A New Path for Early Stage Cleantech?
I have some good news and bad news about cleantech innovation.
I use venture capital investment as a general proxy for innovation simply because many of the technologies and companies do require more capital to create than some of their digital counterparts.
Good news.
In the 2nd quarter of 2014, venture capital investment into cleantech increased to over $0.5 billion for the first time since late 2012, snapping a 6-quarter long period of less than $0.5 billion in cleantech funding.
Related, cleantech funding is finally growing again after taking a negative turn for the 8 quarters spanning 2011–2012.
Bad News.
Most of the venture investment is concentrated in follow-on investments. In Q1 2014 in particular, there were no initial venture capital investments in cleantech.
As you may have guessed, given the lack of initial rounds, there is almost no venture rounds done for early stage cleantech companies. This is a major problem for an industry when an entire sector isn’t seeing a healthy pipeline of new up-and-coming companies being funded to create new products and technologies. This is a leading indicator that means the industry is likely to suffer a dearth of growing companies for the next several years as few are even being created and funded in the early stage.
A New Path.
Cleantech entrepreneurs aren’t all waiting around. They are getting creative with alternative ways to get their ideas off the ground. Some are going directly to family office investors or strategic investors who understand the space better, others are exploring an entirely different path.
One energy entrepreneur, Ilan Gur (@IlanGur), has created M37, an entrepreneurial R&D program based in Lawrence Berkeley National Laboratory. In the first M37 cohort, five selected companies receive $500,000 in seed funding over two years to develop their product / company. It looks like a stronger accelerator model that provides more capital and time for the intensive technology development often required in cleantech. While funding is for the first two years, the overall program lasts up to five years with a network of advisors working closely with each company on product, commercialization, grant writing and partnerships. Ilan was intimately involved in the ARPA-E program and managed 20 research projects. He’ll certainly bring those lessons to bear in M37's efforts to re-accelerate new innovations in cleantech.
This is perhaps one of the best new path forward for energy entrepreneurs and I hope there are more programs similar to this created at other institutions and locations around the country.
