Science Wednesday: Green Investing: Venture Capital for the Environment

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About the author: Mary Wigginton is an Environmental Protection Specialist in EPA’s Office of Research and Development. She recently attended an all-day public meeting of the EPA-Venture Capital Community Summit.

image of Mary Wigginton

Meetings are a staple of work life in a large organization, especially government, but they are not my idea of a productive day. A few weeks ago, I broke from my routine of what I consider “real” work and attended an all-day public meeting of senior managers from EPA and members of the “venture capital community.” After the usual opening pleasantries, Hank Habicht, a former EPA Deputy Administrator turned venture capitalist, said something about “a convergence of factors that I haven’t seen in 25 years,…global environmental issues, … unprecedented financial capital even in this economy,…EPA expertise.” The possibility that a “convergence” was happening got my attention. I completely tuned in.

I learned about “the valley of death,” a melodramatic phrase for what happens to technologies that never make it past the design stage. The “valley of death” is when the seed money runs out and nothing is left for scaling up production, distribution, or marketing. This is the stage where, if the developer is fortunate, the venture capitalist steps in.

According to the National Venture Capital Association, venture capital is a long-term—usually ten to 15 years—investment in an innovative company. Several well-known companies got off the ground with venture capital: Microsoft, Apple, Google, FedEx. In the world of finance, venture capital is approximately 0.02% of total invested dollars, but contributes a significant share of jobs and revenue to the economy. In 2006, it accounted for 10.4 million jobs, $2.3 trillion of U.S. revenue, and 18% of the gross domestic product.

Today, technologies for energy efficiency, pollution control and pollution prevention (“clean tech” to venture capitalists) are seen as the next great opportunities for investment. Venture capitalists want to invest in clean tech, and this is where EPA research and development come in. By tapping into EPA’s science and technology expertise, venture capitalists can gain a better understanding of market forces over the next ten to 15 years and snatch the next great environmental technology ideas from the “valley of death.”

As meetings go, this one turned out to be a good investment of my time. I suspect that we all will be hearing more about EPA and venture capital.

Check back next Wednesday for a follow-up post on this topic, and to find out more and keep tabs on how this “convergence” progresses visit: http://www.epa.gov/ncer/venturecapital/

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