3Q Greentech: VC Funding Down, Plus Early-Stage Struggles

Green technology needs to grow up and get a job — and it’s a tough job market. The third quarter brought some good news but also some ominous warnings for the green technology sector, as I outline in my latest Green IT Quarterly Wrap-up at GigaOM Pro, “Cleantech Market Overview, Q3 2020” (subscription required). Key points were a big drop-off in early-stage venture capital and an even steeper decline in solar power investments.

Third-quarter greentech VC fell to $1.3 billion, a precipitous drop from last quarter’s $2.18 billion and last year’s third-quarter haul of $1.71 billion, the Cleantech Group reported last month. Green transportation led the third-quarter VC race with $208 million invested, while biofuel companies took in $186 million and smart grid companies landed $163 million.

Solar power’s third quarter fall to $144 million, down from $874 million in the previous quarter, was especially steep. It’s yet more of an indication that solar power has become a harder sell with VCs. Firms with novel manufacturing and materials offerings are having a hard time competing with entrenched suppliers of more “bankable” technologies.

Indeed, only one-fifth of the third quarter’s VC investment went to early stage greentech firms in the first half of the year, compared to more than a third in 2007, according to the MoneyTree Report — a sign that opportunities are becoming increasingly hard for investors to identify.

While VCs cooled on greentech, global investment in clean energy as a whole heated up in the third quarter, rising to $37.9 billion, up from $33.9 billion in the previous quarter and $34 billion in the same period last year, Bloomberg New Energy Finance reported. Asset finance, mostly big wind and solar power projects, set a record at $32.8 billion. Nearly half of that came from China, which set its own record at $13.5 billion invested. That’s formidable, and noteworthy when compared to faltering investment in the U.S. — $4.4 billion, down from $5.1 billion in the previous quarter.

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Image courtesy of SqueakyMarmot.