November 18, 2007
Energy And Environmental Venture Capital Funding Up

Given the trend in world oil production (the second graph is really bad news) we urgently need new energy technologies. Luckily, we can find plenty of signs that venture capitalists recognize the scope of the problem and the opportunity to massively profit from new energy sources. (and you VCs feel free to offer me a job)

Nick Parker, chairman of the Cleantech Group of analysts, said: "There is no doubt this year will break records in terms of the amount invested. But this year will also be notable for the amount of commercial take-up of clean technologies."

Last year, more than $4bn (1.9bn) of venture capital was invested in environmental technologies such as renewable energy, water technologies and carbon reduction technologies. The sector is now the biggest recipient of venture capital funds in the US, and in the first three quarters alone about $3.8bn of venture capital was invested, Mr Parker said.

Take all these figures with a grain of salt. There are lots of types of investments getting counted up together in broad categories relating to energy and the environment. But all signs are that energy has become a very attractive area for VC funding.

Venture capital firms poured nearly $900 million - a record - into U.S. startups developing clean and green energy systems in the three months that ended Sept. 30, according to a report out today.

The total flow of dollars to all U.S. startups - $8.07 billion - rose 8 percent compared with the same three months last year, and the energy category soared 28 percent, according to data furnished by the San Francisco office of Dow Jones Venture One.

The quarterly MoneyTree report by the accounting firm PricewaterhouseCoopers and the trade group National Venture Capital Association finds venture capital funding going up in general with a big surge in energy.

With investments in the emerging "clean tech" industry continuing to soar, Silicon Valley companies received more than $2.48 billion in venture capital in the third quarter of 2007 - a sign that the valley's entrepreneurial culture is thriving despite broader economic worries.

The quarterly MoneyTree Report found that the valley's total venture investments, while dipping slightly from the previous quarter, represented robust 9 percent year-over-year growth. As usual, Silicon Valley and the broader Bay Area outpaced other tech hubs by a wide margin, reaping 35 percent of the $7.1 billion in venture investments in the United States.

My guess is that the big surge in clean tech funding is due to rising oil prices. The regulatory environment for pollution and recycling just hasn't tightened up fast enough this year to account for such a huge surge in funding.

Nationally, the clean tech industry, which crosses traditional MoneyTree sectors and comprises alternative energy, pollution and recycling, power supplies and conservation, saw record investment levels with $844 million going into 62 deals in the third quarter. This represented an 80 percent increase in the dollar level and 35 percent increase in the number of deals in the sector over the second quarter of the year.

A list of top 10 VC deals in 3Q 2007 has 2 energy entrants.

2. $100 million in GreatPoint Energy, which converts coal and biomass into clean, natural gas.

...

4. $77 million in HelioVault, developer of technology for depositing thin-film photovoltaic coatings.

Also in 3Q Konarka got $45 million for solar photovoltaics.

Interest in clean energy was especially keen, as oil prices soared toward $90 a barrel. In addition to the GreatPoint deal, one of the largest financing rounds ever in the alternative energy field, Konarka Technologies Inc., a Lowell company developing solar cells for building materials and mobile phones, raised $45 million.

Some of these companies are going to succeed. I am cheering them on. Declining world oil production is going to make the development of substitutes a very urgent matter. The economic disruption due to declining oil is going to be enormous. Even with great substitutes hitting the market in the nick of time we are still going to get hit by obsolescence of massive amounts of capital equipment and personal possessions that are dependent on oil-based products to make them work. The need to replace all that equipment will therefore lower living standards during the transition period to solar, wind, nuclear, and geothermal power.

This trend toward larger amounts of VC funding for energy did not just start. See my December 2005 and March 2007 posts about venture capital funding for energy.

Share |      Randall Parker, 2007 November 18 12:37 PM  Energy Policy


Comments
Venture Capitalist said at December 7, 2007 4:45 AM:

I am actually willing to venture in Oil industries. Your page revealed me some interesting things. Thank for your help.

TOM said at January 27, 2008 4:40 PM:

I AM A COMMERCIAL BROKER THAT HAS ACLIENT THAT NEEDS $100M TO CONTINUE THEIR OIL PRODUCTION PROJECT. PLEASE CALL OR EMAIL ME. I HAVE AN EXEC SUMMARY AND DOCS
TX
TOM
845-294-3001

Richard Harding said at May 19, 2009 12:44 AM:

Morning,

I am from RSA(South Africa) and want to know if you maybe have any information for us concerning exploration in RSA.
We need funding for exploration towards oil.


Thank you.

Hannes and Richard

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