After the Cleantech Group released their 2012 cleantech venture totals this past week, I heard a surprising amount of pessimism out there. I saw the sector called a "bust" and was asked a couple of times if the sector is just plain dying out.

Of course not, c'mon people.

First of all, regular readers of this column probably found very little of surprise in the Cleantech Group's numbers. For a while now we've been talking about how LPs have pulled back from the sector and how that has been forcing VCs to pull back from the sector, and in many cases to go find new jobs altogether. Given all this anecdotal evidence, it shouldn't be a surprise to anyone that the retrospective numbers now back these observations with data. The Cleantech Group's tallies were largely just confirmation of what we already knew was going on (with one exception, lower activity by corporates, which I'll discuss below). But these numbers shouldn't have shocked anyone.

Secondly, cleantech markets continue to grow quickly, with little signs of falling off anytime soon.

Here are some examples I found by cruising through GTM headlines from just the past few weeks:

Similar growth is taking place in many other cleantech markets as well, especially non-energy sectors. These are multibillion dollar markets, often among the fastest-growing segments of the US economy.

It is extremely rare to see such fast-growing markets and not see VCs trying to figure out how to put money at work in them. That's why we're not seeing the end of the cleantech sector for VCs; we're just in period where folks (especially LPs) are still licking their wounds from the past decade's failures and lack of exits. What we're seeing is a big pullback from the 2000s-era cleantech venture investment model, which is understandble. But there are other models now being developed and deployed.

Unfortunately, somewhere along the way someone convinced most of the large LP community that the investment model we saw over the past decade was the only way to invest in this sector. Which means they have pulled away from the sector altogether and thus they're not funding the next wave like they should. But investors who do have capital to deploy -- many of whom are not traditional VCs, but instead investors like family offices and others with more flexibility -- are staying active and will generate some new pathways to returns. Exits such as SolarCity's IPO and ZipCar's acquisition and others to come will help demonstrate that there are alternative high-growth business models in these markets than cutting-edge technology development and commodities manufacturing.

I don't think it'll happen immediately, but there's every reason to believe that as some successes with new investment and business models are seen, the pendulum will swing back and LPs and VCs will eventually jump back into the sector. 

So yes, it's not happy times for cleantech VCs and for cleantech entrepreneurs needing venture capital right now. But we knew that. We didn't need the Cleantech Group's report (very well done media presentation by them, btw) to tell us that.

One trend they note that may come as a bit of a surprise, however, is the decline in venture investment and M&A activity from corporates. In each of Q3 and Q4, for instance, the number of cleantech venture deals tracked by CG as having corporate involvement was below 30, the lowest two quarters since 2008. We've been hearing that corporate investors have been stepping up to help fill the gap left by VCs, but how do we reconcile these numbers with that supposed observation?

It could very well be that corporates are now pulling back from the sector as well. But I'm just not seeing it anecdotally. So alternatively, the numbers may reflect two other factors at work.

1. Corporate venture groups generally prefer not to lead deals. Which means they need a venture deal to be led by VCs. If VCs aren't leading many deals, therefore, that will reduce the number of opportunities for otherwise interested corporates to write checks. Such corporates need to more actively network with other investors besides VCs, if this is the case.

2. Interest among corporates may be shifting from some sectors to others. For instance, chemicals and oil companies that have been funding biofuels startups and projects may at this point have a fairly full dance card and be backing off, whereas other large players in sectors like industrial automation and agriculture may still be ramping up their internal efforts. That would also help explain the lower-than-expected corporate M&A activity, in addition to the low corporate venture activity.

The truth is probably a combination of all of the above. But I keep hearing from corporate managers I speak with that their companies are increasingly viewing clean technologies as major topline growth opportunities going forward, so I would assume that would mean they'll be having to buy their way into these new sectors sooner or later. I'll be watching this particular question carefully in the months to come, because it's a curious (and important) trend.