"In a world where venture capital investment has retreated back to 1997 levels, the fact cleantech has recovered as dramatically as it has and now represents the largest sector for venture investment is a long way for the category to have come from niche status only eight years ago," says Dallas Kachan, managing director of the Cleantech Group.

Sixty-seven percent of funds invested went to companies in North America: $1.1 billion in 73 rounds disclosed. Another 29% went to Europe and Israel, with 53 rounds of investment bringing $457 million to companies in this region. And, companies in China pulled in 3% of the total raised in the third quarter – three rounds of financing for $1.8 million – and four disclosed deals (and one not) in India generated $21.5 million in cleantech investment.

Intel Capital invested the most in cleantech companies. It participated in six rounds of financing: Ozmo devices, Powervation, CPower, Grid Net, iControl Networks and Convey Computer. Five were announced in one week. Kleiner Perkins Caufield & Buyers was next, with five cleantech rounds in the third quarter. New Enterprise Associates and Braemar Energy Ventures made four cleantech investments each.

Though cleantech venture capital investments have been on the rise all year, they are still off from 2008. The third quarter result this year is down 42% from the same period last year, and the average deal size completed last quarter was down $900,000 from the third quarter of 2008 (from $12.9 million to $12 million). In a positive development, the average size of follow-on rounds of financing grew slightly from $15 million to $16 million.

So, the third quarter was mixed – positive and negative signs abound, suggesting that interpretation makes the difference at this point in the cleantech world's development.

Trevor Loy, managing partner of New Mexico-based private equity firm Flywheel Ventures, is upbeat but cautious, saying, "It is certainly refreshing to see signs of momentum in the cleantech sector as well as the broader economy. I do not think, however, that the recent momentum represents a broad enough show of strength to truly represent recovery."

Most of the strength in the third quarter's venture capital gains, he continues, came from the largest and most mature companies in the cleantech sector. Before we can call the recovery, he believes, "We will need to see a broader set of companies, including evidence of momentum among smaller and more early-stage cleantech companies."

The role of government financing remains a complicating factor in the cleantech investment space, with Kachan noting that a third of all new capital raised in Q3 went to companies with some form of government backing. Tesla Motors, or example, raised $82.5 million last month, after receiving $465 million in loan guarantees from the U.S. Department of Energy. Solyndra, a solar cylinder manufacturer, picked up $198 million in financing on the heels of a DOE loan guarantee of $535 million. Both loans were for the construction of new manufacturing facilities.

"Government investments are giving investors the assurance they need to put capital to work in cleantech," Kachan explains. "And this is just the beginning. Of all the billions available in government stimulus around the world, only a very small amount has been allocated to date, let alone actually put in companies' hands. For instance, South Korea has only allocated 20 percent of its cleantech stimulus capital-and they're the ones that have given the most away."

Kachan's position is not without opposition. Stephan Dolezalek, managing director and leader of the cleantech group at VantagePoint Venture Partners, posits that government involvement in the space has actually slowed venture capital investment. He also indicates that companies that haven't received government largesse are experiencing greater capital-raising challenges. "The net reaction is to follow the DOE where it acts and otherwise play a cautious hold game-not ideal at all for the cleantech industry," he says.