Energy Efficiency Hot with VC’s

Doubts about alternative energy have driven cleantech venture capital into less capital intensive start-ups, such as software firms that help people conserve energy, says The New York Times.

This trend toward less capital intensive investments has been percolating for a few years, as investors have grown impatient with the long lead times and heavy investments required to produce new forms of alternative energy. Other causes for concern include uncertainty over carbon regulation and competition from traditional energy sources, including an increase in natural gas production.

In Q3, venture capitalists invested $890 million into cleantech, representing an 11% decline from Q2’s $1 billion, according to the National Venture Capital Association.

Bill Maris, managing partner at Google Ventures, points out that alternative energy companies are not really suited as venture capital opportunities because they aren’t scalable. Recent cleantech Google investments include:
• RelayRides, which is a car-sharing start-up;
• Climate Corporation, which provides extreme weather insurance;
• Clean Power Finance, which runs an online marketplace for financing residential solar panels;
• And Transphorm, which makes tools that reduce power loss when electricity is converted in data centers or industrial motors.

According to the Times, another software company that has recently received funding is FirstFuel Software, which tracks energy usage in commercial buildings and produces an energy-saving plan. It raised $2.4 million from Battery Ventures and Nth Power in September.

Despite the switch by many venture capital firms from alternative energy to software, Khosla Ventures will invest the majority of its newly formed $1B fund into cleantech, such as biofuels and companies that produce engines. The firm’s founder, Vinod Khosla, commented that start-ups that built efficiency software did not do enough to address climate change.

To read the full article by The New York Times cited in this story, click here

Tags: Fundings

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