Over the past few decades, venture capitalists have had plenty of waves to ride: computer technology, biotechnology, dot-com technology and nanotechnology. For some of the waves, it was boom or bust – as was the case with the dot-com era – while others, such as computer technology, reached saturation. Biotechnology remains robust, however, and nanotechnology still is evolving. But now there is clean technology. Despite economic times that would seem to dictate caution and the avoidance of high-risk alternative anything, clean technology is attracting serious investors who are in it for the long haul.Clean technology is driven by rising energy prices and a shortage of natural resources – fossil fuels, clean water – coupled with strong government incentives. According to the National Venture Capital Association, in the first quarter of 2009, clean-technology investment increased 15 percent over the same quarter in 2008, with $274 million pumped into 42 deals.Greentech Media of Cambridge, Mass., has reported that venture capital investment in green technologies totaled $1.2 billion in 85 deals in the second quarter of 2009, up from $836 million in the first quarter. Company analyst Eric Wesoff said that third-quarter venture capital investment will be even better.He noted that it is not just government incentives that are boosting clean-technology investing, “although a stable, encouraging policy framework is a positive for investors.”Andrew Williamson, a director at venture capital firm Physic Ventures in San Francisco, said that clean technology is here to stay “because of the fundamental macro-economic drivers.” These include the “increased scarcity of natural resources and an increased awareness of the impact of economic development on the environment.”Williamson added that it is a lot easier to find a way to save a megawatt of electricity – a negawatt – than it is to find a clean way to produce one. And these negawatts are likely to come in the form of energy efficiency.Following this sector is the San Francisco-based Cleantech Group, which publishes a global index of publicly traded clean-technology companies. The index rose 16.6 percent in the first half of 2009, surpassing other leading indices such as the Standard & Poor’s 500.What receives fundingIt always seems safer to invest in a product you can see to assess its long-term viability. But some venture capitalists ante up the cash long before the production stage. Vinod Khosla, a co-founder of Sun Microsystems in Phoenix and a venture capitalist, has invested millions in green technology. In 2004, he launched Khosla Ventures, which has raised $1.1 billion to invest in green technology and information technology start-ups. He plans to fund “science experiments” that address climate change, a big risk for venture capitalists, he said. He sees it as akin to 1980s’ investing, when people took technical risks with a small amount of money and a small team. Khosla and four partners have invested at least $100 million of their own money in a seed fund for very high risk start-ups that they acknowledge have a high likelihood of failure.Physic Ventures’ Williamson noted that venture investments in clean technology span a range from early-stage research projects with a lot of technology risk to later-stage infrastructure projects. Early-stage investments typically are more capital efficient and offer the potential for high returns, while later-stage finance projects have less risk but provide lower rates of return. His position is that “the most attractive venture investments are found in disruptive technologies and business models, where, if the research pans out, they will have an impact on a large market.” Cleaning upWesoff listed smart grid, algae biofuels and energy efficiency as likely to continue to receive funding.Williamson’s list echoed that and added batteries and electrification of transportation as areas likely to make a difference. He also sees promise in water purification technologies. “Water is often described as the new oil, in that clean drinking water is becoming increasingly scarce.”Technologies he believes will be interesting to follow include low-energy desalination approaches and the use of UV LEDs as a way of disinfecting water. Progress in battery and desalination technologies has been “painfully slow,” he said, but we are starting to see exciting technology solutions that may come from nanotechnology.