After a decade of failures, the cleantech industry's maturity has finally reached an inflection point. Let us look at what are the lessons learned from past negative results that have supported the cleantech industry's promising comeback
Fremont, CA: Innovation and environmental regulation are the two weapons that can help us fight global warming and other environmental issues. With the help of innovation, markets can become less oil-dependent and more eco-friendly. Regulation, on the other side, forces companies to invest capital and to further decrease their carbon emissions. Venture Capital (VC) industry is one of the forces that support innovations.
After a decade of failures, the cleantech industry's maturity has finally reached an inflection point. The technology is gradually becoming economically feasible, and new business models have emerged. Consequently, investments are being made in this sector on a great scale. At present, $300 billion of annual investments are being made in the sector, and this is expected to surpass $1 trillion within the next five years.
Let us look at the three lessons from a decade of failures that have helped the cleantech industry get back on their feet:
The energy investment industry requires a lot of capital expenditure, even before revenues start to generate. This is supposedly a result of the need to develop energy-related hardware before a company can start the sales process. Therefore, to encourage Venture Capital-led innovation, there is a need to target on software-based and capital-efficient investments.
Regulation Matters in the Energy Industry
The energy industry, in some respects, is led by regulatory reforms such as carbon taxes, carbon mandates, emission goals, and energy rebates, to name a few. The ability to sell to regulated utilities presents a challenge that not every startup can successfully deal with, which means that VCs who wish to succeed in the field need to understand how regulations develop and help entrepreneurs deal with sales to transmission companies and power stations. One of the great examples is the $465 million government loan that saved Tesla at a time of crisis.
All the Fields and Technologies within the Energy Sector Grow Differently
Some areas, such as energy storage and electric vehicles, have experienced threefold growth. Simultaneously, other sectors, such as internal combustion engine-driven vehicles, have not gained much attention. The cleantech investment industry is going through a crucial period. VC investors need to implement these hard-learned lessons to turn the possibility of a cleaner future into reality.