Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/260814 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9684
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
After a boom and bust cycle in the early 2010s, venture capital (VC) investments are, once again, flowing towards green businesses. In this paper, we use Crunchbase data on 150,000 US startups founded between 2000 and 2020 to better understand why VC initially did not prove successful in funding new clean energy technologies. Both lackluster demand and a lower potential for outsized returns make clean energy firms less attractive to VC than startups in ICT or biotech. However, we find no clear evidence that characteristics such as high-capital intensity or long development timeframe are behind the lack of success of VC in clean energy. In addition, our results show that while public sector investments can help attract VC investment, the ultimate success rate of firms receiving public funding remains small. Thus, stimulating demand will have a greater impact on clean energy innovation than investing in startups that will then struggle through the “valley of death”. Only with demand-side policies in place should governments try to plug funding gaps by targeting clean energy startups with low potential for outsized returns that will continue to find it hard to attract private capital.
Subjects: 
venture capital
renewable energy
start-up firms
JEL: 
G24
Q40
Q48
Q55
Document Type: 
Working Paper
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