Home Going Green: Cleantech VC Funding Narrows Focus to Energy Efficiency

Going Green: Cleantech VC Funding Narrows Focus to Energy Efficiency

In a new study released by Ernst & Young and Dow Jones VentureSource, cleantech startups focusing on energy efficiency raised more from venture capitalists in the last quarter of 2009 than those working on electricity generation. While fewer dollars were spent from the third to fourth quarters, more investments were made, especially in the energy efficiency category, suggesting more focused investments.

While investment in cleantech startups as a whole dropped 45% from $868.5 million in the third quarter to $564.5 million in the fourth, the money was refocused into energy efficiency, which nearly doubled from $133.7 million in Q3 to $252.8 million in Q4. Energy generation companies, Q3’s leading cleantech investment category at over $300 million, was dethroned in Q4 as they fell 62% to $118.5 million.

51 total deals in Q3 rose 21% to 62 deals in the final quarter of 2009. Energy efficiency leap-frogged energy generation, gaining 8% more of the total deals between quarters, while energy generation lost 12% of its share. Ernst & Young cleantech director John de Younge says these numbers signify a shift from the expensive nature of the solar companies, which dominate the electricity generation sector, to less fiscally demanding energy efficiency companies.

“Energy efficiency is in the sweet spot of many venture capital investors in terms of skill sets and funding parameters, particularly given its basis in information technology,” says de Younge. “Consequently, we may see investor participation in cleantech broaden.”

This trend echoes that of overall VC investments which saw an increase in the amount of deals along with a drop in value from Q3 to Q4 of 2009 – a clear sign of investors more carefully spending their funds. Cleantech, and more specifically energy efficiency startups, could see even further growth in 2010 as venture capitalists are set to spend even more in the first part of the year thanks to a boost in funds raised at the end of 2009. Even if the VCs decide to remain cautious as they did at the end of 2009, they seem to be taking a shining to the energy efficiency startups, so it wouldn’t be surprising to see continued growth in that sector.

Photo by Flickr user NeoGaboX.

About ReadWrite’s Editorial Process

The ReadWrite Editorial policy involves closely monitoring the tech industry for major developments, new product launches, AI breakthroughs, video game releases and other newsworthy events. Editors assign relevant stories to staff writers or freelance contributors with expertise in each particular topic area. Before publication, articles go through a rigorous round of editing for accuracy, clarity, and to ensure adherence to ReadWrite's style guidelines.

Get the biggest tech headlines of the day delivered to your inbox

    By signing up, you agree to our Terms and Privacy Policy. Unsubscribe anytime.

    Tech News

    Explore the latest in tech with our Tech News. We cut through the noise for concise, relevant updates, keeping you informed about the rapidly evolving tech landscape with curated content that separates signal from noise.

    In-Depth Tech Stories

    Explore tech impact in In-Depth Stories. Narrative data journalism offers comprehensive analyses, revealing stories behind data. Understand industry trends for a deeper perspective on tech's intricate relationships with society.

    Expert Reviews

    Empower decisions with Expert Reviews, merging industry expertise and insightful analysis. Delve into tech intricacies, get the best deals, and stay ahead with our trustworthy guide to navigating the ever-changing tech market.