My picks for favorite startup sectors to improve your fundability in the new year include green, biotech, and renewable energy (also called alternative energy or sustainable energy). In previous articles, I’ve put some definition around the green and biotech investment categories, so I’ll try to do the same here for renewable energy.

Renewable energy is any source that can be produced cleanly, will not disappear like fossil fuels, and is less polluting. The Clean Technology venture capital sector, which includes alternative energy, soared 68 per cent year-on-year during the first quarter of 2010. I expect another increase this year. Here are the key components, as summarized by the New Alternatives Fund:

1. Solar power. Solar cells produce electricity from the sun. Conversion efficiency of silicon cells has increased from 4% in the early eighties to over 20% for the latest technologies. The cells create no pollution when they generate electricity. They are not yet as cost effective as coal-generated electricity, but costs keep declining and efficiency is increasing.
2. Wind power. The latest turbine technologies have resulted in wind-produced energy becoming more cost efficient, and more widespread. New wind energy development is essentially cost-competitive with conventional energy technologies.
3. Hydropower. This technology is clean but limited by geography. This is already an important source of renewable electricity. More attention is going to low-impact and “run-of-the-river” hydropower, which does not have the ecological problems of older dams.
4. Ocean energy. Technologists predict that wave action, current, tidal movement and temperature differential will become an outstanding form of clean energy. Ocean energy has a big advantage because the timing of currents and waves are understood and reliable.
5. Geothermal energy. Geothermal energy is produced by heat from sources below the Earth’s surface. Steam created by these underground heat sources is used to spin turbines for electricity generation.
6. Biomass energy. This is a broad category encompassing a variety of fuels produced from biological sources.
   • Bio-diesel can be created from used or virgin plant oil. Production and testing today center around rapeseed oil, soybeans, sunflower oil. Overall, bio-diesel works cleaner than petroleum-based diesel fuel.
   • Ethanol is derived from agricultural products, including corn, wheat, fruit, wine, and various kinds of cellulose stalks and wood chips. The techniques are steadily improving. Ethanol can be mixed with gasoline to minimize engine changes.
   • Waste gas (methane), emitted from landfills, breweries, waste water, animal sewage and coal mines, provides almost free fuel for stationary fuel cells and conventional gas generators.
   • Hydrogen is the ideal alternative fuel, since it releases no toxins into the air. It can be derived for waste gas, or mixed with natural gas in hybrid fuels. Liquid hydrogen, the preferred form of hydrogen, still requires more storage space and pressure than other fuels.

There are many other technologies which may be lumped into this category, including combustibles, municipal waste, and even nuclear energy. There is overlap between this category and the green category, as it relates to global warming and environmental impact.

Nevertheless, if you are looking for a hot sector to help you recover from tough economic times, get you tagged as a world leader, and increase your probabilities for funding support, put some energy into this one in 2011.

In addition to the “green” sector, which I outlined a few weeks ago, I see biotech as one of the places where startups can always go for real opportunities. Recession-proof products with innovation continue to come from the biotechnology industry. Plus, it was the top industry attracting VC money in the most recent quarter of 2010, with a total of $944 million.

In its most general sense, biotech is used to refer to any sort of technology that uses biology or other medical technology to accomplish its end. It includes the use of microbes, or life processes, to produce materials and products that are useful to mankind.

Two top-notch analysts in this area, Eric Schmidt and Ross Muken say in Forbes “True innovation and products with a more durable revenue stream are coming from the biotechnology side of the industry,” They argue that biotech drugs treat life-threatening diseases – so recessions barely dent sales growth.

The hot areas of research today are cancer, AIDS, diabetes, heart disease, neurological diseases, immunological diseases, viral infections and tissue regeneration, where there is a high degree of incidence in the population.

Success in these areas will ensure a faster return on investment in R&D and licensing efforts. An alternative is to start a niche company with an orphan drug that, if successful, is protected from competition for several years. There is always money around for the right team and the right plan, and I believe biotech is a good area to start from.

