investment totals $1.53 billion, down by 30 percent compared to last quarter, according to a new report by the Cleantech Group.

“The development is significant, as third quarters have generally been the strongest of the year for cleantech investment,” said Dallas Kachan, managing partner of research company Kachan & Co.

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The first three quarters of 2010 is still a little ahead of the 2009 total ($5.73 billion to $5.69 billion), and part of the decline is attributable to the pullback in solar investment this year. It’s not all bad news, though: The Cleantech Group is forecasting 2010 to be second-highest in cleantech investment volume ever.

Still, it’s no secret that clean energy investing is on the decline — and some investors like Peter Thiel and Marc Andreesson remain vociferously wary of the sector. (At a TechCrunch Disrupt panel this week, Vinod Khosla of Khosla Ventures called Thiel’s thinking “plain wrong.”)  The industry may even be facing a shakeout of sorts.

“There’s been a bubble in cleantech. That doesn’t mean the opportunities have gone away,” said Maurice Gunderson, CMEA Capital senior partner, in an interview with VentureBeat. “What we have seen over the last five, six years is a great deal of capital … from investors that have no experience in it. Where you see the mistakes made are people who don’t have experience in this field.”

Investments in the sector are coming from a shrinking set of investors, according to a report from Kachan & Co. Early-stage investing is taking the biggest hit as investors wait to put in money until later rounds, when the technology is more proven.

“Investors are creating a disproportionate amount of ‘walking dead’ — companies kept alive, waiting for exits — and that’s capital that new cleantech innovation isn’t getting,” Kachan said.

The Cleantech Group also highlighted the top global cleantech venture capitalists: Draper Fisher Jurveston (Solar City, Power Assure), Imperial Innovations (Plaxica, QuantaSol), Braemar (Solazyme, Lumenergi), VantagePoint (Trilliant, Solazyme) and Low Carbon Accelerator (Lumenergi, QuantaSol). This quarter, the leading sector by investment dollars was transportation, with $208 million invested, followed by biofuels ($186 million) and smart grids ($163 million).

VantagePoint announced earlier this month a $100 million fund devoted to cleantech investment in China, and will be a keystone investor in the Hong Kong IPO of Goldwind, a Chinese wind turbine manufacturer. Other firms like CMEA and Khosla Ventures also continue to invest.

“There are always opportunities outside the bubble. That’s the key, finding an area that is experiencing bubble behavior and staying out of it. It’s easily done if you are an expert in this field,” Gunderson said.

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For non-experts, perhaps the going advice should be: Stay away from what you don’t know.

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