MIT reports on cleantech VC

An MIT report last month, Venture Capital and Cleantech: The Wrong Model for Clean Energy Innovation, found most VCs lost money in the sector during its peak years of 2006 to 2012.

The report said: “Cleantech startups fall into five categories, among which there are huge disparities in performance:

• Companies developing new materials, processes, or chemicals—for solar, biofuel, battery, lighting, and other applications—returned only a sixth of the invested capital.

• Hardware integration companies, which commercialized novel ways to integrate existing hardware components, performed even more poorly, returning only 5 cents on the dollar.

• Cleantech software companies—like Nest, which dramatically boosted the aggregate return of cleantech companies funded in 2010, and Opower, which analyzes energy use data and helps utilities apply peer pressure on customers to compete with neighbors on efficiency— returned about three and a half times the capital that A-round VCs invested. This makes sense, since these cleantech companies could also be classified under the software sector, where strong returns are more common.

• Deployment finance companies, which sought investor capital to construct large projects like solar farms based on proven technology, also performed poorly, returning only a quarter of the invested capital.

• Other companies that fell into none of the categories above—including energy efficiency consultants and waste processing services—returned only a fifth of the invested capital.”