The post last week about the current challenges of solar investments elicited a bunch of comments from colleagues -- split between yea or nay. Meanwhile, last week saw yet another wave of general media coverage of the "bubble" in cleantech, such as this Boston Globe article. And we continue to see some high-profile "venture capital" investments of eyebrow-raising magnitude, such as SunEdison's raise this week (see below), and rumors going around the industry of multiple thin-film solar fundings underway at valuations in the hundreds of millions or even over a billion dollars... You know, the kind of thing that, if you're only checking the headlines, would make you think there's a bubble in cleantech. So it's worth noting yet again what we wrote about a year ago, when all this talk started: If there are bubbles in some sub-sectors of cleantech (a big "if"), that really doesn't indicate a general bubble across the sector. There are still plenty of great investment opportunities in cleantech, and it seems like the number is growing, not declining. It's admittedly a small data set, but at least at one firm, @Ventures, we're seeing plenty of attractive early-stage deals across the various sectors of cleantech -- energy, water and materials. Deals at reasonable valuations, with strong management teams and decent long-term growth prospects. Companies like GE are raising their revenue targets (and thus their need to acquire technology solutions) for cleantech markets. And while macroeconomic conditions are putting a damper on exits in 2008, bankers expect that cleantech IPOs will lead the re-opening of the exit window when it occurs. It's for subscribers only, but it's very much worth checking out Venture Capital Journal/European VCJ's recent Cleantech Report if you can get a copy. It's a very good overview of what's going on in the sector, touching on the breadth of investment opportunities, and taking a good balanced point of view that gets beyond the general media headlines. A nicely-done primer and update. And the following passage seems particularly relevant:

"So far, however, enthusiastic projections aren't reflected in the early funding data. For all the buzz cleantech has generated, it hasn't attracted anything near the early stage funding levels that Internet and telecommunications drew a decade ago. Even today, despite all the media attention focused on cleantech, Internet investments continue to exceed cleantech by a substantial margin."

It's worth reiterating: Yes, it's entirely possible that there are bubbles within certain narrow sub-sectors of cleantech venture capital. And yes, despite the incredible breadth and variety of uncorrelated sub-sectors within "cleantech", it's possible that at some future date there could be overall over-investment across these categories. But we're a long way from that point. We're only at the earliest stages of a period of "creative destruction" of incumbent energy, water and materials markets that are measured in the trillions of dollars in size. Cleantech continues to be only a small portion of venture capital investments. Cleantech, broadly defined, is going to be an attractive venture capital sector for a long time to come. Deals from the past week:

• GTM's Funding Roundup had details on the raises by SunEdison, Marrone Organic Innovations, and Climos, as well as on Suntech's strategic investment in Shunda Holdings.

• Michael Kanellos reports that Hum Cycles has raised an angel round of financing.

• It's not really a venture deal, but it's worth noting Masdar's $2B bet on making thin-film solar in Abu Dhabi.

• Sapphire Energy has raised $50mm from ARCH, Wellcome Trust and Venrock, to develop algae-to-gasoline.

• BT Imaging, an Australian company which is developing inspection tools for solar cell manufacturers, closed an A$3mm Series A led by Allen & Buckeridge Venture Capital, with participation from UniSeed.

Other news and notes: Google is reportedly teaming up with Ormat... Another article describing the increasing interest of limited partners (LPs) in cleantech... Here's a funny column on the subject of VCs and IPOs... DTE Energy and the University of Michigan are teaming up on the DTE Clean Energy Prize... A nice article on how student ideas and efforts can impact markets... Finally, green astroturf?

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?

