Green technology may be one bright spot amid an increasingly gloomy landscape for venture capital, but venture capitalists at a conference in Seattle said Tuesday that the financial crisis will still curtail green investing in the short term.

While long-term prospects remain strong, shorter-term funding for green companies is likely to decline during the coming months, according to a panel of VCs at the Renewable Energy Finance Forum in Seattle on Tuesday.

"I think funds will have a very hard time raising capital in this capital market," said Anup Jacob, managing director at the Virgin Green Fund, a later-stage growth capital investing firm which has backed startups such as thin-film solar photovoltaic company Solyndra and desalination facility maker Seven Seas Water.

And that means venture-capital firms are likely to refocus their attention on startups that can promise revenues within a few years, and to be more wary of those that require large upfront capital investments, panelists said.

"Any renewable business that doesn't fund itself in two years or less is something we're not going to do," Jacob said. "We're only doing deals with revenues and cash flows at this point."

Specifically, that could shift some of the venture capital away from new solar technologies, which have claimed a large portion of the capital invested this year, to "lower risk, lower reward" fields like water conservation and treatment, said Michael Butler, chairman and CEO of Cascadia Capital.

Greentech Media's Venture Power Report in September reported that solar investments made up more than half of the deals in the third quarter, raking in $1.5 billion out of $2.8 billion in greentech deals in North America and Europe.

While Butler projected that this year's total venture capital investment in green technology companies could set a record-breaking $6 billion, investors are "definitely being more careful" with their money today, he said.

Jacob agreed, saying that the Virgin Green Fund also is looking at water treatment and recycling companies as a match to the current economic climate. As for solar companies: "I think the challenges on the capital intensive nature of building [solar panel fabrication plants], especially in a market where debt capacity is not available, is very challenging," he said.

Raj Atluru, a managing director at Draper Fisher Jurvetson, which has funded such companies as Tesla Motors, Konarka Technologies and Bright Source Energy, put a three to six-month timeframe on what he said would be a coming "hiccup in venture capital" for greentech companies.

Companies that can't promise quick returns on investment because they've got longer-range, "swing for the fences" business models will find it harder and harder to get capital, he said.

"I hate to see those opportunities go to the wayside for the net two to three years, but that may happen," he said.

Atluru agreed that investment in companies with new thin-film solar or solar-thermal technologies is likely to drop off in coming years.

Some of the new technologies that may be coming into favor include green information-technology investments, including investments into technologies that help utilities and their customers better monitor and control electricity use, he said.

Energy efficiency is still a big theme for Draper Jurvetson. The firm is keen on companies that convert "waste to anything," including recycling companies and firms that make fuel from waste, Atluru added.

Brad Zenger, managing director of early-stage venture-capital investment firm Pivotal Investments, said he's looking for investment opportunities in companies with technology to convert biomass into energy, as well as into alternative products such as chemicals.

While the ongoing economic downturn will likely slow down growth for green-building and alternative-building-material companies, Zenger also noted that "this is a great time to start working with customers to introduce new products," since builders are slowing down construction and may have time to consider new materials that could reduce costs.

In spite of all the short-term challenges, Zenger and his fellow panelists said they still believe green technology will remain the brightest spot for investment in the coming years, given the world's rising population, increasing energy demand and the need to reduce greenhouse-gas emissions to combat global warming.

"Those trends are clearly in place," Zenger said. "We need to plow through this because this is the time to invest in the next cycle."

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