Cleantech Picks Up in Q3, Thanks to Uncle Sam

Similar to yesterday’s report from Greentech Media, the Cleantech Group today issued a third quarter analysis of VC funding nationwide in cleantech. And the results of both were pretty much the same: cleantech investments picked up in the last three months following some dismal activity earlier in the year.

The Cleantech Group went so far as to point out that the cleantech category for the first time has overcome biotech and software as the top U.S. venture capital area of investment.

Here are links to Cleantech Group’s Q3 report and its previous Q2 analysis.

Before you get all giddy with cleantech euphoria, keep in mind that it’s been a tough year for all VC investments, and you should never get too carried away with quarter-to-quarter reviews. Solar deals took a nose dive in Q2, according to the Cleantech Group, only to roar back and lead all categories in Q3. However, solar still only received $451 million in Q3, down from a high of $1.2 billion invested in Q3 2008.

Another takeaway of the Q3 numbers is that VC activity followed the government’s lead. As Dallas Kachan, managing director of the Cleantech Group, pointed out, the two largest venture deals (Solyndra and Tesla Motors) and the largest IPO (A123 Systems) in Q3 were all recipients of U.S. government funding.

Neil Suslak, managing director of Braemar Energy Ventures (which is an investor in A123), told me that the scope of the investments by the government in the cleantech sector has been enormous. In addition, “the receptiveness in the IPO market to a large offering for battery maker A123 also has helped improve sentiment,” he said.

Braemar was the fourth most active VC cleantech investor in Q3 behind Intel Capital, New Enterprise Associates and Kleiner Perkins Caufield & Byers, according to the Cleantech Group, and the firm was the third most active in Q2 behind Kleiner Perkins and Khosla Ventures. (By the way, Greentech had a different list of top investors, according to a report by my colleague Debbie.)

But Braemar will likely rank as one of the most active investors in Q4, too, considering how Suslak is optimistic.

“Although we picked up our investment pace to participate in what we hope are well-timed offerings at attractive valuations, we still see some attractive opportunities out there which would suggest that the trend will continue into Q4,” he told me.