Emergence of Cleantech as an Investment Category - Media Attention and Venture Capital Investment

Authors: Michael Migendt, Florian A. Taube, Brett A. Gilbert & Paschen von Flotow


This paper investigates the emergence of the category “clean technology investing” in the field of venture capital (VC). Building on industry evolution and life-cycle literature it extends the understanding of drivers for VC growth. It takes industry and public policy forces into account. The case of cleantech investing is examined using a multitude of datasets and methods including a quantitative and qualitative content analysis. A software-based analysis of press publications combined with investment data shows clean technology media and investment emergence patterns. These patterns follow evolutionary life-cycle patterns. The paper conjectures on factors that influence observed patterns in each stage.


Sustainability and cleantech are commonplace words today relative to two decades ago. Renewable energy, energy efficiency and alternative transportation technologies which are part of the cleantech vernacular originate from inventions from the 1980s and 1990s and were developed to become household knowledge and important business sectors (Pernick & Wilder, 2007). The term cleantech was created by the investment community and is widely regarded as a major investment category or even asset class (Caprotti, 2012; O’Rourke, 2009; Pernick & Wilder, 2007). The cleantech industry encompasses companies that focus on green and sustainable technologies with product, process or service offerings decreasing the amount of greenhouse gas emissions. Newly introduced technologies such as cleantech require significant work to establish their positioning within society. This development is carried heavily by small, innovative, and entrepreneurial ventures (Hockerts & Wustenhagen, 2010a), which commonly lack the resources that are needed for rapid growth. Venture capitalists have developed a strong reputation for funding promising technology companies. For this reason, entrepreneurial firms are commonly financed by venture capitalists (VCs) who provide the requisite capital. VCs provide funding that is not generally available through traditional financial institutions, and have been found to be one of the major drivers of innovation and technology commercialization (Da Rin et al., 2011; Samila & Sorenson, 2010a).They are especially important during early © Springer Fachmedien Wiesbaden GmbH 2017

M. Migendt, Accelerating Green Innovation, Innovationsmanagement

und Entrepreneurship, DOI 10.1007/978-3-658-17251-0_2

stages of an industry. For example, von Burg and Kenney (2000) describes the emergence of the local area network (LAN) industry and the support provided through VC. According to their work, not only did the VCs supply capital for the companies but also assisted in strategic planning and were influential over the adoption of a dominant design. Dodgson et al. (2008) similarly highlighted the role and importance of VC in the evolution of the national as well as sectoral innovation system (NIS/SIS) in Taiwan’s biotech industry. Despite these studies, there is limited research that shows how new technology classes are financed over time by the VC community.

This article explores the evolution of the cleantech category for venture capital investment from early industry emergence to a decline in investment. While cleantech as a new industry and its corresponding investment category has been reviewed in recent research, a comprehensive analysis of the category's investment evolution has not been done (Randjelovic et al., 2003; Ghosh & Nanda, 2010; Kenney, 2011b; Marcus et al., 2013; Cumming, Henriques, & Sadorsky, 2013). This paper seeks to explain when an investment category within venture capital emerges and the factors associated with its evolution. It leverages longitudinal data including press articles mentioning “venture capital” from Lexis Nexis to analyze the emergence of the cleantech VC category (Da Rin, Hellmann, and Puri 2011; Wright, Pruthi, and Lockett 2005). These articles are analyzed alongside investment data from Thomson One Banker to identify key milestones of investment class emergence and to understand how investment patterns align with or deviate with media attention given to emerging technology classes. Cleantech terminology within media data is used to identify investment stages and the technologies, that dominated the stages of industry development (Hoffman, 1999; Kennedy, 2005; Navis & Glynn, 2010).

By analyzing the historical emergence of the cleantech VC category, this paper shows patterns relevant for emerging investments within the VC industry. Moreover, there is a gap in academic literature showing historical patterns of VC investments (Da Rin, Hellmann, and Puri 2011; Wright, Pruthi, and Lockett 2005). This study adds to the different streams of literature and addresses calls for further research by (1) Gompers and Lerner (2001) who asked for additional research on the interlink between the growth of the VC industry and the respective funded high-tech companies; (2) Wustenhagen and Teppo (Wustenhagen & Teppo, 2006) who requested more work on the emergence of market sectors within VC especially with a focus on cleantech; and (3) Avnimelech et al. (2004) who see opportunities to transfer their life cycle model to different areas of application.

The main research question of this paper is:

How does an investment category within venture capital emerge?

The paper proceeds as follows. It begins with a theoretical background on venture capital evolution and life cycle. It then describes the data and research methods used, followed by results of the analysis from the media database matched with the investment data. It concludes with a discussion on the emergence and evolution of the cleantech venture capital category, the paper’s limitations and several suggestions for future research.

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