U.S. government becoming clean energy venture capitalist

Michael Giberson

The Wall Street Journal summarizes the news that you already know: the U.S. Department of Energy has become one of the biggest financial forces in the clean energy innovations business.

The DOE hopes to lend or give out more than $40 billion to businesses working on “clean technology,” everything from electric cars and novel batteries to wind turbines and solar panels. In the first nine months of 2009, the DOE doled out $13 billion in loans and grants to such firms. By contrast, venture-capital firms — which have long been the chief funders of fledgling tech firms, taking equity stakes in the start-ups that will pay off if they go public — poured just $2.68 billion into the sector in that time, according to data tracker Cleantech Group.

My gut reaction to this news: it can’t be good.

Of course my gut reaction here my be no more a reliable guide to action than Leon Kass’s repugnace or Michael Sandel’s outrage. Is there data or history available that could calm my troubled nerves? I’m not in principle opposed to government funding for basic or even applied research, but I believe we are well beyond those limits. Here is part of the problem created:

“The existence of an 800-pound gorilla putting massive capital behind select start-ups is sucking the air away from the rest of the venture-capital ecosystem,” said Darryl Siry, former head of marketing at Tesla Motors Inc., a San Carlos, Calif., company that got a $365 million DOE loan in June to build high-end electric cars. “Being anointed by DOE has become everything for companies looking to move ahead.”

The result is that developments in applied clean energy research become focused around the ideas of a handful of people involved in the US DOE’s “deal teams.”


2 thoughts on “U.S. government becoming clean energy venture capitalist

  1. Hey Michael,

    I think that having government money behind industry creates its own ecosystem of opportunity.

    I would actually argue that having a support structure for high cost energy-related entrepreneurship is a very good thing. It allows Angel investors to actually “get in the game” because they can leverage a company to get to “product phase” with a more secure second round financial partner in the waiting.

    I am excited about the new opportunities this creates for me. A little guy 🙂

    Keep up the great work Michael.

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