If you are looking for the ideas on top of the list, I recommend you start with one of the following hot areas of biotech. Each one has the potential of annual sales more than $1 billion, which puts it in the new “blockbuster” drugs category:

• Metabolic disorders. “Metabolic syndrome” is the politically correct term for patients who are obese, diabetic, and face increased risk of heart disease. Now that half of the U.S. population is technically obese or overweight, an effective diet pill has become the Holy Grail of drugs.

• Vaccines. With new products to prevent cervical cancer, avian flu, and the common cold, vaccines are back in vogue. There are many other novel vaccines now on the table for development, ready for entrepreneurs who can license and commercialize them.

• Infectious diseases. Now that HIV has been transformed from a death sentence to a chronic disease has turned the infectious-disease-drug market into a multibillion-dollar industry. The next frontier is an effective treatment for Hepatitis C. Current drugs have terrible side effects and only “cure” 50% of patients.

• Lowering blood cholesterol. Drugs in this category are commonly called “statins.” They not only control blood cholesterol, but also stabilize plaque and prevent strokes through anti-inflammatory and other mechanisms. This is a huge need as the population ages.

Another biotech subcategory with opportunity is new medical devices. A friend of mine, a distinguished physician and surgeon, happens to manage a small private investment fund seeking early stage companies with new medical devices that have an established market. If you know a hot new startup in this area, I’m interested.

There’s never been a more exciting time to be a biotech startup. People tell me that “Big Pharma” companies have nearly $100 billion in cash that will keep buyout offers large. There are plenty of Holy Grail areas to focus on. How can you argue with this logic? Now is the time to jump in.

For those of you looking for startup ideas that are hot today and recession proof, consider anything to do with saving energy, sustaining the environment, or solutions to the global warming problem. These are especially good for Gen-Y (millennials) who have the passion, or every Gen-Y “wanna-be” (over 25 but not yet fulfilled).

Especially during a recovering economy, these will get you extra attention with investors, as long as basic business principles are not forgotten. Doing the right thing has to be profitable and competitive if it is to be sustainable.

Here are ten themes to get your mind rolling:

1. Reduce, reuse, recycle. Figure out how to recycle profitably your old cell phones. Come up with a responsible way to dispose of old medicines. Generate energy from the stuff you recycle.
2. Sustainable agriculture. Eliminate poisons from insecticides, weed killers, and other common products as well as the use of sprays in agriculture, and reduce dangerous chemicals in the food source.
3. Wildlife and resource conservation. Replant deforested areas to improve air quality, and restore indigenous forests. Protect wildlife to restore natural selection and the natural environment.
4. Renewable energy. Harvest renewable energy sources to power your home; sell that renewable energy back to your utility company site and build your dream eco-home; minimize your fossil fuel use; and more.
5. Alternative transportation. The alternatives here range from wind-powered battery-electric vehicles, to concentrated solar powered, geothermal-powered, tidal powered, wave-powered, to nuclear powered vehicles for different roles across the world.
6. Hyper-efficient appliances. Residential technologies – heat pump water heaters, new air conditioners, programmable thermostats, lighting, electronic appliances.
7. Organic food. This can be done both as big business and on a relatively small farm; and the third, help in hunting and gathering food for oneself.
8. Healthy fast food. Make visits to fast-food restaurants healthy rather than the culinary equivalent of “impulse buys.”
9. Save the global environment. Global warming, air and water pollution, and reducing energy usage are just the beginning.
10. Green construction. I’ve heard many ideas for greening your house and your business, from minor improvements – such as what paint to use – to major ones, such as how to choose and install solar electric panels.

There are programs out there to help businesses green their practices in a way that works with, and often enhances, the bottom line. There’s a phrase in green-talk, “the triple bottom line” which encapsulates what it takes for a business to be truly sustainable – economy (profits), ecology (resource management), and equality.

The last refers more to the social issues of green businesses today. It’s all about how a thriving business can enhance the community it is located in. Go green, and make it a triple bottom line – for your business, the economy, and the environment.