Looking forward to seeing everyone at our REBN-East networking event at Boston University on Tuesday night. As a topic for discussion, I'll throw this thought out there: Had the pleasure of visiting NREL last week as part of a productive trip organized by the New England Clean Energy Council. There, I and around a dozen other VCs from the Boston area were presented to by several of the Lab's researchers in areas like solar PV, biofuels, energy storage, etc. It was a good opportunity to once again peak "under the hood" at a DOE energy lab, to get a quick overview of some of the world-class research being done there. It was necessarily a brief overview, but one thing that came through for me loud and clear (yet again) was how short the Innovation Cycle is in many of these sectors. Yes, each innovation in an area like solar is often the result of years of difficult research. But with so many efforts underway in parallel (at NREL and elsewhere), the results mean that every year there's a new bright idea for how to eke out more electricity from available solar resources (for example). New materials, improved manufacturing techniques, more effective components... In many cleantech sectors there's a backlog of these kinds of innovations, as the ideas languish uncommercialized in the labs and the literature, awaiting visionary entrepreneurs and investors. But in some of the more investigated sectors, investors are quick to jump on the latest innovation out of the various centers of research. Breakthrough innovations funded last year are trumped (on paper, at least) by this year's funded innovations, and they'll all be trumped by next year's funded innovations. Meanwhile, we're all still waiting on many of the innovations from several years back to be fully commercialized. Continuing to pick on the solar sector as illustrative example, we're all still waiting for many of the promised thin-film manufacturers to fully hit the market. That's not to cast doubt on those players, it's just a lesson in how long the Commercialization Cycle is for these technologies. So the questions for Tuesday's REBN-East event are these: 1. Put on your "green cluster-builder" hat -- what could this disparity between the Innovation Cycle and the Commercialization Cycle mean in terms of key roles for public policy? 2. Put on your VC hat -- what could the disparity mean for investors? Speaking of cleantech clusters: The NECEC has launched a new Fellowship Program to help experienced entrepreneurs from outside the industry to gain familiarity with clean technologies and launch the Next Big Things. Check it out! Deals from the past week (-ish):

• Grid-scale solar energy developer eSolar has raised $130mm from Idealab, Oak Investment Partners, and Google.org. They plan on building a demonstration plant later this year. Back in January we passed along word of Google's $10mm investment -- no word on whether this new investment figure includes that or not.

• Kleiner and RockPort have teamed up to help launch Th!nk North America (no, that's not Al Gore's latest public awareness campaign, it's a car company), in partnership with Norway-based Think Global. Think Global was already a portfolio company of RockPort's. Fortunately for the company, it would appear that Th!nk is not "very cute".

• Ireland-based NTR has put $100mm into Stirling Energy Systems in what has been called an "investment," but did result in a 52% ownership for NTR, so is really a bit of an acquisition.

• River- and tidal-energy system developer Hydro Green Energy has raised a $2.6mm Series A led by The Quercus Trust.

• Sensicore has apparently been acquired by GE.

Cleantech investors in the news:

• British Columbia has launched a new $90mm venture capital fund, managed by several institutional investors, with cleantech as part of its mandate.

• Bill Weihl in a good interview about Google's renewable energy activity (but he won't dish on which technology he thinks is overhyped).

• Piper Jaffray looks to ramp up their activities in cleantech.

Other news and notes: Interesting article on something we've talked about before -- the project financing challenge in cleantech... Seattle-area VC firms "chided" over their relatively low cleantech investment amounts... A good article illustrating how "green collar jobs" are being targeted for economic growth... But on the other hand, some argue that the lack of strong technical talent in the sector is a continuing challenge... Dallas points us to an update on the peak oil argument... GTM puts out their updated Top 10 startups list -- apparently the unstated 7th criterion is how much effort the company puts into PR (full disclosure: @Ventures portfolio company Powerit is mentioned)... Finally, some tips on green choices consumers can make, from the recent NYT "Green Issue" (full disclosure: @Ventures portfolio company M2E Power is mentioned).

