Venture Capital’s Disconnect with Clean Tech

CleanTech Investments

Many entrepreneurs today are focusing on startups associated with CleanTech/Environment. For these entrepreneurs – the following article and review done by Joseph Lassiter, Professor of Management Practice at Harvard Business School, titled -“Venture Capital’s Disconnect with Clean Tech” would be a worthwhile read.

Interestingly, we at GlobalLogic had similar fears on the points raised by Professor Lassiter last year as we were in process of defining our technology services offering. This article certainly does a great job in articulating such fears.

Few key highlights which entrepreneurs trying to focus in this area should take away from this article –

  • Be ready to face and live through the ‘valley of death‘ – the painstaking stage between researching and developing a product and going to the market.
  • Unlike their cousin startups in the area of IT, Software/Internet and Telecom/Communication space, startups in CleanTech typically have a catch-22 challenge – they cannot prove their ability to scale without actually scaling. An absolute must for modern day VCs to be excited about a business.
  • Huge amount of dependency of the CleanTech ideas on the Public Policy. Interests in it tends to change from one political administration to another.
  • Extremely low VC investments (average ratio of one investment for every 100 ideas)

Personally, as mentioned above I had my inhibitions about entrepreneurship in the area of CleanTech – however it would also be of interest to me to hear (possibly from Professor Lassiter himself) as to how the VCs should try to structure their investments in such ideas/companies. In our internal study about a year back – we had seen that the same investors who were making investments in Consumer/Technology/Healthcare related ideas were also making investments in CleanTech. Just felt that this was a odd combination to have in a portfolio considering the differences in mindset required towards such investments.

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