Cleantech Investing Follows The Economy Lower

A pullback in solar deals led to a fall in third quarter cleantech investmentsThe edgy economy is spilling over into cleantech venture investing.

That seems to be the conclusion to draw from today’s preliminary cleantech investing numbers from the Cleantech Group. The research firm found that $1.53 billion went into 152 deals worldwide during the third quarter, down 11% in dollars from the same period a year ago and 30% from the $2.18 billion that was invested in second quarter.

It is not a surprise to see the pullback. The IPO market in the United State remains largely stalled (even though it is active in China) and fundraising limps along. VCs also seem to have recoiled from doing the large deals that fueled investment totals in the first half of the year. Remember that Better Place took in $350 during the salad days of 2010, BrightSource, $150 million, Solyndra, $175 million, etc.

“People are certainly a little nervous,” says Sheeraz Haji, managing partner at the Cleantech Group. He is right. And the uncertainty may not lift any time soon.

Particularly interesting in the third-quarter figures, which were released early to peHUB, is a sharp retreat in solar investments. Venture capitalists may simply have made their solar bets and aren’t willing to take on new deals. In any event, solar represented just 9% of total activity.

North American investing also was weak, falling 42% from the second quarter. A total of $928 million went into 70 rounds – and three large deals made up an oversized share of the pot. Kior, a Pasadena, Texas-based biofuels technology developer, took in $110 million; smart-grid company Trilliant, from Redwood City, Calif., attracted $106 million; and the Ottawa, Ontario-based waste-to-energy provider Plasco Energy Group raised $110 million.

Early stage deal making also seems to have slowed a bit, says Nat Goldhaber, managing director at Claremont Creek Ventures, though the number of young companies making the rounds among VCs has not.

On a positive note, transportation, biofuels and smart-grid funding levels remained fairly steady. Activity in China also was strong with the number of deals setting a record. Chinese companies raised $153 million in 11 rounds, with eHi Car Rental, a car sharing company, getting $70 million.

Unfortunately after a solid second quarter for venture capital, this early peek at the third quarter is sobering. The economy continues to be a drag. It will likely take a boost in economic confidence to turn things around. Who knows when that will be.