Green is back in venture capital circles -- but call it light green.

Having placed big bets on capital-intensive industries like solar and ethanol just as the financial crisis quashed interest in risky new technologies, early-stage investors these days have a limited appetite for startups that need large amounts of cash to bring their products to market.

Biofuels maker KiOR raised $150 million in its initial public offering on Friday, the latest in a number of alternative fuels companies to tap public markets, but it took $182 million in venture backing over four years to get there. The company has no revenue and needs $350 million to build each of its planned commercial scale production facilities. A loan guarantee from the federal government will help cover those costs.

But despite the success of KiOR and other biofuels makers' IPOs, most venture investors are now shying away from clean-tech companies that require so much capital.

Instead, lower-capital companies like Opower and Hara, which make energy management software; Transphorm, which makes more efficient power-conversion modules; and Amprius, which is developing components for lithium-ion batteries, are among the new darlings of Sand Hill Road, the strip in Silicon Valley in California known for its concentration of venture capital (VC) companies.

These companies -- whose backers include firms from Kleiner Perkins Caufield & Byers to Accel Partners to VantagePoint Capital Partners -- have raised considerably less than KiOR. More importantly, however, they don't need hundreds of millions of dollars for large production facilities. Some, like Opower, are even generating revenue.

The biofuels/solar `If you build it, they will come' model of raising hundreds of millions of dollars to demonstrate technology is now dead in the water, said Peter Hebert, managing partner of New York-based venture firm Lux Capital.

If a promising new business needs to build a factory that will prove its technology works, VCs are bringing in deep-pocketed corporate partners to fund it rather than shouldering the entire burden themselves.


VCs have learned from experience. As oil prices skyrocketed in 2008, they poured millions into biofuels and solar, sending valuations through the roof. Some of those bets turned out to be disappointments.

There's not a history of good exits said Google Ventures Managing Partner Bill Maris, who invests in cleantech but stays away from companies that require large amounts of capital.

Cellulosic ethanol maker Range Fuels Inc, for instance, was forced to shut down operations after raising $100 million in 2008 from Passport Capital, Khosla Ventures and others to build its first commercial plant in Georgia.

Some companies, however, are simply taking their time. Generally, venture capital companies expect exits, either IPOs or sales to make a profit on their investments, in 4 to 6 years. But some investments in this sector have languished far longer than that, forcing VCs to rethink their timetables.

People are more acutely aware of how long it really does take to get some of these technologies to mature, said Sheeraz Haji, chief executive of research firm the Cleantech Group.

Solar company Solyndra, for one, pulled its IPO a year ago due to poor market conditions but is still in business. It has raised some $1 billion in venture capital, including investments from CMEA Ventures and Redpoint Ventures, on top of a $535 million loan guarantee from the federal government.

A number of solar start-ups, including Miasole, Nanosolar, and others, are waiting in the wings for their exits. But there is little enthusiasm in the public markets for solar these days as the industry faces steep competition from Chinese rivals, an oversupply of panels and tumbling selling prices.

The Guggenheim Solar ETF has dropped 78 percent since its high in May of 2008, and valuations of private solar companies have also taken a hit.

VantagePoint CEO Alan Salzman estimated that they have been halved since the 2008 boom, but said valuations across the cleantech sector overall are healthy.

You don't have the robust enthusiasm in valuations that we've seen in some of the social networking stuff, but good companies are attracting capital, Salzman said.


One company stands out as an exception to the stagnation among venture-backed solar firms. BrightSource Energy, which filed for an initial public offering earlier this year, is building a massive solar thermal power plant in California's Mojave Desert.

Backers have said the company's tie-ups with Alstom SA, Chevron Corp, NRG Energy Inc and others have been critical to its success.

People look at that and suddenly go: 'Interesting. These big guys are all partnering up,' said Salzman, whose firm holds a 25 pct stake in BrightSource.

Corporate partnerships with the likes of Total SA, Chevron, Dow Chemical Co, and others have been key to the biofuels IPOs in the last year, including Gevo Inc, Solazyme Inc and Amyris Inc. BrightSource also has benefited from federal grants and loans.

It gives investors comfort that these technologies are real, said Smith, adding that the corporations are not simply future customers of the companies' products, but true partners that are going to help them develop and grow their business.

Still, many VCs say they have bowed out of those types of investments entirely and are increasingly looking to the less capital intensive energy storage or efficiency sectors.

While they say it's possible to build excellent green companies with tens of millions of dollars instead of hundreds of millions, there is a sense of missed opportunity.

Small investments will do less to address the big pressing challenges, said Hebert. At the edges, it's beneficial. But if you're trying to replace coal, I'm not sure how much of a difference that will make.

(Reporting by Nichola Groom and Sarah McBride; editing by Carol Bishopric)