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

13 Pages Posted: 23 Mar 2014

See all articles by William D. Bygrave

William D. Bygrave

Babson College - Arthur M. Blank Center for Entrepreneurship

Julian Lange

Babson College - Arthur M. Blank Center for Entrepreneurship

Ed Marram

Babson College

David Brown

Babson College

Joel Marquis

Babson College

Date Written: March 22, 2014

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.

Keywords: venture capital, clean technology, cleantech, IPO

JEL Classification: M13, G24

Suggested Citation

Bygrave, William D. and Lange, Julian and Marram, Ed and Brown, David and Marquis, Joel, No Financial Cleanup: A Study of Venture Capital Returns on Cleantech IPOs (March 22, 2014). Available at SSRN: https://ssrn.com/abstract=2412959 or http://dx.doi.org/10.2139/ssrn.2412959

William D. Bygrave (Contact Author)

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

231 Forest Street
Babson Park, MA 02457-0310
United States

Julian Lange

Babson College - Arthur M. Blank Center for Entrepreneurship ( email )

231 Forest Street
Babson Park, MA 02457-0310
United States

Ed Marram

Babson College ( email )

231 Forest St.
Babson Park, MA 02457-0310
United States

David Brown

Babson College ( email )

231 Forest St.
Babson Park, MA 02457-0310
United States

Joel Marquis

Babson College

231 Forest St.
Babson Park, MA 02457-0310
United States

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