Cleantech VC falls again: science is expensive

The third quarter venture capital figures are in from PricewaterhouseCoopers and the National Venture Capital Association. And the cleantech figures aren’t good. From GigaOM:

The third quarter of 2013 saw the 7th consecutive drop in cleantech venture investing. In Q3 there were 40 deals and $297 million invested, which was a 20 percent drop in dollars from the second quarter of 2013, and a 65 percent drop from the third quarter of 2012. This funding is anything that is classified as venture, which includes venture arms of corporations, institutions, and investment banks. If it’s not classified as venture, and it’s from a corporate, seems like it’s not included here.

It wasn’t just cleantech that took a hit. Life sciences, which includes biotech and medical devices, saw its lowest VC levels in the first 9 months of the year since 2005. Similarly VC for cleantech hasn’t been this low on a quarterly basis since 2006. Conversely, VCs pumped $3.6 billion into software startups during Q3, the highest level in 12 years.

So what gives? VCs have learned that capital intensive startups with unclear exit strategies involve risk levels they just don’t want to take. Most importantly, from my perspective, is that cleantech, like life sciences, involves some very challenging basic science as well as engineering hurdles to overcome, which is why the industry really requires not just subsidies from Washington but major investment in the core scientific areas that can pave the way to commercialization. Software services have none of these challenges, are easily scalable, and build upon three decades of advances in development.

So cleantech startups trudge on in a world where early stage financing is getting harder to come by. One hopes that at some point the federal government will realize that improving our energy economy will require supportive programs like ARPA-E. You know, as long as the federal government’s open.

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Adam Lesser

Cleantech Curator Gigaom Research

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