On creating cleantech confluences : best practices and partnerships to mobilize multiple sources of private capital into early-stage clean technologies

Abstract

During the 2015 Paris Climate Change Conference, world climate scientists and policymakers agreed that global temperatures must not exceed a two degree Celsius increase above pre-industrial levels within the next 30 years. It is estimated that this will require investments of $40 trillion or $1.3 trillion per year in new and mature clean technologies. Currently, only about $0.3 trillion of investment goes to clean technology a year and the majority of that funding goes to mature, proven technologies. There is an investment gap in clean technologies, and the gap is especially pronounced for new and unproven technologies that are necessary to bring down costs of the entire system, and produce quicker breakthroughs in CO₂ mitigation. The gap is partly due to the large losses sustained by venture capitalists-one of the greatest source of early-stage capital-who invested heavily in clean technology companies in the years leading up to the 2008 recession. After the market crashed, federal and state governments ended up being among the few remaining supporters of these technology companies because of their public benefits. However, in order to stay below 2 degree Celsius warming, venture capitalists and other private venture investors must be engaged to invest in the clean technology sector again. Public sector funds are not sufficient. In a sector that has produced few winners while receiving substantial government support, the challenge could not be greater. To address this challenge, we ask three questions of three key actors: How can entrepreneurs attract private investment and scale up pass the Valley of Death? How can venture capitalists build the ability and confidence to invest in the cleantech sector again? How can policymakers address the failure modes that may still exist if investors and entrepreneurs follow best practices? To explore this issue, we conducted interviews, reviewed literature, compiled data from online sources, and compiled information from conferences and workshops. Our findings reveal a "Cleantech Confluence", or a preliminary set of best practices and partnerships. When simultaneously implemented, the Confluence can mobilize multiple sources of private capital into early-stage clean technologies.