Any time a sector is dependent on government subsidies, investors should be very skeptical.

Sure enough, on Thursday, April 23 Greentech Media published How to Get Stimulus Dollars,   a report on how the law firm  Cooley Godward Kronish and McBee Strategic Consulting, a lobbying firm that describes itself  as “one of the fastest growing clean energy consulting firms in Washington DC”,  had formed a strategic alliance.  The two companies have essentially formalized an existing collaborative relationship to provide tools and advice to help cleantech clients access funds made available under the government’s economic stimulus program.  The partners predict that the American Recovery and Reinvestment Act (ARRA) could create $100 billion in “public sector funding opportunities” over the next two years.  

Some of the challenges cleantech companies will face include filing massive amounts of paperwork, such as 200 page applications, and meeting encroaching submission deadlines.  Reporter Michael Kanellos gives the example of the $400 million advanced electric program.  The government began accepting applications just over a month ago, will stop in two months and disburse money in September.  He also says, 

The ARRA in many ways seems destined to reorder the energy business as well as the economic foundation of the United States. It is unlikely that the U.S. will become a bastion of socialism, but the government is taking on the role of the country’s largest investment bank, thus placing it in a position to foster new companies and ideas while stranding others.

I italicized that phrase because it seems to support, and take even further, my recent conclusion that VC investment in cleantech had likely fallen sharply in the first quarter while venture capitalists waited for the government to decide what cleantech ideas and companies to fund.   Waiting gives venture capitalists the advantage of knowing what cleantech will actually have a chance of being a successful investment.  In other words,  I said, 

The economic stimulus package effectively serves as an Economic Signal-Us for venture capitalists.  

Kanellos seems to be saying that the program could also serve – justifiably or not – as an Economic Sorry-You for cleantech entrepreneurs. 

If that is the case, once the cleantech winner companies have been chosen and the initial ARRA funds have been distributed, I ask:

Could ARRA ultimately stifle cleantech innovation?

• GreenBiz.com: Categories include Energy & Climate,  Resource Efficiency and Design & Innovation.  The parent company, Greener World Media has a variety of related media brands including Greener Buildings, Greener Computing and Greener Design.

• Greentech Media: Comprehensive news, research and events company covers 10 sectors and special interests like venture capital.  It offers specialized blogs like Cleantech Investing  and subscription research like their Greentech Innovations Report.

• The Social Media and Web Guide to Going Green: A consumer-oriented post on the Social Media blog Mashable  by Elsa Wenzel , it offers links to numerous sites with information and tools to help educate and support individuals wanting to go green.

• The Cleantech Group Comprehensive news and information similar in structure and the types of content from Greentech Media.

• Cleantech Blog:  Founded by Neal Dikeman, a partner at Jane Capital Partners, a San Francisco based merchant bank focused on cleantech, energy & environmental technologies.  Dikeman is also connected with CleanTech.org ”A virtual incubator for clean technologies, a resource to scientists, inventors, entrepreneurs and investors interested in cleantech.”

• Clean Ventures: The U.K. perspective on Cleantech and Cleantech investing.  The most recent post by the founder, Tim Chapman, discusses the British government’s budget for cleantech initiatives.

• Cleantech RSS Feed on Google Reader : News feeds and blog posts tagged “Cleantech” as they happen.

If you want to suggest a source to add to the list, please leave a comment.  

Please consider the environment before printing this blog post.

I wrote on TechCrunch and VentureBeat’s take on the decline in VC investments in Q1, focused on their respective analysis of the decline in Cleantech investments. It helped to hear how you explained the drop. Here’s my post http://is.gd/tnpF

Originally posted as a comment by CathleenRitt on A VC using Disqus.

A summary of the MoneyTree™ Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), using data provided by Thomson Reuters, said that venture capitalists invested $3.0 billion in 549 deals in the first quarter of 2009,  down 47% in dollars and 37%  in deals from the fourth quarter of 2008, when $5.7 billion was invested in 866 deals.  Every major industry sector saw double digit declines in investment in Q1, the lowest level of venture capital investment since 1997.  Similarly, another database,  Dow Jones VentureSource  reported investments of $3.9 billion in 477 deals, a 50% decline from a year ago.

While both posts reported the same data and highlighted a serious decline in Cleantech investments, they diverged on their reaction to this development.

Interestingly, the MoneyTree 2008 year end report (PDF) states that the Clean Technology sector – defined as a cross industry category comprised of alternative energy, pollution and recycling, power supplies and conservation - experienced significant growth in 2008.   $4.1 billion invested in 277 deals represented a 54% growth in dollar amount invested and a 16% growth in deals compared to the $2.7 billion invested in 238 deals in 2007.  Clean Technology investments accounted for 15% of all venture capital investing in 2008, up from 9% in 2007.  Seven of the ten largest deals in 2008 were in clean tech.

Yet in Q1 2009, venture capital investment in Cleantech fell significantly. $154 million went into 33 deals, an 84% drop in the $971 million invested in 67 deals in Q4 2008.  It represented the lowest level of investments in the sector since 2005 and only one of the top ten largest deals in the first quarter.  

