No Financial Cleanup: A Study of Venture Capital Returns on Cleantech IPOs

Abstract

We studied the financial returns of 52 venture-capital-backed cleantech companies that had IPOs between 2000 and 2010. The median IRR for the first round of venture capital was 26.1% with a range from -10.4% to 140.0%. The median IRR on the third round was 24.5% with a range from 8.1% to 184.6%. We found that the returns on venture capital invested in cleantech companies were not satisfactory because the median returns on our study fell way short of the 80% that venture capitalists expect for successful early-stage investments and the 40% for successful later stage ones. To put it in perspective, the median venture capital return of first round investments in Internet companies was 506.9%; in software companies 124.8%; and computer hardware companies 148.9%. We believe that a median annual return of around 25% is not high enough to sustain venture capital investment at its current level.