December 13, 2007 4:00 AM PST
U.S. green-tech hot spots go coast to coast
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December 13, 2007
Over the last three years, an avalanche of venture capital has flowed into start-ups developing technology to use natural resources more efficiently. Incumbent fuel producers and energy utilities are also investing in alternative fuels and power sources.
Most of the new company creation is rooted in the traditional financial investment centers in Silicon Valley and the Northeast U.S.
But the middle of the country is playing a very significant role in bringing more technical innovation to energy.
Refineries to make biofuels are being built in states where corn and soybeans are turned into transportation fuels ethanol and biodiesel. Meanwhile, universities around the country are spinning out energy-related companies in response to the growing interest in clean tech.
Where is the most activity? Tracking the regions with the most academic institutions offers some clues. But if you follow the money, it's not very hard to draw a map of green-tech activity. Here's a rundown of the top five green-tech areas in the U.S. based on venture investments.
The Silicon Valley is the top spot, by far, for a host of companies that do everything from solar electric power to green building materials.
That's because many venture funds, which typically invest in IT and biotech, have added a clean-tech practice over the past two years, adding to the existing funds that specialize in energy and materials.
The Valley also has a lot of entrepreneurial and technical talent. Many people are trying to transition from sectors in IT, such as chip manufacturing, to areas in the clean-tech industry, such as solar.
Along with the Silicon Valley money comes a heavy dose of promotion--something that's a mainstay in the hype-filled Internet industry. Some people are already warning that green-tech technologies may not deliver as promised and that late-arriving investors will be disappointed.
"As has been demonstrated in the IT and life science arenas, investing in new technologies can be wrought with pitfalls and is not for the inexperienced or the faint of heart," said Mark Heesen, president of the North American Venture Capital Association in a recent report. "Short-term 'tourists' should steer clear."
Despite those concerns, Silicon Valley is poised to generate some of the most successful green-tech companies based on volume alone.
During the first nine months of 2007, California was home to 68 clean-tech investments, according to the NVCA. That's nearly half the number of all investments made during that period and more than 40 percent of the $1.7 billion total.
Tesla Motors, which is making an all-electric sports car, is perhaps the most high-profile clean-tech company. Several other companies, including solar thermal company Austra, electricity demand management service provider Fat Spaniel, and solar cell manufacturer Nanosolar, among many others, have set up shop in the Valley. And don't forget Google, which last month said it intends to invest millions in clean-energy companies.
Massachusetts was second in the first nine months of 2007 with 11 deals totaling $292 million.
The Boston area benefits from several universities and a workforce with technical skills. The Massachusetts Institute of Technology, in particular, has sought to become a leader in energy with a campuswide initiative to spur innovation. It also co-sponsors an energy entrepreneur contest.
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