Under the radar: 5 great cleantech companies to watch

Dave Leonard

The governing green giants of Silicon Valley continue to dominate headlines—from electric sports car maker Tesla to solar giant Solyndra and smart-grid sensation Silver Spring Networks—but a crop of smaller firms now flying under the radar could soon rise above the noise.

While cleantech popularity is a moving target, venture capitalists seem to agree on one thing—the next explosion of innovation could come from beyond the traditional renewable energy and biofeuls milieu. “There is a tremendous amount of activity—everywhere,” says Eric Straser, a partner at Mohr Davidow Ventures (MDV) who leads the firm’s clean investment team.

In the third quarter of 2008, renewable energy represented 65 percent of venture dollars going into cleantech, according to Cleantech Group, a San Francisco market research and consulting firm. By the first quarter of 2010, that figure dipped to about 35 percent. “In less than two years we’ve seen a good shift. I think part of that is driven by what is up and coming,” says Sheeraz Haji, president of Cleantech Group.

Leading the charge is energy efficiency—from super-efficient LED fixtures to home energy management software. “Efficiency is incredibly important for us,” says Raj Atluru, a managing director at Draper Fisher Jurvetson (DFJ).

The sector was tagged by Cleantech Group to outdo solar in 2010. One main reason for the efficiency boom is the rise of the cost-conscious customer. “There are really, really good returns on investment,” Haji says. “If you’re an existing building owner, and you invest in energy efficiency, you could get payback in a year.”

Another is the infusion of federal funds into the cleantech sector: About $50 billion in spending and $20 billion in tax incentives outlined in the American Recovery and Reinvestment Act was tagged to go toward renewable energy, energy efficiency and cleantech projects. “I believe the government has played a significant and helpful role in driving the efficiency boom,” Haji says. “The direct stimulus has provided necessary capital.”