June 18, 2008
Venture Capital Spending On Energy Surges

The flow of VC money into energy start-ups continues unabated.

Nationally, four of the 10 biggest VC deals in the first quarter of 2008 were in alternative energy, according to the National Venture Capital Association. About $625 million was invested in 44 deals, marking a 51 percent increase from the first quarter of 2007.

The big flow of VC money into alternative energy technologies shows that capitalists really aren't permanently wedded to oil. Investors will put their money into anything they see as having a reasonable chance of earning good returns on the money invested.

One VC firm alone just raised $450 million for clean tech investing. Most of that money probably hasn't been invested it. It takes time to find suitable prospects.

RockPort Capital Partners says it has closed its third venture capital fund, pulling in commitments of more than $450 million to be focused on clean technology investments.

A lot of ways to make solar, wind, batteries, biomass, and other potential energy sources are going to get tried with all this money.

Sun Microsystems co-founder Vinod Khosla continues his pursuit of biomass energy investments.

Vinod Khosla is reportedly angling for $640 million from the California Public Employees’ Retirement System (CalPERS). CalPERS would become Khosla Ventures’ only other limited partner if it puts up the money.

Khosla, famed Sun Microsystems co-founder and Khosla Ventures founder, , is fond of ethanol companies such as Range Fuels in Broomfield, Colo. and Mascoma in Boston. These are companies with capital-intensive projects, and that makes the $244 billion CalPERS a valuable partner for Khosla.

Still, while good greentech exits may be few and far between for now, some analysts and companies believe they are just around the corner (see Greentech Exits Ahead? and Funding Roundup: Solar, Biofuels Dominate Light Week).

I've previously posted about the trend in VC funding for energy in 2005, 2007, and again in 2007. Another big surge area for VC money is biotech.

Share |      Randall Parker, 2008 June 18 10:36 PM  Energy Policy

David Govett said at June 19, 2008 1:07 AM:

Why spend VC on energy surges?

averros said at June 21, 2008 12:02 AM:

One word: "tulips".

philw1776 said at June 23, 2008 3:57 PM:

I used to work in high tech and have experience with VCs. They're vampires but they do put their money where the action is. They know that over 90% of the ventures they fund will go bust but the single digit % successes will make so much money that they're ahead. The question remains...do they (the VCs) have enough expertise to pick the right startups in these new industries? Venture Capital with its myriad faults and draconian aspects is what keeps America a world leader in innovation and drives the economy.

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