Over the past few years, business ventures into the clean energy sector have been taken on a roller coaster ride, given on-and-off funding opportunities.
“Commercializing a new technology is a difficult endeavor, and many potentially breakthrough technologies languish due to lack of investment,” according to an article on the Americans for Energy Leadership website.
Experts suggest that despite the development of promising products, commercialization of technologies is an expensive and lengthy undertaking, with many promising startups going under due to funding problems.
Many venture capital (VC) firms are reluctant to put their money into development and production of clean energy products because their objective is to get in, make huge returns, sell to the market, and go on to other ventures.
Investment experts suggest that increasing government subsidies for the clean energy sector is imperative given the miniscule private sector funding opportunities.
“The level of capital required for clean energy demonstration projects has proven to be a dilemma that the private sector cannot sufficiently address, implying the need for significant government support,” stated Americans for Energy Leadership.
Venture Capital Opportunities
“Despite this growing interest in the sector, the number of venture capital firms with a strong focus on clean energy remains small. Less than 30 U.S. VCs have a substantial portion of their portfolio targeted towards clean energy investments,” according to a Harvard Business School working paper titled “Venture Capital Investment in the Clean Energy Sector.”
In the United States, only 43 VC startup firms raised capital in 2002, at a value of around $230 million. By 2008, around 200 of such firms received $4.1 billion in VC, which was about 15 percent of all U.S. VCs. In 2009, venture capitalists reduced their investments in clean energy production to 8 percent of all U.S. VCs.