In his post Good luck with that funding: Q1 sees lowest VC investment in more than a decade VentureBeat reporter Anthony Ha comments,  ”those numbers are particularly mind-boggling since it was previously seen as the silver lining in the dark clouds hovering over venture”.   In a recent VentureBeat interview, Mark Heesen, president of the National Venture Capital Association, indicated Cleantech could be the largest area for venture capital investment within five years.

In  Venture Capital Down 50%. It’s Not Just the Recession, Folks, Tech Crunch reporter Sarah Lacy has a worthwhile take on the overall state of venture  capital, making the case that the steep drop in funding is not the result of a recession but “more of an industry correcting for more than a decade of scale and liquidity issues.”  

Saying she has more to write on the topic, Lacy offers 3 key takeaways, one of them being “Bye-bye Clean Tech Hyperbole.” She explains:

“It’s not that clean tech isn’t a huge opportunity. It’s not that it isn’t an important opportunity. But I’ve never believed it was the next wave equivalent to the personal computer, as several VCs and even President Barack Obama said during the campaign.”

I later discovered a post on a new site, TrueSlant, by Anne Field.  In Good News for Cleantech Startups?, she reports that the advanced-battery and fuel-cell segment of cleantech received $126 million of the $154 million invested in Q1.  Quoting a New York Times article,  Field indicates that this segment of the sector has started to receive solicitations from the government looking to deploy the $2 billion in stimulus money set aside strictly for batteries.  She suggests that more VC money will come back into the space as they see more stimulus money flow from the government and in what direction it goes.

While each reporter has a different perspective on the story, they each add an insight that leads to my key takeaway.  

Chances are Cleantech will revert to being a major recipient of venture capital investment in the near future, even if the category is overhyped.  Right now the oversupply of poorly performing and not fully-invested venture capital funds, combined with the impending economic stimulus, has actually stalled the process.  

The economic stimulus package for cleantech effectively serves as an Economic Signal-Us for venture capitalists.  By waiting for the government to act, they gain the advantage of knowing what cleantech will have a better chance of succeeding as investments.  

In other words, by waiting to find out what the government stimulus thinks is the right cleantech, they reduce their risk of being wrong.  This sounds like the closest to a sure thing that a venture capitalist could ever get, so pulling back and holding off, whether by instinct or design, is the smartest cleantech investment a venture capitalist could ever make right now.

Serious List of Blogs

1. The Big Picture  Blogger Barry Ritholtz is a money manager, entrepreneur, frequent commenter on CNBC and author of the forthcoming book Bailout Nation.  The blog covers the gamut from investing and trading to macro economics and has received “Best Blogs” accolades from Time Magazine and Pensions and Investments. As luck would have it, this post appeared on his blog today (April 12, 2009) and links to a CNN article that references other financial bloggers:   Financial Bloggers Gain Recognition Amid Turmoil

2. Infectious Greed Blogger Paul Kedrosky has been a leading technology research analyst, venture capitalist and journalist. He writes pithy and often funny comments throughout the day and frequently provides links to his Reading Lists  that often include obscure yet valuable academic papers.  

3. Seeking Alpha Aggregator of mostly market commentary and stock ideas.  Not a blog I read regularly, but a good one stop shop for different ideas and perspectives from a number of different investors.

4. All About Alpha Blogger Christopher Holt also has used the pseudonym “Alpha Male”.  His frequent articles,  research archives and links make this more than a blog, it’s a comprehensive resource of information for hedge fund investors.

5. A VC Blogger Fred Wilson is a VC and principal of Union Square Ventures.  He specializes in technology, particularly digital media and web 2.0.  In this personal, thoughtful and popular blog, he discusses business, family, life in New York City and music, among other things. 

6. Pension Risk Matters Blogger Susan Mangiero runs Pension Governance, Inc., an independent information services, research/analysis and training company for the pension community and is the author of Risk Management for Pensions, Endowments, and Foundations (John Wiley & Sons, 2005).  One of the highlights of this comprehensive blog is frequent postings with links to other resources including government research.

7. Techmeme  Aggregates technology news from various news sites and blogs.  

8.  Lifehacker  Features tips, shortcuts, and downloads for getting things done smarter and more efficiently. 

9. Collegia Shared Items   Includes a few other blogs with similar themes to those listed above like Pension Pulse and Venture Beat  

What blogs do you read regularly?  What blogs give you good ideas or a good laugh?  Any other blogs I should add to the list?

Please leave a comment and let us know.

“Blogs are an abbreviated version of ‘weblog’” which is a term used to describe web sites that maintain an ongoing chronicle of information.” 

In essence, blogs are Internet-based independent publishing platforms, meaning investors will find in the “blogosphere” some of the best and most informed reporting, writing and commentary on just about any topic.  Ironically, that has happened for the same reason blogging appeals to consumers.  Blog software is cheap – often free – easy to use, and readily available on a computer network that reaches billions of people.  It has removed the editor and distributor from the process of creating and delivering content, and by offering the opportunity to comment, democratized the chain of communications between experts and audience. 

Most important it gives specialists, writers and dedicated hobbyists an accessible platform to present their knowledge, express their opinions and connect with others that share their interests.    

This widespread, free, and rich source of information is indeed filled with angst-ridden ramblings, but, it is also filled with great information and insights.  That makes it a great source of new investment ideas for you.

In my next post, I will recommend a list of blogs that you can take seriously.

Do you have a question or comment about blogs?  Please leave it in the comments.