Over the past week or so we've gotten a couple of data points indicating that VCs are pulling back a bit from the cleantech sector, or at least from some of the hotter sectors in the space. The Cleantech Group pointed to a big drop-off in Q1 cleantech VC totals in North America, Europe and Israel -- from $1.6B in Q4 down to $1.25B last quarter. They note that the Q1 total still represented a 42% increase on 1Q07 totals, but still, that's a more than 20% decrease in dollar totals from Q4, which itself was down from Q3. The drop-off was mostly led by (in)activity in North America, where dollar totals fell from $1.23B in Q4 to $873mm in Q1. Importantly, the pull-back was even more pronounced in terms of numbers of deals done in North America, where Q1's 50 rounds was significantly down from Q4's 72 deals. What this means is that, while activity was down, investors went more to later stage deals, and indeed it's probably indicative that the global average deal size in Q1 was $15.8mm, up from $10.3mm a year ago. That suggests a big shift toward later-stage investing. The Cleantech Group release notes that the pull-back was led by lower investment levels in solar and biofuels, but it's worth noting that those two categories still led all others. Dallas Kachan speculates that the biofuels activity is partially explained by a switch from corn-based to cellulosic ethanol investments. All of this was then echoed in yesterday's tallies from New Energy Finance, which came up with somewhat similar global cleantech VC totals. NEF made a particular point of showing how "private equity" (meaning all private equity except venture capital, presumably) was heavily down in the sector, while VC was up year on year. They suggest that the credit crunch is having a double-whammy effect on non-VC private equity and public markets: The credit crunch makes buyouts, etc., more difficult, and the broader effects of the financial crisis have closed the IPO window. However, M&A activity surged in the sector, from $3.5B in 1Q07 to $7.7B last quarter. That's a huge jump. So apparently the turmoil in the financial markets hasn't yet dampened large corporate interest in getting into the sector. Furthermore, NEF follows the Cleantech Group by pointing out that late-stage VC "saw a big increase." They suggest that VCs are filling in while the private equity and IPO opportunities remain shelved. So what about that health care bubble that no journalists talk about when they're all worried about how $873mm is far too much money to invest into the trillion-dollar energy, water, and materials markets? Well, they're seeing big declines in that sector as well, but the average deal size remains high at $18.6mm. Still bubblicious... for now... Joking aside, the general impression is that cleantech investing is roughly following the overall VC category, with a general slow-down but not collapse in activity. All in all, our "third scenario" prediction still seems to be on track. In other news:  Maybe they should settle it with a drag race.  Is there a Fast and Furious sequel in the making?  Tell you what, whichever one is first to provide me with a 3-month loaner will get my vote.

A couple of months back we discussed the potential impacts on cleantech venture capital from a possible recession. Since then that "possible" recession now seems to be hitting in full force, with a lot of pessimism out there at the highest (well, not the VERY highest) levels. So does that mean the picture's gotten clearer for those in cleantech venture capital? Nope. If anything, opinions are even more widely cast at this point, showing that no one really knows anything. In the past few days, we've seen arguments all over the map. Here's a column which argues that green technology could be recession-proof. Then there's consultant Rob Enderle, whom I heard this morning on NPR, arguing that green technology could be the hardest hit of all tech sectors because green techs are "feel-good" only, with poor economics. Finally, Eric Janszen hopes that cleantech could be the "good bubble" that floats the rest of the economy through the coming rough times... We still don't know how it will turn out. For yours truly, it's still looking "third scenario" out there in the industry, at least so far. In 2008, it looks likely that exits will be harder to come by, and that'll have a negative impact on some existing portfolios (esp. those with big cash burn), as well as a dampening impact on all the generalists still on the fence about whether to jump in or not. And while debt markets sort themselves out, project financing could be harder to come by. But the dealflow remains healthy, cleantech VCs so far remain active, large corporations are still very eager to get into the market, and for clean technologies that DO have strong economic value propositions (Mr. Enderle's learned opinion notwithstanding), customers seem very eager to capture cost savings. So, we'll stick by the "third scenario" (2008: down but not disaster) forecast... at least for now. Speaking of cleantech venture activity not slowing down, here are deals from the last few days:

• Swedish SiC wafer manufacturer Norstel AB has raised approximately $24mm from a consortium of investors including Northzone Ventures, Eqvitec, and Creandum.

