A story by “60 Minutes” on CBS earlier this year described a cleantech bubble that swept Silicon Valley leaving venture capitalists with broken promises and failed investments. Promising firms such as Fisker, Better Place, A123 and Solyndra fell short of expectations due to mismanagement and lack of funding. Without the right facts, it is easy to conclude that cleantech startups have a dismal future and are a last resort for venture capitalists to put investment money into. While tech firms can show successful exits and provide substantial returns within two or three years of the initial funding round, the cleantech business model is simply not the same. Electric vehicles and solar companies require longer time periods to show substantial traction, typically 20 years or more. There is quite simply a mismatch in the product maturity between low-cost consumer tech products as compared to high-cost clean energy companies.

According to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association, “In the fourth quarter, cleantech industry venture capital funding reached its highest level in 2013. It was also the first time in five consecutive quarters that a region (Texas) received more funding than Silicon Valley.” Although the report is lopsided due to eRecyclingCorps’ $105M Series C financing in October 2013, there is a glimmer of hope that there is still interest in cleantech. Google’s $3.2 billion acquisition of smart home thermometer-maker Nest also shows the industry’s pulse. Some critics do argue (completely logically) that the Nest acquisition does not belong under cleantech, but under consumer electronics, the reality is that Nest spans both industries.

Although there are not many headlines highlighting initial-stage venture capital investments in the typical cleantech sectors such as solar energy and electric cars, there are still other opportunities in energy efficiency, pollution control, water and waste management – all of which are sustainability sectors that support cleantech and advance environmental progress, just without the same degree of exposure. According to Cleantech Group, energy efficiency remains the biggest focus with $1.3 billion invested in 188 deals in 2013, 23 percent higher than in 2012. In fact Brightfarms, a company that builds rooftop gardens and hydroponic greenhouses attached to supermarkets, recently closed a $4.9 million Series B financing from a group of investors led by NGEN Partners, Emil Capital Partners, BrightFarms founder Ted Caplow, and several other prominent investors.

As long as startups continue to innovate with environmentally sound products and services, they will support the cleantech industry as a whole. And as long as those innovations have viable business models that prove a return of investment for investors, venture capital will continue to allocate funds for companies that fit their match.

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