Cleantech is back from the dead — Yep, it’s a Halloween leftover

Until recently, it has seemed that “cleantech VC” was a four-letter word. 

Or perhaps a term reserved for hushed whisphers of digust and distrust thanks to the financial woes in the sector about ten years ago.

But, it appears that the tide may be turning. 

Here are three headlines that might give cleantech entrepreneurs some hope.

#1:
Renewal Funds just raised $145M to invest in cleantech (what?)

Here are some highlights (link):

• Sectors = Energy, water, smart cities, and food/ag tech, sustainable food system, cleaner oceans, and lowering the carbon footprint and waste generation of the consumer products industry (aka, impact investments)
• Additional interests = Social impact, supporting diverse management teams

#2:
ArcTern Ventures just raised $165M to invest in cleantech (oh my!)

Here are some highlights (link):

• Sectors = AgTech, artificial intelligence, energy, FoodTech, consumer hardware, software
• Perspectives = Cleantech is a “a multi-trillion-dollar opportunity...Our life’s work at ArcTern is to demonstrate to the market that if you solve a big problem you get a big reward. We are chasing the biggest problems that we face — i.e., climate change and resource scarcity.”

#3:
Clean Energy Ventures just raised $110M to invest in cleantech (gasp!)
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Here are some highlights (link):

• Sectors =  “Early stage advanced energy with disruptive hardware and materials technology solutions and capital-light business models that have the potential to massively scale”
• Perspectives = “After more than a decade of investing in the advanced energy sector, it's been gratifying that this first fund, which is focused on investments that address climate risks, was significantly oversubscribed. It's really indicative not only of investors' appetite for innovation in these sectors, but also of the new normal in which this kind of funding is possible without compromising return on investment."

But wait…

Before all of us entrepreneurs get too excited about sending an email to these groups and receiving $10M in growth capital the next day, let’s remember this...

Venture capital firms reject at least 95%+ of all the deals they review

• This is based on my personal experience at a private equity fund for about a decade, and work now as an investment banker focused on energy and the environment.

Far less than 1% of startups raise capital from VC firms. 

The estimates vary:

• Inc.com = 0.6%
• Fundable / Entrepreneur.com = 0.05%

In contrast, the last study above showed that “57% of startups are funded by personal loans and credit, while 38% eceive funding from family and friends.”

These VC firms like low company valuations.

• Firms like those referenced above tend to invest in companies who value themselves at around $10M, plus or minus. (Source: Pitchbook) But they can make exceptions for gamechangers.

Fundraising takes a ton of time, and will distract you from running your business.

• You should plan on being distracted for at least six months, plus or minus, with perhaps 20-50% of your time spent on researching, emailing, tracking, calling, visiting, and negotiating with investors. Here’s a good Forbes article overview of the process.
• To avoid this distraction, you could consider engaging licensed professionals with sector expertise. (Ahem, like us. Subtle, I know.)