• Environmental Operating Solutions, which has technology for the removal of nitrogen from wastewater, has raised a $2.5mm Series A, led by Stuart Mill Venture Partners. The company had previously been backed by angels.

• Advanced Power Projects, which is developing efficient natural gas turbines, raised an undisclosed (but "more than $10mm") Series A, led by Bay Partners and Sequoia Capital.

• CleanFish, a distributor of sustainably-harvested seafood, raised a Series A (VWire reports it at $4.2mm) led by TBL Capital, and including Mindful Capital and individual investors.

• Cleantech investors in the news: A cleantech hedge fund gets launched... Speaking of TBL Capital, Clean Technology Investor reports that they now have six portfolio companies in their $50mm fund... And VentureWire reports that Masdar will no longer make any LP investments in cleantech venture capital firms, instead they're going to focus on direct investments.

The AIChE's Boston chapter is going to be holding a Clean Energy Dinner Meeting in Boxboro, MA on April 3rd, check it out. Here's a suggested ice-breaker topic: Mr. Ozzy Freedom's fantabulous homemade automotive electrolyzer and hydrogen injection "water burning hybrid" system (thank you, Google AdSense, for bringing this one to my attention). Over dinner, you may enjoy discussing the following topics: a) "Do you think Rachel understands basic thermodynamics?"; b) How can I enroll at the "Water4Gas University", and are there scholarships available?; c) Mr. Freedom, thank you for the vote of confidence: "Anybody with NO MACHINES, with two broken pliers and half a brain, can build a jar with some wires inside. And get results."; and last but not least, d) does the recycled Bell jar come with the kit, or do I have to supply my own? This cleantech stuff is pretty easy, I guess. Other news and notes:  Advent Solar announces re-tooling program, with workforce reduction and plans to re-launch production next year [note: Advent is a portfolio company of @Ventures]...  Finally, still waiting on my loaner...

