The article above shows some of the numbers but it's not quite pointed enough.
The problem with investing in e.g. solar power isn't that it's a dead end technology. Just the opposite. It is a technology that is still rapidly improving on price:performance. But any technology rapidly improving on price:performance, without significant barriers to competition, demands ongoing investment and offers low returns on capital invested. VCs want significantly higher returns than they could get by investing in established manufacturing businesses.
There's too much competition in clean tech. Invent a better mouse trap for the energy sector and in 5 years you'll be competing with Panasonic, General Electric, Siemens, LG, and 4 Chinese companies you never even heard of before.
The same thing happened with the hydraulic fracturing revolution. Competition is too robust to deliver respectable returns, and the capital requirements are high.
"The technological advancements developed by the industry have been the weapon of its own suicide."
There are some non-software businesses that have significant barriers to competition, like medical imaging. But those barriers also hinder capital-lean scrappy upstarts. Invent a better MRI machine, and again you're competing with General Electric, plus you need to go through a regulatory gauntlet before selling your first unit.
After rejecting sectors where competition is fierce, sectors with barriers to competition that also hinder startups, and sectors where people can't/won't pay much (e.g. anything based on serving unmet needs of low-income people), there's not a whole lot left but software businesses and software-mediated platform businesses.
Weathering the Storm: Kleiner Perkins and the Tragedy of Clean-Tech Venture Capital
https://digital.hbs.edu/platform-rctom/submission/weathering...
The article above shows some of the numbers but it's not quite pointed enough.
The problem with investing in e.g. solar power isn't that it's a dead end technology. Just the opposite. It is a technology that is still rapidly improving on price:performance. But any technology rapidly improving on price:performance, without significant barriers to competition, demands ongoing investment and offers low returns on capital invested. VCs want significantly higher returns than they could get by investing in established manufacturing businesses.
There's too much competition in clean tech. Invent a better mouse trap for the energy sector and in 5 years you'll be competing with Panasonic, General Electric, Siemens, LG, and 4 Chinese companies you never even heard of before.
The same thing happened with the hydraulic fracturing revolution. Competition is too robust to deliver respectable returns, and the capital requirements are high.
Chesapeake Energy starts bankruptcy countdown
https://www.marketwatch.com/story/chesapeake-energy-starts-b...
Former EQT CEO: Shale Gas Revolution an ‘Unmitigated Disaster’ for Investors
https://www.oilandgas360.com/former-eqt-ceo-shale-gas-revolu...
"The technological advancements developed by the industry have been the weapon of its own suicide."
There are some non-software businesses that have significant barriers to competition, like medical imaging. But those barriers also hinder capital-lean scrappy upstarts. Invent a better MRI machine, and again you're competing with General Electric, plus you need to go through a regulatory gauntlet before selling your first unit.
After rejecting sectors where competition is fierce, sectors with barriers to competition that also hinder startups, and sectors where people can't/won't pay much (e.g. anything based on serving unmet needs of low-income people), there's not a whole lot left but software businesses and software-mediated platform businesses.