Cleantech Investments Surge

Third-quarter venture capital investments in clean technology increased 10% from the second quarter, according to a preliminary report from research firm Cleantech Group. Funding totaled about $1.6 billion, still 42% below the same period a year ago.

In the midst of a slow economic recovery, “government spending is emboldening private capital to get back in the game,” says Dallas Kachan, managing director of Cleantech Group. For example, the largest funding round of the quarter, $198 million for thin-film solar firm Solyndra, was raised in conjunction with a $535 million loan guarantee from the Department of Energy.

In addition to renewed interest in solar energy, Kachan says, biofuels investment has been healthy, and the sector is attracting significant funding from large energy firms. Renewable fuels and chemicals firm LS9 said last week that it raised $25 million in private funding, led by Chevron Technology Ventures.

The recent initial public offering of stock by lithium-ion battery maker A123Systems may signal that the public markets are also thawing. The long-awaited IPO raised $350 million for A123. IPO activity was all but nonexistent in the first half of 2009, blocking the traditional avenue by which venture capitalists recoup their investments.

Meanwhile, venture capital firms continue to raise money to invest in cleantech. CMEA Capital, an investor in Solyndra and A123, has raised an additional $100 million to spend on the alternative energy sector in a commitment to the Clinton Global Initiative, part of the William J. Clinton Foundation. CGI members meet annually to commit to solving challenges such as cutting CO₂ emissions.