Now that we're almost a month into the new year, it's time to corral and sort out all the various cleantech VC tallies that have been put out there. So: Why isn't there more talk about the "health care tech bubble"? Check out the Dow Jones VentureSource annual roundup. By their count, cleantech investments in the U.S. totaled $2.5B over 187 investments, the dollar growth being 67% from 2006. Yes, significant growth. However, then note that the "health care" sector took in $10B over 671 investments. Yes, "only" a 17% growth in dollar amount over the $8.5B 2006 total, but that's an increase of $1.5B versus an increase of around $1B in their cleantech sector tally. And unlike in cleantech, where the popular consensus appears to be that the growth drivers won't go away soon, in health care policy discussions all the talk is about how to limit the growth in spending. Perhaps most notably, the median deal size in cleantech was about $7mm -- just about the same as that for all VC deals overall, and flat from 2006. But in health care the median deal size jumped up above $11mm, a 33% rise from 2006. I'm not at all trying to argue against the attractiveness of health care as an investment sector, I'm not informed enough to say anything like that. Nor am I trying to use this simplistic comparison to argue that there isn't a bubble in cleantech (I'll argue that in other ways, elsewhere). But I am indeed arguing that the business media seems far too willing to throw around the B-word in cleantech in comparison to the treatment given to other investment sectors. Why? 1. Probably because percentage growth is high -- allowing some to focus on relative rates in growth versus the absolutes. But remember how small a percentage cleantech has represented in venture spending up until recently. Health care is a huge market, but so are global markets for energy, water and materials, so sometimes it might be useful to take a step back and recognize just how early we are in the process of creative destruction of these huge industries. Potentially a lot of room left to run... 2. Another reason is that a few cleantech entrepreneurs and investors persist in making bold statements about how their ideas/ investments are going to re-make the world in the blink of an eye. Health care entrepreneurs and investors learned the hard way a few years back that claiming to have cancer cured is a sure-fired way to trigger a lot of skepticism and scrutiny by the press. The current generation of cleantech entrepreneurs and investors are only now learning that lesson (although one would think the lessons of 2000-2001 would be more vivid than they apparently are). Big, bold changes are indeed happening, it's an exciting time, but one can hardly blame the jaundiced business journalists for raising an eyebrow at some of the claims and mega-deals that are being made. 3. Finally, there's always confusion about publicly-traded stocks versus venture investments, in terms of thinking about valuations, etc. For good reason, we refrain on this site from getting into questions about appropriate valuations for publicly-traded cleantech stocks. It's not the author's purview, there are smarter people looking at it, and it's also only indirectly relevant what those companies are doing. It affects potential exits, but it doesn't necessarily impact what venture investors are doing. Certainly VCs will tend to follow the exits... but that doesn't mean that when journalists see solar stock prices rise and fall precipitously that the same volatility is felt by early stage investors making multi-year investments in privately-held companies. Again, not looking to revisit the "is there or isn't there" discussion here. And we probably shouldn't expect that mainstream business journalists will somehow back away from the whiff of controversy inherent in such discussions. But the juxtaposition of the sectoral data in the VentureSource release was pretty fascinating... The Cleantech Group also put out their annual total recently, as GTM wrote up a couple of days ago. As usual, they have the highest numbers among those counting, which is understandable given the group's central role in the industry and their inclusiveness. By their count, North American total cleantech venture investments were $3.95B, up 38% from 2006, and European cleantech venture investments totaled $1.23B, up 34% from the previous year. Interestingly, the number of deals in North America only increased 15%, to 268. This means, of course, that average deal size went up significantly -- but if you also believe the VentureSource data suggesting that median deal size stayed the same, then the conclusion must be that there were more mega-deals out of the bunch. And this is exactly what the Cleantech Group reports, pointing out not only that the number of $100mm+ deals increased from 2006, but that 8 of the top 10 solar financing rounds since 1999 took place last year. So we are left to conclude that valuation pressure isn't really impacting the sector for most deals... yet. But that certainly the pace of mega-deals doesn't appear to be slowing down. At least that's what this data would suggest, although shifts in the mix toward earlier stage (although we haven't seen anything like that, it's possible) would also hide valuation pressure as counted by median, and some VCs are sharing anecdotal evidence about some valuation pressure out there (mostly in solar deals, of course). We already talked about Eric Wesoff's first-cut tally (as well as yours truly's poor track record with annual predictions) earlier in the month. His VenturePower report, looking worldwide, totaled $3.4B for 222 deals. And rounding up the surveys, the MoneyTree/NVCA totals for the U.S. in the cleantech sector (note: link opens pdf) were $2.2B for 201 deals. It's helpful to see them aggregate cleantech deals from across several of their traditional categories, kudos -- and another good validation of interest in the sector. So as usual, big disparities in the counts. Which is understandable, reflecting the different levels of inclusiveness -- how do they define cleantech, what geographies are considered, how do they count project-finance type rounds. The difference in deal count between the VentureSource survey and the Cleantech Group survey, for example, was 81 deals. And most importantly, all the surveys pointed to very strong growth in the sector, both in terms of dollars and numbers of deals. So no matter how you're counting it, cleantech remains hot... just not as hot as health care tech.

