Venture capitalists will put a lot less money into greentech startups next year, predicts Rob Day, but that could be a good thing. Day, a partner at @Ventures (and a blogger for Greentech Media) believes there's a readjustment in financing coming in 2009. Until now, too many VCs have been putting large amounts of money into companies trying to horn into already crowded markets like solar. And, as the dollars have climbed, VCs have assured themselves that it would work because: 1.) the world needs lots of energy; 2.) the established energy companies seemed resistant to adapt to the new opportunities; and 3.) we're from Silicon Valley and know better. The result is going to be a haircut in funding that could go as deep as 40 percent or more in the first half of 2009, he said. But, again, that could be good because of where and how that money's been invested. Roughly 40 percent of the funds now are getting sucked up into massive rounds for individual companies. Over $1 billion has been invested in a few CIGS startups while cadmium telluride solar startup AVA Solar nabbed $104 million in a single round earlier this year. The big money is not just confined to solar. Luminus Devices, which has a high-efficiency LED, raised $72 million in the first quarter. That has lead to a lopsided market which has created unrealistic expectations for well-funded and underfunded companies. (Of course, for those companies that need $100 million for a new factory, this sort of stinks.) The credit market has effectively terminated these kinds of deals for the moment. Remove those and you're already down 40 percent. Add some general queasiness about the market overall and VC funding can easily drop by 50 percent next year. The real problem, however, could occur if a malaise sets in as a result in the drop in funding. The decline in funding could be seen as a lack of confidence in greentech. If that occurs and the sector gets branded as another Internet-like bust, it could cause a lot of promising companies to wither away. (He put together a slide show on his thoughts here. It's pretty entertaining.) He brings up a lot of good points. Funding no doubt will drop. On the other hand, you can already see the re-education of many investors taking place. Many have begun to pay more attention to green software companies and smart-grid companies that hope to port classic IT technologies to the grid. Can smart grid become a bubble too? Sure, but at least it's familiar territory to many, and these kind of companies don't need big factories. Thus, the dangers of over-funding are reduced. Plus, these companies tend to have self-regulating mechanisms. Solar and biofuel companies (and their investors) sometimes start to believe they really have the power to change the world. It's tough to get grandiose thoughts about a fuel intake regulator for scooters. And there's the issue of consumers. Consumers are clamoring for solar panels and alternative energy. Over-investment and excess supply will be bad for producers but it will also spur sales. The PC market went through chronic cycles of over-investment and excess supplies in the 1980s and '90s, but a lot of people still managed to make money. It's going to be an interesting year.