Talk to a dozen investors in any given field, and you’re guaranteed almost as many different perspectives.

That said, people are clearly listening to whatever investors have to say when it comes to placing bets on new renewable energy technology.

Judging by the attendance at an investment panel yesterday at Solar Power 2006 in San Jose, there’s huge interest in where venture capitalists are spending their money and why. Hundreds of people wedged into an undersized room to learn where money is flowing. The room was so tightly packed that a single spilled coffee doused the feet of four people standing in an aisle (your faithful reporter was just outside the blast radius.)

The number of people in the room, and the buzz in the crowd, made it clear that green technologies, and solar in particular at this conference, are seen as hot opportunities.

Two groups of investors shared deals they’ve recently completed and insights into how the venture capital game is played. Their comments centered around two major themes: where they’re looking to spend more money and why, and what turns investors off potential deals.

“We’re looking for highly disruptive things that can ideally exist in a world without subsidies,” said Stewart Sonnenfeldt, one of the early principals in web conferencing provider WebEx and now an angel investor. He cited Konarka as an example of disruptive new solar technology: a company applying organic inks onto lightweight, flexible polymers for military and other applications.

Defensibility of technology and exit multiples were other themes. While more money than ever is flowing into the industry, some lamented the dearth of high profile renewable energy IPOs, with Evergreen Solar the only clear solar success to date. Others investors complained they hadn’t seen a lot of new technology lately that had got them really excited.

Subsidies have been a key factor in solar. Investors had been put off by the subsidies prevalent in the sector only a few years ago. Previously a deal-killer, venture capitalists were now largely “over” the subsidy issue, according to Sonnenfeldt.

Why? “Japan and Germany have shown you can have an exciting market with subsidies, or in a climate of reduced subsidies,” said David Aslin, partner at 3i, a public global venture capital and private equity company with 30 locations around the world. Specifically, the solar industry in Japan, he noted, continued to grow at a healthy 10-15% annually, even after the expiry of a ten-year government subsidy.

And in the face of rising fossil fuel prices, some panelists only half-jokingly suggested solar, wind and other industries might not require subsidies soon to compete cost-effectively with conventional energy.

David Edwards of ThinkEquity Partners, a boutique investment bank in San Francisco, said his firm looks for four essential elements in promising new vendors, what he called the four “p”s: potential, products, predictability and people. The people factor was particularly important in nascent markets like alternative energy, where “you really want a strong management team,” he insisted.

David Ratzker of Cornell Capital said he was actually attracted to failed deals involving a previous VC. He found the technology in such companies had been more de-risked and was usually closer to market.

There were a variety of reasons cited by VCs as to why they chose not to purse certain deals.

“The easy way to walk away from anything is to have a team that doesn’t add up, doesn’t make sense, the engineering team isn’t good, chemistry with management team isn’t solid or the technology doesn’t work,” said Jim Simmons of Draper Richards.

There’s also the zig-while-others-are-zagging factor. If something’s “hot”; David of 3i said when we see something hot, “we tend to run away.”

Concerns about small market size or small exit potential were also raised. If a company doesn’t appear to have a large enough total addressable market, or good acquisition or IPO potential, it’s a non-starter. Sometimes company founders will figure out a way to expand the size of their total addressable market, and a VC will come back, said Ratzker of Cornell Capital.

Another potential turn-off is when the technologist insists on remaining CEO of the company. Ratzker noted he’d seen many companies fail because their technology-focused CEOs didn’t recognize their limitations. Ratzker also said he’s concerned when companies don’t understand the benefits of retaining control over their capitalization; he wanted more startups to understand that it’s important for employees to retain a significant percentage of the company’s ownership to provide principals and employees sufficient incentive to make the company succeed.

Most investors, given their classic VC investment backgrounds, expressed little interest in financing large installations as a rule, and were more interested in classic technology plays. However Aslin of 3i reminded the crowd that “there’s no playbook,” and that investors would always look for where returns appeared most promising. The panel noted that classic venture capitalists were better at assuming risk than the project finance community, which generally eschewed risk. Those seeking financing for installation projects were generally encouraged to “seek out project finance guys who are risk adverse,” according to David Edwards of Think Equity.

Is the VC model broken in solar and other greentech sectors? Is too much money chasing too few deals?

The big concern is current company valuations. “We’re getting to a point where today’s valuations could be tarnishing the industry, and hurting IPO prospects,” said angel investor Sonnenfeldt.

While some argued it was good to have more money than less in the industry, Aslin of 3i cautioned the audience to “expect a series of disappointments over the next few years, but you’ll eventually find VC firms figuring out how to structure things.”

“There will be risks and failures,” added Ratzker. “Reality will set in sometime soon. But does that mean we’re not investing? No.”