VC Funding & Success of Clean Tech Startups: Impact of Exogenous Demand Shocks

Abstract: Using a dataset of 51,184 global early-stage venture capital (VC) financing rounds, we examine the impact of exogenous demand shocks on VC funding and success rates in the clean technology sector. Specifically, we investigate the repercussions of the Fukushima Nuclear Disaster (2011) and the Paris Agreement (2015). Our analysis does not provide support for the hypothesis that exogenous demand shocks significantly affect VC funding, success rates or exits of clean tech startups. Instead, our findings suggest quantifiable pricing signals, notably oil and carbon prices, and early-stage fund supply exert a substantial influence on early-stage clean tech investments. Further, our research only partially confirms the popular notion of clean tech startups exhibiting risk, return, and exit characteristics which deter early-stage VC investor interest overall.