The venture capital community remains bullish on the greentech sector but is much less optimistic than six months ago, despite an anticipated increase in federal funding for green initiatives, according to a recent survey by the U.S. audit, tax and advisory firm KPMG LLP.

In polling 304 venture capitalists, corporate executives, entrepreneurs and bankers in the greentech space, 53 percent of respondents indicated that they expect venture capital investment in the greentech sector to increase in 2009 compared to 2008 and 26 percent expect investment to decrease. This is a far less optimistic response than that given in September 2008 when 93 percent expected investment to increase and just one percent anticipated a decline.

KPMG also found some noted differences between the September 2008 and February 2009 surveys that still display the greentech sector as an attractive opportunity, albeit it at muted levels. In September, 84 percent of those surveyed expected investment in greentech to increase by 10 percent or more over 2008, while only 40 percent of February respondents see gains of 10 percent or better.

"There is no doubt that the greentech sector remains an attractive investment area, but the lack of available credit and the difficult economic environment has investors operating in a cautiously optimistic fashion," said Brian Hughes, KPMG partner based in Philadelphia and co-leader of its venture capital practice. "Our data showed that while investors are less aggressive in their investment projections, greentech is likely to be one of the few sectors that will see an increase in venture capital investment in 2009."

While venture investment levels may be tempered, KPMG found that respondents have little doubt that the government will play an increased role in greentech activity. In fact, 90 percent of those surveyed anticipate an increase of federal funding for greentech initiatives, and 94 percent expect more public/private partnerships.

When asked which sub-sectors of greentech would receive the most investment over the next two years, the responses indicate that there will be two clear winners - renewable fuels (solar, wind, etc.) and energy storage (fuel cells, batteries, etc.). Interestingly, when asked what will become the dominant clean-air energy source in the next 20 years, 44 percent of venture capitalists say wind or solar, followed by 27 percent for nuclear.

"With cleaner and renewable energy sources being a high priority for President Obama's administration, it is not surprising to see renewable fuels (solar, wind etc..) are the most likely target for venture investment," said Packy Kelly, KPMG partner based in Silicon Valley and co-leader of its venture capital practice. "These technologies are advancing at an incredible rate and have large existing markets."

With regard to where greentech investment will be spread geographically in the United States, the West was dominant, followed equally by the Northeast, Midwest and Southwest. Outside the U.S., venture capitalists expect greentech investment to be focused primarily in Asia, with Eastern Europe second.