“Hokum” and the decline in early-stage cleantech VC

Ran across this interesting article on Forbes.com full of useful tips for investors who “know that human-caused global warming is hokum.”  I’m pretty sure it’s the first time I’ve seen the word “hokum” written this century.  The best line refers to the “clueless U.S. venture capital community”... “throwing their investors’ money at futile chimeras based on the idea of a climate crisis.”

Apparently either we VCs really are clueless or we fundamentally disagree (or, I suppose, both).  Because according to recently released numbers, cleantech was one of the few areas to see increased VC spending in Q1.

Ernst & Young/ Dow Jones VentureOne announced their tally for Q1 last week.  While overall VC spending declined 7% yoy to $6.5B, cleantech totals grew 18% from Q1 ‘07 to $571.6mm.  Solar and biofuels (once again) led the pack, although energy efficiency showed a bump as well.   These numbers are significantly lower than numbers from other groups like the Cleantech Group, but as we’ve discussed before, the differences are largely methodological and the overall trends remain consistent across surveys.  Here’s GTM’s coverage of the E&Y totals.

A couple of things to take note of in particular:  a) while it’s impressive to see cleantech grow while other sectors declined, those totals suggest cleantech remains less than 10% of all VC spending; and b) while the dollar amounts grew, the number of deals DECLINED by 11%.

Meanwhile, Moneytree/NVCA released their 2007 cleantech VC totals, which they pegged at $2.2B.  And yes, solar and biofuels led the pack there, too.  They also noted that the highly-anticipated first big wave of cleantech exits is expected this year and next.

So what’s going on?  A storyline appears to be coming together that (as we’ve talked about recently) as cleantech venture firms raise much bigger new funds, they’re having to write bigger checks and shift into later-stage investing.

One of the most interesting factoids in the E&Y data was on deal stage, where they note that early stage deals accounted for 37% of cleantech financings in Q1, down from over 50% a year ago.

This also mirrors a trend spotted by some observers (and discussed here as well) that while some cleantech sectors are getting a lot (perhaps too much) attention, others aren’t getting nearly as much attention.  Well, of course—as investors move later-stage, they have to double-down on sectors that have already gotten a lot of attention.  And as generalists move into this complex and varied sector, the simplest decision on where to focus attention is on the “proven” subsectors… where others are already investing.

It’s a good time to be a small, flexible, disciplined early-stage cleantech specialist.  Unless, of course, it’s all hokum…

Deals from the past week:

• We mentioned GM had put money into Mascoma—apparently Marathon Oil put in $10mm as well, and the company announced the new financing totaled $61mm overall.

• Wellbore Energy Solutions, which has technologies to “clean up” the wellbore in oil & gas applications, raised an undisclosed amount of financing from NGP Energy Technology Partners.

• BASF Venture Capital announced a 4mm (dollars?  euros?) investment in Deutsche Rohstoff AG, a mining company that BASF believes will help them gain access to supplies of minerals critical for applications like efficient lighting and energy storage.

• Airship Ventures, which seeks to bring back the dirigible as a form of transportation, raised an undisclosed amount of Series A from six individuals.  [Insert your own bad pun or analogy here]

• Cleantech investors in the news:  Lightspeed Venture Partners, which has been ramping up cleantech investment activity, announced the closing of Fund VIII at $800mm...  Good Energies appointed George Coelho as managing director and head of venture capital—he’ll also head up the European solar team…  And kudos to The Quercus Trust and 21Ventures for their $100k award to Engineers Without Borders.

Other news and notes:  Neal shares five investment strategies to play in cleantech...  The promises and challenges of solar power...  CNet’s top 10 cleantech companies (6 are in solar, and none are in water—really?)...  Lux Research points to the strong links between nanotech and cleantech, but has some cautionary words…  New England area VCs are starting to look far and wide...  Finally, where’s my checkbook?