We'll talk more about 2007 dealflow numbers and recent deals tomorrow, but today the big news is macroeconomic. International markets are melting down, the Fed is stepping in with a big emergency rate cut, and everyone is talking about the R-word. So what would a recession mean to cleantech venture investors and startups? There are four potential scenarios being discussed by investors: 1. There are those who argue that, in a recession driven in part by high energy costs, alternative energy generation and energy/ water/ materials efficiency plays can look even more attractive. This argument suggests that cleantech markets can be somewhat counter-cyclical, and that government stimulus plans could provide a short-term boost to startups. Furthermore, the argument goes, the stark challenges facing incumbent energy and resource markets could prompt venture and project finance investors to turn even more to cleantech as they run away from other tech sectors more affected by a downturn. 2. A second scenario accepts many of the above factors, but weighs that against lessened spending by corporate customers, and generally more difficult financial markets, and balances it out to suggest a "business as usual" outcome for cleantech startups and their investors. 3. A third scenario is more negative, but tempered by the countercyclical factors from the first scenario. Those arguing for a slow-down in 2008 point out that exit windows for investors and startups will be much narrowed, if not closed. And that corporate customers, who continue to drive most of the markets for cleantech, would tighten their purse-strings. Cleantech might be a bit insulated from the magnitude of macroeconomic bad news because of some countercyclical features, they argue, but an ebbing tide lowers all ships regardless. 4. And the fourth scenario being (carefully) discussed is the gloom and doom scenario. Those fearful of this kind of outcome point to the market downturn of 2001+, when publicly-traded energy tech stocks lost most of their value, energy tech venture capital investments fell by more than half from their 2000 peaks, and much-anticipated market transformations (such as "a DG world" and visions of fuel cell cars all over the highways) were delayed indefinitely. Each of these scenarios could hold true, but we're thinking that the third seems most likely. Tough to maintain optimism in the face of everything going on with the economy. And while there are some mitigating factors that may help insulate cleantech markets from the worst of it, it seems likely that investors and customers will be forced to back off a bit if the economy really does stumble. And yet this time around, unlike in 2000, much of the venture activity in cleantech has focused on technologies that are more ready for prime time and on real market needs, which makes it tougher to believe the worst scenarios. So what would a 2008 like that third scenario look like? 1. Some sectors will be hit worse than others. Any startup dependent upon sales to or through new home builders, for example, could be pretty hard hit. Others, such as biofuels perhaps, where regulatory mandates now in place will continue to provide an impetus for further adoption, may be less hard hit. Startup management teams will be scrambling to control things as best as they can; investors will be paying even closer attention to the effects of macroeconomic conditions on particular end markets. It'll be company by company, but some sectoral trends will be visible as well. 2. Remember when we talked about how 2008 was going to be a critical year for cleantech investors in terms of the first real wave of exits? Uh oh. Exit windows just got a lot harder to squeeze through. Where this will really hurt will be the high profile, high-cash-burn startups that have been going all out to try to get to a quick IPO. Any company's expectation that an IPO in 2008 could provide necessary additional funding and an exit for investors just took a bit hit. For companies now in this precarious position, those making real operational progress will probably still be able to raise necessary funds to carry them through, but perhaps not at the hoped-for valuations. And others will be shaken out. Capital efficient startups whose management teams are focused on achieving cashflow breakeven, on the other hand, will be somewhat insulated by being able to wait out any temporarily unfriendly market conditions. 3. This time last year, I predicted that while cleantech venture deal numbers would go up in 2007, fewer mega-deals would mean that the overall dollar totals would remain pretty flat. "Never wrong, but often early," huh? That prediction may have been meant for 2008 instead of 2007. In fact, it wouldn't be surprising to see dealflow in terms of both dollars and deals take a hit. But I'm also not expecting a mass exodus of generalist VCs from the sector, and the specialists aren't going away, and the long-term market fundamentals remain as attractive as ever. So I would expect a pause/ slowdown, but not a screeching halt in cleantech venture activity. Nevertheless, in all likelihood, in some sectors where high-growth expectations have driven particularly high valuations and big round sizes lately, we might see some reconciliation there as investors become less willing to price upside returns potential out of their deals... All of this is much of a guess as ever, but there you go, for what it's worth... It'll be an interesting next few months, that's for sure. Fingers crossed...