Study Puts Cleantech’s Gross IRR At An Underwhelming 6.6%

Cleantech returns” is widely seen as an oxymoron. The belief is that nothing much has come from the tens of billions venture capital and private equity funds put into alternative energy and energy efficiency companies since the start of the investment boom.

This isn’t exactly the case, according to a study from Cambridge Associates. Instead cleantech’s gross IRR is presently 6.6% and the value of investments to paid-in capital is 1.2x since 2000, the study found.

In truth, relatively little of this value is fully realized – just 22%. And returns trail the 15.2% gross IRR for a broader basket of investments over the same period, including non cleantech ones.

But it is a suggestion that failures, such as Solyndra, are less the rule than many might think.

To develop its initial quarterly cleantech report, Cambridge looked at 1,222 cleantech investments in 644 private companies. Invested capital in the study totaled more than $21 billion and came from 302 venture capital and 106 private equity funds. Almost three-quarters of it went to U.S. based companies.

“While the sector is young, so far overall clean tech returns have been below what institutional investors expect from their private investments,” Cambridge said in a press release. “This is true particularly after investors pay fund management and incentive fees, which are not reflected in these gross investment-level returns.”

However, final judgment may have to wait several more years until the investments mature and exits do or do not occur.

Photo courtesy of Shutterstock.


  • Curious to compare this data to the broader venture industry rather than a “broader basket of investments”. Looking quickly at a recent Cambridge Associates report ( it appears that venture funds that originated in 2000 experienced an average return of 1.01 since that time, that is significantly worse than the 1.2x quoted for clean tech in your piece. If there are other thoughts on how to make an apples-to-apples comparison, I’d be interested to hear them.

    Also, might make sense to consider breaking out the clean technology market into segments to better understand the dynamics. Technology manufacturers of clean tech products might be better compared to other industrial and energy-related product manufacturing start-ups. The solar technology market may also be a bit of an anomaly given the market impact of chinese dumping practices. Cleanweb companies that include online platforms and solutions might be best compared to a cohort of high tech comparables. Clean tech software firms might be better compared to other energy-related software start-ups.

    I always encourage a fair comparison of these numbers. Maybe they still support the same conclusion, but that will best be seen in the analysis.

  • Good observations. Cambridge did break the industry into segments: renewable power manufacturing; renewable power development; energy optimization; and resource solutions. Sorry for not including these details. Each segment had a positive gross IRR, with renewable power development the best at 11.4%.

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