Venture Capital Investment in Cleantech Grows in First Quarter

Market grows 18% while overall VC investment declines, report says.

'Robust' is how Ernst & Young described venture capital investments in cleantech companies in the first quarter of 2008. Capital invested grew by 18% to $571.6 million compared with $483.9 million in the same quarter a year ago, according to an Ernst & Young report based on data from Dow Jones VentureOne. That said, the number of deals dropped 11% to 34.

Overall U.S. venture capital investment the first quarter of 2008 was down 7% to $6.5 billion.

"Cleantech is enabling the business response to climate change," says Joseph Muscat, Americas director of cleantech and venture capital for Ernst & Young. "The fundamental challenges that corporations face today related to carbon emissions, energy costs and resource scarcity will continue to provide opportunities for innovative cleantech solutions."

By Ernst & Young's definition, clean technology encompasses a range of products and services that optimize the use of natural resources or reduce the negative environmental impact, while creating value by lowering costs or improving performance. Examples include alternative fuels, water treatment processes related to conservation, fuel cells, solar, and energy efficient products.

Alternative fuels received the largest capital infusion, with some $178 million invested in the first quarter. Energy/electricity generation captured the next largest share with investments of $148.3 million.

Data also show a maturing industry, according to the tax advisory service. Deal volume shifted from early stage financing to later stage investments in the first quarter. Later stage deals accounted for 43% of financing rounds.

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