More Brains

We all know the current VC structure used to fund cleantech companies is broken. One major aspect of this is the more rigorous technical challenges of the cleantech world. The VC structure, formed by funding tech companies, places very little emphasis on the idea and, as such, just isn't capable of accurately assessing the technological challenges and potential of cleantech companies.

If this is true, biotech VCs should face the same challenge as biotech startups face at least similar levels of scientific and engineering intricacies. Looking into the status of biotech VC funding, the trend is starkly similar to cleantech. Looking to move their model into new areas, VCs went crazy in the biotech field and now are scaling back as their startups fail to meet returns under the tech paradigm.

How can VCs change their structure to accommodate cleantech and biotech? The best place to start is at the beginning: pick better companies to fund. To do this VCs need to re-prioritize what they look for in startups. But even with a higher priority on the idea VCs will be in a tight spot. When being exposed to  hundreds or even thousands of ideas a year, how can a VC with possibly no technical background make the right call?

The failure of Cleantech VC

For those looking for VC Cleantech funding, these are rather dark days. While sad, there is a reason VCs are jumping the Cleantech ship: the returns over the past 10 years have really sucked really bad. The question is why? Why have VC IRRs dropped from 40 during the days of tech to <10 in the days of Cleantech?

Although nobody knows the right answer, two things are clear: Cleantech does not appear to be capable of producing the explosive returns that tech companies can and something is fundamentally wrong with the process that VCs are using to decide what companies to fund and what companies to reject. Lets look at both these issues.

Why don't we site Wikipedia

Wikipedia, weather you will admit it or not, it is probably the first place you go when you want to learn something about a new topic you are unfamiliar with. It is hands down the most useful site on the Internet for people looking for knowledge. And as the 6^th most popular website in existence, it is clearly everyone’s go to site for learning. So why is there still a taboo about siting Wikipedia as a source of information?

In short, I think the reason is that people believe that, given Wikipedia’s nature, some of the information on the site may be wrong. Since the site is technically not peer-reviewed, mistakes may carelessly slip through the cracks and be portrayed as truth. This clearly is possible, but I think, as usual, human perception is holding us back. Wikipedia, from my own anecdotal standpoint, is significantly more trustworthy then peer-reviewed journals.