Venture Capitalist: Early Stage 'Cleantech' Attractive

Written by Ucilia Wang

The venture-capital world will likely see a sharp decline in investment dollars and smaller deals in the fourth quarter, as investors and startups figure out how to weather the sinking economy.

Boston-based VC Rob Day made that prediction on his Cleantech Investing blog last Friday, at the end of a week that was marked by sharp declines of the Dow Jones Industrial Average and solar stocks. The Dow had sunk for eight straight days by Friday, capping the worst week ever in its 112-year history.

First Solar's (FSLR) stock lost 26 percent of its value last week. Shares of Suntech Power Holdings (STP) lost 28 percent of their value, while Evergreen Solar's (ESLR) lost 25 percent.

With no visible end to the financial market crisis, VCs will likely prefer early stage greentech companies, which won't have to worry about exits through acquisitions or initial public offerings any time soon, Day wrote.

"So I think (guess?) Q4 will see a moderate decline in the number of cleantech deals overall, a bit of a shift into earlier-stage investing, and a big decline in aggregate dollar amounts," he wrote. "And early stage will be the first to pick back up going forward. Early stage cleantech venture capital remains a very attractive investment area."

Day also predicted "big-name cleantech startups [will] implode" during the downturn. Companies that have raised a lot of money to support fast expansion plans -- and that expected to raise more large sums in the near future -- will suffer, he said. (Don't miss "Balance Sheets Matter Now More Than Ever")

On that note, here is some recent funding news.

Public Companies

Ascent Solar (ASTI) is getting $15 million from Norsk Hydro [Over-the-counter ticker: NHYDY], an aluminum company whose stake in Ascent Solar will rise to 35 percent. Littleton, Colo.-based Ascent Solar develops copper-indium-gallium-diselenide solar cells using plastic substrates. Last month, the company said it will begin supplying Spanish roofing firm Texsa with thin films that will be integrated into Texsa's products.