Funding Options Shrink for Early-Stage Cleantech Ventures

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to Monsanto’s $1.1 billion acquisition of Climate Corp., which analyzes weather data to create crop insurance. But there are also a number of companies using sensors and drones to improve farming and there are a number of biotech veterans who see natural overlap. “Agriculture is getting a lot of attention from investors who say it looks a lot like biotech and they are kind of making the jump,” Ault says.

But early-stage startups are getting less funding.

One worrying trend for entrepreneurs is that the number of deals going into seed or Series A funding rounds has dropped from last year. This means that companies need to work harder to get early-stage funding, a consequence of over exuberance in years past. “It’s not just deal volume. Series A rounds are smaller than they used to be,” Ault says. “That’s the nature of any bubble or bubble-like scenario where you’ve got investors rushing in, copy-catting, and a lot of companies getting funding that shouldn’t have.”

Credit: Cleantech Group

Credit: Cleantech Group

Another area of concern is that there aren’t obvious sources of funding for companies trying to create radically better energy technologies, which many consider necessary to address climate change. Transatomic Power, an atomic energy startup that wants to generate electricity from spent nuclear fuel, today said it raised $2 million from FF Science, a portion of the Founders Fund dedicated to science- and engineering-based companies. But as a whole, venture companies are wary of any technology that could take close to a decade and hundreds of millions of dollars to commercialize. These are not the kinds of long-term investments most venture capital funds are set up to make.

Anecdotally, entrepreneurs will tell you that they struggle to get financing in the current environment or they need to be more creative in finding new sources of funding. One former battery startup CEO told me he’s moved out of energy because of the  funding environment. Venture capitalists say it’s difficult to form syndicates since many firms have exited cleantech, which means they sometimes need to dedicate their available money to their existing startups, rather than funding new ones.

But despite the challenging funding situation for some types of companies, few would question that energy and natural resources are areas ripe for innovation, given the stresses caused by a growing global population and a changing climate. The question for entrepreneurs is whether they can find the financial backers to realize their clever ideas.

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5 responses to “Funding Options Shrink for Early-Stage Cleantech Ventures”

  1. CleanTech Advocate says:

    Why would investors take the risk when the government can pick and choose the winners and losers in the politically charged clean energy game?

  2. Andy OryChris says:

    Thanks and good read, Martin. Where did efforts focused on water fall? Giving how pressing that is, was wondering what’s up on that front? Cheers…

    • Martin LaMonicaMartin LaMonica says:

      Water was the smallest category in terms of investment in the first half ($190M over 69 deals). Agreed – it’s one of those areas where there’s a clear need for better technology but it can be a tough market, particularly in municipal water–low prices, conservative customers, etc.

  3. Brian Jenkins says:

    Good article Martin. What do you think about Energy Storage for the grid… our platform has been a very successful ARPA-E project that has terrific cost profile relative to the current experiments out there. I was thinking Impact Investing with HNW investors – like oil & gas cowboys that might want to place a covered bet.

    • Martin LaMonicaMartin LaMonica says:

      Hi Brian,
      Yes, I think impact investors and angels, etc. are routes many companies are taking. Then the hope is to go to VC or strategics/corporate VCs. I think what’s happening in energy storage for the grid is really exciting. Obviously, California is big but so are NY and Hawaii.

      What company do you work for? I’m at [email protected]