Cleantech VC Funding Takes Temporary Hit

Mark Marich

The venture capital industry is not immune from the current economic downturn. It appears that VCs, like many of us, have paused to assess the impact on their portfolio companies.

The first quarter of the year saw a drop in venture capital investment. The level of investment dropped to lows not seen since 1997. According to the MoneyTree™ Report from the National Venture Capital Association (NVCA) and PricewaterhouseCoopers, VC firms invested only $3 billion in 549 young companies in the first quarter, representing a 61% drop from the first quarter of 2008.

Investment in clean-technology start-ups was hit the hardest--an 85% drop from a year ago. With heavy government investment in energy, and a lot of promising technologies emerging from universities, this trend is alarming. If innovations do not reach the market, the investments will never benefit the public and related new jobs will not be generated.

Fortunately, Mark Heesen, president of the NVCA, said he did not expect the levels to continue to fall further. “We would expect a mild and steady increase in investment throughout the rest of the year, particularly if the exit pipeline is allowed to clear,” he remarked in the report.

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