This research aimed to understand VC investment patterns in an emerging technology sector. We examined the emerging cleantech sector and considered the evolutionary influences in the early and expansion stages of the life cycle of the adjoining investment category. The results clearly reflect that VC investment patterns occurred in stages, beginning with early investments and proceeding through commitment and institutionalization stages where the technology class becomes more accepted. Investments during these times align with broader societal trends in this whether the technology responded to climate change, represented a clear market opportunity in the sector and then finally those that represented a technological revolution for the category. They illustrate that investments begin slow and at small amounts, perhaps to provide low-cost learning opportunities to the involved VCs, and then increase in amount and volume over time. Also observed was an overshooting stage where VC investors investments capped out and began to slow, and finally a stabilization stage where investments were diverted into specific types of investments in order to capture value in VC investments. Overall, these results strongly support the work of Caprotti (2012) and Ghosh and Nanda (2010).

This paper provides insights into the evolution of cleantech financing. The joint analysis of press publications and investment data highlights understanding of historical turning points in the sector. A variety of factors such as policy changes, political shifts in direction, investment programs and global trends or phenomena likely underlie these investment patterns and influence market growth and public perception. Deeper knowledge of these factors would enhance understanding of emerging investment categories. The understanding can support in the construction of public measures or supporting frameworks to foster innovation and job creation in desired industries. This paper contributes to different streams of literature, first on the historical emergence of VC investments and second, on the role of VCs in industry development. Additionally we advance the literature on cleantech and sustainable VC (Caprotti, 2012; O’Rourke, 2009; Pernick & Wilder, 2007). Finally, we make a methodological contribution by showing the usefulness of media data as a proxy for VC investments.

The approach used in this paper is one of the few examples of a conceptualized framework for the historical analysis of a VC market (Avnimelech et al., 2004; Avnimelech & Teubal, 2006). It transferred a life cycle model from the national to an industry level and introduced methodology to interpret the changing themes within the VC industry. The VC life cycle model aims to understand the establishment of the cleantech VC category and its environment.. VCs changed the look of the category and ultimately pushed the market towards a dominant design (von Burg & Kenney, 2000). By leveraging the growing environmentalism of the late 1980s and early 1990s and political initiative to support sustainability, VCs were able to help finance an emerging industry. Moreover, through market pull, for example through Germany’s renewable energy feed-in-tariff and on the other hand, and direct investment support like California’s Green Wave initiative, the cleantech category was poised for investment. However, the policy driven support led to an immense growth and “overshooting” (Lerner, 2002) which in addition to the financial crisis reversed the momentum the industry had been experiencing.

Our results call for for thoughtful use of policy instruments in emerging industry contexts as too much policy stimulation can saturate the market. A consistent and reliable regulatory environment that encourages technology-push policies in earlier stages and market-pull policies in later stages with a relatively free acting and without overshooting the financial system would contribute to sustainable industries that not only provide impressive returns for investors but also contributes to sustainable economic growth and job creation. While we believe the combined analysis of the emerging VC investment category for clean teach emergence should transfer to other industries and investment category contexts, we encourage research that validates this assumption. The quantative content analysis can be biased based on the dictionary development and depends upon predefined textual information (Hsieh & Shannon, 2005). Therefore, testing our findings through different quantitative analysis could enrich the overall contribution and strengthen knowledge transferability.


The authors are grateful for the time and support of Martin Kenney, Ramana Nanda, Dimo Dimov and Gavin Cassar as well as anonymous conference reviewers for valuable comments on earlier versions of the paper. The opportunity to present and discuss earlier versions of the paper at SEE Conference 2012 in Denver, RENT Conference 2012 in Lyon and at the ISPIM Symposium 2012 in Seoul helped us tremendously in further refining our argument.

The research team would like to thank the Federal Ministry of Education and Research (BMBF), Germany, for their financial support as part of the research project ‘‘Climate Change, Financial Markets and Innovation (CFI)’’.

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