Clean Power Drives Energy VC in Q3

Renewables rule the day when it comes to equity investments in the energy and utilities industry. According to a new report out today Dow Jones VentureSource, the renewable energy sector raised just over $221 million in 16 equity financing deals during the third quarter of 2010, accounting for the bulk of venture investment in the energy and utilities industry. As a whole, the industry raised $359 million in 21 deals during the most recent quarter, according to VentureSource.

While renewables have driven investment in the energy industry, however, clean power has seen a drop from the nearly $471 million invested in 15 deals in the renewable energy sector during the third quarter of last year, and the approximately $1.2 billion in 24 deals in the same quarter of 2008.

Tracking investments by venture capital firms, corporations, private equity firms and individuals into companies that have closed at least one round of venture financing, VentureSource reports that venture investors poured a total of $5.5 billion into 662 deals with companies based in the U.S. during the third quarter. That’s a 5 percent drop in the amount invested, but a slightly higher number of deals (up 2 percent) compared to the same period in 2009.

Early stage investments, including seed and first rounds, made up a slightly larger portion of the activity during the third quarter of 2010 than in the same quarter a year earlier. According to VentureSource, seed- and first-round investments made up 34 percent of deal activity and 20 percent of the capital invested during this most recent quarter. That’s up from 31 percent of deals and 15 percent of capital invested in the third quarter of 2009.

Yet, as Jeff St. John explained in his latest Green IT Quarterly Wrap-up on GigaOM Pro (subscription required), the green technology sector as a whole saw a substantial drop-off in early-stage venture capital and an even steeper decline in solar power investments during the third quarter of 2010. Firms with novel manufacturing and materials offerings have struggled to compete with entrenched suppliers of more “bankable” technologies, and solar power has become a harder sell with VCs.

The information technology industry took the lion’s share of investment during the third quarter, according to the VentureSource report, with $2.8 billion in 232 deals — up 35 percent from the same period last year in terms of capital invested. Software in particular saw significant activity, with $1 billion invested into 159 deals. That’s a whopping 67 percent increase in the amount invested compared to the year earlier quarter.

Image courtesy of NREL.

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