Cleantech VC focus shifts to energy storage, efficiency

While solar still claimed plenty of funds, the focus shifted during the third quarter.
Written by Heather Clancy, Contributor

I spent some time this weekend synching up the latest cleantech venture capital report from Cleantech Group with a panel about the same topic -- the future of cleantech funding -- that I attended at the inaugural SXSW Eco conference on environmental and sustainability issues.

The third quarter data from Cleantech Group, showing that there was approximately $2.23 billion dedicated to 189 deals in the quarter served as an objective validation of the panel's subjective focus on two main themes: energy storage technology and energy efficiency.

First, the data. Energy storage emerged as the most active category for deals, with $514 million invested in the quarter. Some of the biggest deals for the quarter included $150 million for fuel-cell maker Bloom Energy, $125 million for lithium-ion battery developer Boston-Power, and $73.5 million for fuel-cell maker ClearEdge Power.

Energy efficiency was also big, according to the latest Cleantech report.

There were 34 deals in the quarter, more than for energy storage, but they were smaller. Of the $224 million in funding that was allocated, $61.5 million went to Fusion-io, a green server and workstation maker; $16 million went to data center efficiency company SynapSense, and $15 million went to energy management technology company Elstat.

Both themes received more than passing attention during the SXSW Eco panel.

Cheryl Martin, deputy director of commercialization for the U.S. Department of Energy, said that batteries for electric vehicles and transportations remain a primary concern for the ARPA-e research and development program -- which is focused on supporting companies with emerging technologies and standards rather than on specific products. "We will set a bar that says, 'This is what we need'," Martin said.

Nick Allen, partner with venture capitalist firm Spring Ventures, said one emerging area of interest for his company is what is calls "Clean Web" companies. These are online platforms or business models that help make better use of existing resources, for an energy efficiency or resource efficiency play, Allen said.

One example of what Allen means is the company Airbnb. By helping properties managers and individuals rent out apartments and rooms, the company is helping make better use of existing properties around the country. There are now upwards of 15,000 rooms being "rented" per night via the Airbnb Web site, Allen said. "This is about how do we use the things around us whether they are physical assets or electrons, more efficiently," he said.

It should be noted that solar technology was the second biggest area of investment in the Cleantech Group data (after energy storage but before energy efficiency). For obvious reasons, the panel was less enthusiastic about solar technology and other renewable energy investments, suggesting that the more practical path for the time being is to focus on the efficiency challenge.

"Effiency is the fifth fuel," Martin said.

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