![]() However, VCs must be careful about long R&D timelines. Today’s climate tech landscape includes wide-ranging businesses across multiple sectors, from high-margin software companies to more capital-intensive hard tech, to the hybrid “software-enabled hardware.” If these hard tech companies can reach scale, they can outcompete incumbents. Meanwhile, China in the early 2000s framed and implemented a long-term vision around manufacturing solar panels, batteries, and relevant components, that rendered some U.S. Early solar investors anticipated receiving an amount of public funding that didn’t come to pass until the IRA–and needed that funding at the time to scale and compete with fossil alternatives. What we learned during the early 2000s is that it’s important to avoid getting fooled by small tailwinds. For example, the notorious Solyndra bankruptcy failed to anticipate the rapid decline in conventional solar costs, and many other investments were made based on the assumption that a carbon tax would pass, which (unfortunately) never occurred. Many of these investments were in technologies that were years away from commercialization, or companies making assumptions about future economic and policy factors that never came to pass. In the era of “Clean Tech 1.0,” VCs committed $25 billion to companies in the climate space and lost half of it by 2011. There are important lessons that can be learned from the history of climate tech investing, specifically from the beginning of this century. That, in addition to the general maturation of zero-emissions technologies, will accelerate both innovation and investment in climate tech. For climate, though, the current level of venture investment doesn’t reflect the $370 billion passed in the Inflation Reduction Act (IRA) to help companies working to decarbonize the economy. The environment following Silicon Valley Bank’s collapse has been one of investor caution, and this might be doubly so due to investors’ general concerns about the VC market becoming heated in recent years. While this has taken time to achieve, the value proposition of a modern, sustainable, and net-zero economy has become the greatest business opportunity of our generation. As a whole, climate investing has experienced years of breakout growth.
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