Why Venture Capitalists Gave Up on Renewables

Wall Street Journal has written a fascinating explanation for why venture capitalists have given up on renewables.

Why Venture Capitalists Abandoned Clean Energy

Two experts say high costs and low returns sent venture capitalists fleeing. A new funding model, they say, is crucial.

A decade ago, clean-energy companies were the hot trend that venture capitalists were chasing. Oil and natural-gas prices were on the rise and Al Gore’s “An Inconvenient Truth” had just made its premiere.

But high hopes that the clean-energy sector would replicate the big returns of biomedical and software startups quickly faded. Instead, monumental losses piled up: Venture-capital investors lost more than half of the $25 billion they pumped into clean-energy technology startups from 2006 to 2011.

A study of why venture capital and clean energy haven’t been a good match was launched by Benjamin Gaddy, director of technology development at Clean Energy Trust, a startup accelerator in Chicago, and Varun Sivaram, the Douglas Dillon fellow at the Council on Foreign Relations. In a paper recently published through the MIT Energy Initiative and written with Francis O’Sullivan, the Energy Initiative’s director of research, they predict future funding for energy startups increasingly will come from more-patient providers than venture capitalists—including groups like the Breakthrough Energy Coalition, formed by Bill Gates and more than two dozen wealthy investors last year. And they argue that established energy companies and governments need to play a bigger role in nurturing clean-energy startups.

Why Venture Capitalists Abandoned Clean Energy - WSJ (external - login to view)
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