A recent Technology Review column brought up the idea that venture capitalists are now veering back toward investing in smaller-scale, low-risk energy projects as opposed to the large, possibly revolutionary cleantech companies that require great initial capital and structure. Governments have also scaled back in their support for these companies that require large initial costs.
This is a sad but somewhat expected trend. Venture capitalists, at the end of the day, pursue investments with the goal of making even more money. This has never changed. Social and moral responsibility has never been a duty of theirs, so why would it be surprising for them to return to their roots? Unfortunately, ours is a society in which success is heavily influenced by money, and this has been the foundation of our country since its beginning. I would be wrong to attempt to be some beacon of moral and social goodness, since obviously one of the most appealing qualities of entrepreneurship and technology is the possibility of “making it big”; but it is a bit demoralizing that even those who seem to have all the money in the world are not willing to take a bit of risk for good causes like clean energy. This is the problem with the investing side of the puzzle.
Another article a month ago highlighted how the Bay Area entrepreneurial scene has been rife with Groupon clones and the next fun iPhone application, and that basically the motive to change the world is no longer a particularly appealing thought, but making money in some shape or form still has its lure. I am a zealous supporter of cleantech investments and energy startups. In that industry, there is a desire to improve quality of life and to help the world in which we live, but there is so much startup cost involved that software always seems like the easier, risk-averse route. Since software programming will always require only a computer (and possibly some other things), cleantech startups and other hardware companies will have a very difficult time trying to persuade venture capitalists or the government to invest a great deal into their companies. Why go for the long bomb and risk a fourth down when you can run it up the gut for a few yards and the first? It will always be a difference in philosophy, and obviously whenever money is involved at such grand scales, we tend to be more conservative. Not only are VCs scared to invest money, but entrepreneurs themselves are scared to invest that much money and time into projects, since there are easier, quicker, and more conservative ways to pursue the dream of entrepreneurship.
Again, it would be wrong of me to say that all investors and entrepreneurs should be pursuing ideas that can revolutionize the world, help the poor, etc. At the end of the day, you look out for yourself and your loved ones first, and then you start addressing more universal concerns.
I think policy changes will help. Obviously, our government is having quite a few financial problems right now, but one thing that should not be diminished is its support for cleantech startups. I’ll admit that I don’t know that much about cleantech or policy in general, but I think when the government mandates something, people/companies have to listen. Sure there will be uproar (as there was when fuel efficiencies of all cars needed to be at a particular level in a few years), but this is how change can be made when human nature simply is too risk-averse or insufficiently altruistic. There needs to be incentive or necessity for us to pursue growth in these fields, so the government can use its pull to provide that.