Venture capital-backed IPOs are nonexistent lately (there were zero in Q2). The M&A market has been soft for VC-backed deals. And the economy is slowing.

All in all, this is the recipe for big-time problems in the VC space. Yet, according to a recent survey from Thomson Reuters and the National Venture Capital Association, VCs were actually able to raise 3% more in funds in Q2, to $9.1 billion.

True, the typical kind of investor in VC fund include long-term players, such as endowments, insurance companies, pensions and other types of institutions. And, if history is any guide, VC returns can be lucrative.

But, if you look deeper into the figures, you'll see that there is a flight to quality. That is, the tier-1 VCs are grabbing most of the investment dollars. For example, Kleiner Perkins raised a $700 million fund and Foundation Capital scooped up $750 million.

Despite all this, there could be tough times for the VC industry. Some of the less-noteworthy firms may disappear. More important, if returns continue to lag, it seems inevitable that even the larger firms will eventually feel the pain.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

While cleantech investing is a hot topic today, Foundation Capital has been focused on the sector for about six years (the firm is a pioneer in the space). Last year, one of the firm's investments -- EnerNOC (NASDAQ: ENOC) – went public and now garners a market cap of $800 million.

I had a chance to talk to Steve Vassallo, a principal for the cleantech practice at Foundation Capital. Vassallo has worked with companies like Cisco (NASDAQ: CSCO) and Nike (NYSE: NKE). He even holds 19 patents.

So, what is on his radar?

Capital Light: Vassallo doesn't like deals that require huge amounts of capital, such as solar and bio-fuels. "We look for ways to use software and information technology (IT) to bring about more efficiencies," he said.

An example is Silver Spring Networks. The company has fixed two-way wireless solutions to help utilities improve meter data management.