Once upon a time, 10 years ago, there were actually a number of funds and general partners at Sand Hill Road VC firms dedicated to early-stage alternative energy and clean technology investing.
VCs directed almost $8 billion to cleantech in 2008 and 2011, building successes such as Tesla, Sunrun, Opower and Kurion, arguably successful firms such as SolarCity and Bloom Energy, and an extremely long list of unsuccessful companies.
But VC investment in cleantech is down, even as overall VC funding has reached an almost dot-com-era fervor. According to a Brookings report, cleantech VC as a share of total VC investment fell from 17 percent in 2011 to 8 percent in 2016, with a trend toward geographic concentration and a drop in early-stage rounds.
A just-released report from Mercom Capital Group compiles a list of the year’s “top smart grid” VCs: Energy Impact Partners, E.ON, Ørsted and Shell Ventures. Excepting EIP, a financial fund backed by corporates, those are all corporate funds. EIP was also the most active energy efficiency investor in 2018, according to the report.
The hard-won realization is that investing in alternative energy or utility-centric startups is not for most traditional VCs. Kilowatt-hours are a regulated commodity in a low-growth monopoly industry, and while we might be in an energy transition, the Smil-theorized speed of change in global energy sources is just too slow for venture capital.