America has always been reliant on fossil fuels, with over 80% of its energy obtained from oil, coal, and gas. In 2016, CO₂ emissions produced by burning fossil fuels comprised nearly 80% of greenhouse gas emissions –and that’s not to mention their responsibility for 94% of total carbon dioxide emissions. Luckily though, with increases in emissions came cleantech companies, who hope to lead the shift towards cleaner, renewable energy.

However, for these newborn companies, finding funding can be a struggle. For the greater majority of startups in the environmental sector, partnerships are crucial to building and sustaining their companies.

The Venture Ecosystem for Cleantech

To better understand the venture ecosystem, The Rising spoke with Jigar Shah, founder of Generate Capital, a venture firm that manages over $200 million to back cleantech startups. Shah said he started Generate Capital motivated by his own experience growing his solar startup, SunEdison.

The Future of Clean Energy | The Rising

“We didn’t have a go-to investor when we started SunEdison,” Shah told The Rising in an email interview. “Generate Capital is that go-to investor and we want to make sure every entrepreneur that works hard has fair access to project finance for their ideas.”

Today, according to Generate Capital’s website, it currently invests in renewable energy, resources, food, and water, among other sectors. Evidently, it hopes to lead the change in renewable resources.

The Decrease in Venture Funding

Unfortunately, research shows investment in cleantech by venture capitalists has taken a downturn in recent years. A 2016 Brookings report found total VC investment in cleantech companies dropped by 8% since 2011. (That’s after a rise from 2008-2011.)

VCs have long been instrumental in moving the “resource revolution” forward. So with this decline in VC investment, how else can cleantech startups survive in the business world?

The Importance of Partnerships In Cleantech

A study conducted by the University of Maryland, University of Cambridge, and Technical University of Munich found government collaboration led to tremendous growth for cleantech startups. The report showed patenting activity rose by more than 73% when cleantech startups chose to work with the government.

The data doesn’t stop there. A Research Policy study showed that when cleantech startups licensed government-developed technology, financing deals would go up. Not just by a bit either – by some 155%. In perspective, that’s more than twice the amount of financing deals for comparable companies. Evidently, partnerships are essential to the success of cleantech companies.

Laura Diaz Anadon, Climate Change Policy Professor at the University of Cambridge, echoes a similar sentiment to these studies. She told Forbes, “Cleantech that comes from public-private partnerships will be essential for meeting global climate and sustainability goals.”

Conclusions

With the effects of climate change becoming increasingly prevalent, it’s important cleantech startups continue to rewrite the nation’s energy narrative. However, cleantech startups can’t reach their full potential without partnership. Cleantech might be an area where returns aren’t as immediate for investors, but some funds are already on board.

Not too long ago, Al Gore’s Generation Fund raised a $1 billion third fund to fund sustainability startups. Shah’s Generate Capital is another leader in the sustainability venture space. As the space becomes increasingly popular, it wouldn’t be surprising to see more firms enter the space. The general consensus seems to be that money isn’t everything in cleantech, but it sure helps.

But altogether, it’s going to take much more than a couple of funds to truly create a sustainable future. To invoke real change, partnerships must be more open, and it’s clear to see public and private sectors need to work together. Now, it’s just a matter of seeing how things play out and what that will look like in the coming years.