The doctoral dissertations of the former Helsinki University of Technology (TKK) and Aalto University Schools of Technology (CHEM, ELEC, ENG, SCI) published in electronic format are available in the electronic publications archive of Aalto University - Aaltodoc.

Financing Clean Energy Market Creation – Clean Energy Ventures, Venture Capitalists and Other Investors

Tarja Teppo

Dissertation for the degree of Doctor of Science in Technology to be presented with due permission of the Department of Industrial Engineering and Management for public examination and debate in Auditorium TU1 at Helsinki University of Technology (Espoo, Finland) on the 16th of June, 2006, at 12 noon.

Dissertation in PDF format (ISBN 951-22-8227-5)   [738 KB]
Dissertation is also available in print (ISBN 951-22-8226-7)


Many factors have emerged for change towards cleaner and more efficient technologies and services: climate change, increasing oil demands, and rising living standards in many parts of the world are putting an ever-increasing strain on the environment. Recently, these drivers have fueled the formation of a clean energy venture capital market where both independent venture capitalists (VCs) and corporate venture capitalists (CVCs) have invested in clean energy start-ups. Financing of clean energy market creation is the focus of this dissertation. The dissertation contributes to several bodies of literature in the area of entrepreneurship, new industry creation, corporate venturing, and venture capital research. The dissertation uses a grounded theory approach. The study is guided by three data collection approaches with an emphasis on the first two. First, interviews with European and North American VC and CVC firms that have invested in the clean energy sector were carried out. Second, a clean energy venture financing survey that consisted of qualitative, essay-format questions and some quantitative questions was carried out. Third, interviews with clean energy stakeholders were carried out in order to gain a better understanding of the emerging sector.

The research results consist of three main findings. First, the research results suggest that clean energy ventures face the following three main entrepreneurial challenges: financing, market education, and growth management. A further study of three clean energy industry categories revealed additional challenges that varied according to the industry development stage. Second, the results demonstrate that, from a venture capitalist perspective, clean energy venture risk characteristics can be divided into two groups: generally recognized risk characteristics and cognitive risk characteristics. The identified generally recognized risk characteristics were market demand and adaptation, incompatibility with the VC model, technology, regulatory control, and exits. The four cognitive risk factors were investment outcome history, VC risk preferences, investment domain familiarity, and venture framing. Third, the study developed a model showing that parent firm organizational culture affects the performance of a CVC fund. The effect of the organizational culture is moderated by risk-taking practices in the parent firm's decision-making process and the parent firm's skills in managing, measuring, and compensating fund success.

The main contribution of this dissertation is in identifying theoretical models that explain the clean energy venture entrepreneurial challenges, how VCs view clean energy ventures from a risk perspective, and how the organizational culture of a firm affects its CVC activity. The findings of the study suggest several managerial implications to policy makers, corporations planning to launch CVC fund activities, venture capitalists, and clean energy ventures. The findings and limitations of the study suggest several avenues for future research. First of all, the developed models and propositions should be quantitatively tested and further refined. Furthermore, the effect of the parent firm's organizational culture on the CVC fund performance warrants further investigation, preferably in some other than clean energy context. In addition, future research could explore the two other clean energy venture entrepreneurial challenges, growth management and market education, in more detail. The role of institutions and energy policy in the formation of clean energy markets, especially from the perspective of clean energy ventures and investors, would also be worth exploring in future research.

Keywords: venture capital, cleantech, clean energy, entrepreneurship, sustainability

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© 2006 Helsinki University of Technology

Last update 2011-05-26