US venture capital investments in cleantech rose 12% in 2011 despite strong headwinds from slow global economic growth, political deadlock in Congress and Europe’s debt crisis, according to the MoneyTree report released today by PwC and the National Venture Capital Association.

Both dollars and deal volume increased in 2011, bringing the year’s total to the highest level ever recorded at $4.3 billion across 323 deals, compared with $3.8 billion going into 289 deals in 2010.

Venture dollars invested in 2011 represents the third highest annual investment total in the past 10 years. Across all sectors, VCs invested $28.4 billion in 2011, with cleantech accounting for 15% of all venture capital dollars in 2011 – a small drop from 16% in 2010.

Tracy T Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said: “We saw a resurgence in investments in clean technology and internet-specific companies in 2011, as well as a bit of a jump in average funding in the internet sector. However, while venture capitalists continue to show their interest in these areas, they are acting prudently and not chasing excessive valuations. Accordingly, despite the increase in investing, we’re unlikely to see these sectors overheat like we saw in the 1999 to 2000 era.”

Breaking Energy spoke extensively with Lefteroff this month about venture capital trends in energy and clean energy. See the first part of that Q&A here and the second part here.

The Trillionth Dollar

Despite the global economic crisis and compression in the public markets for cleantech stock cleantech investing is trending upwards. In December, Bloomberg New Energy Finance recorded the trillionth dollar invested in cleantech since its data began in 2004.

Although global cleantech IPOs dropped from 96 in 2010 to 48 in 2011, investor appetite for cleantech did not slow down last year.

But Jon Sadoka, partner at VC firm NEA, said: “There is a concentration of VC investments in the most promising companies – but a decline in the number of VCs participating in the sector. Those who have been in the industry for some time are seeing very promising companies with promising futures and are excited about increasing their investments in those companies.”

NEA has committed $1 billion to the cleantech sector and has raised $2 billion in equity capital through investments in 35 companies.

2007 All Over Again?

“The 2011 cleantech numbers are very strong from a dollars invested and deals perspective, surpassing investment levels not seen since 2008, Sadoka said. “In spite of volatility and perception of the sector we’ve seen a strong recovery from VC investments primarily driven by the growing global demand for clean, cheap, renewable power and technologies that enable societies to use energy more efficiently.

“We’re tracking two trends in the 2011 numbers which are representative of the investment trends we’ll see in 2012. The first is significant late stage investment activity in emerging market leaders who generally have plans for near-term IPOs. There continues to be an abundance and concentration of capital for companies that have innovative products that are scaling globally .

“The winners and losers are becoming more clearly defined and while those who are in the number one position are clearly able to raise substantial amounts of capital those who are in second and third place are really struggling to get financing.”

Sadoka said that investor activity had increased in energy efficiency, LED lighting, energy storage and transportation. He also said that although 10 companies had already registered an SEC filing, he knew that there was a stronger pipeline of companies wanting to go public this year.

“Our outlook for 2012 is cautiously optimistic – we are seeing a very slow and steady recovery in the cleantech sector. In 2011 the cleantech sector definitely saw the impact of global slowdown in economic growth and the European debt crisis.

“Stronger recovery in the economy, stability in the European debt crisis and currency and increasing global demand will boost cleantech sector in 2012.”