For several years now, cleantech investing has been stuck in a rut—still perceived as too risky by some, too slow to grow by others. However, there’s no doubt that we need VC investors in cleantech startups. Whether it’s two years from now or ten, the future is written in our growing population, growing climate change, and growing demand for energy—all of which combats our decreasing safe drinking water, decreasing agricultural abilities and global financial instability.
If you’re going to invest in cleantech startups, here are a few points to remember:
- Cleantech investments are not short-term investments
New and developing clean energy investments require time and money, more so than many investments that realize within a fairly short period of time. Cleantech has a long development cycle, which means that VC investors have to have sufficient capital to survive until the investment pays off.
- Cleantech startup ventures are trying to break into established territory
Many startups are breaking into a bright new world with a new idea. IT, for example, is constantly making leaps and bounds: phones the size of your hand; toasters that talk to refrigerators; television screens on windows. Never-before-seen technology. Science-fiction come to life.
Not so with most cleantech startups. Many are trying to capture a part of an established market—the energy market. They’re going up against the likes of mega oil companies and utilities.
- Governance can be an issue
Although part of the purpose of clean energy is to solve the ESG criteria, creating cleaner, more sustainable energy, startup ventures generally lack trained management. So, while the established energy companies may work like well-oiled machines, many startup venture managers are hired based friendships and how well one gets along with another.
- “Strike while the iron is hot” may not be the best mode of operations for cleantech
Cleantech investing is high-risk investing that needs to be balanced with careful research. As mentioned above, smaller VC investors should take a good hard look at whether they can sustain the longer lifecycle of clean energy.
Cleantech startup initiatives aren’t going to go away, and we shouldn’t want them to. To continue to exist, to move forward as healthy humankind, to have breathable air, unpolluted ground waters and safe agricultural practices that span the world, cleantech is a must. It’s a long-term investment for you, as a VC investor, that will last for multiple generations.