Venture competitions could help spur
the cleantech revolution in Switzerland
CIES Policy Brief 7 | Spring 2021
Matthias van den Heuvel
Massive amounts of investments in clean technologies (e.g., solar energy, electric vehicles) are needed in order to limit global temperature rise below 2°C. Experts estimate that the world needs to invest $12.1 trillion globally over the next 25 years. To put this figure in perspective, it would require increasing the current level of investment by $210bn per year, a bit less than Portugal’s GDP. Yet, the current funding of clean technologies is hindered by an unattractive risk/return profile compared to other types of technologies. It takes high amounts of both capital and time to prove the commercial viability of a cleantech startup (Nanda et al., 2015). To tackle this issue, it is crucial to develop a better understanding of novel financing tools available to startups. One of these new financing tools, which we study in our recent research, is venture competitions.
Certification or Cash Prize: The Heterogeneous Effect of Venture Competitions
Paper | 3 November 2020
Gaétan de Rassenfosse and Matthias van den Heuvel
Venture competitions usually reward winners with a certification of their startup’s quality and a cash prize. We model and estimate the impact of these rewards on startup performances using original data on about 1000 startups that have participated in a highly-regarded venture competition. We find that winning in the competition improves startups' performances on average. However, it does not affect all technology types equally. Startups in sectors where quality can be more objectively assessed enjoy a long-term benefit from the certification's effect. By contrast, startups with low running costs and whose quality is harder to evaluate only benefit temporarily from having received a cash prize, with no long-term effect. We also show that the competition's certification provides valuable information to both entrepreneurs and outside investors. This information accelerates the termination of low-quality startups and improves external funding opportunities for high-quality startups. Our results highlight sector-specific heterogeneity in startups early-stage support needs, which bears implications for the design of entrepreneurial programs.
What do investors in electric vehicles technologies want?
CIES Policy Brief 6 | Autumn 2020
Eva Bortolotti, Bettina Kast and Joelle Noailly
With 25% of worldwide emissions due to road transport, the deployment of electric vehicles (EVs), full battery electric vehicles and plug-in hybrid electric vehicles – presents many promises to mitigate climate change. Despite its rapid growth, the market share of EVs vehicle remains low in Europe. Norway leads the EV market with 10% of total vehicle stock, followed by Iceland (3.3%), the Netherlands (1.9%) and Sweden (1.6%) (IEA, 2019). This Policy Brief presents the results of a survey among European cleantech investors examining which policy instruments and design can best mobilize private investments to advance e-mobility technologies.
Policy uncertainty and renewable energy
investments in Romania
CIES Policy Brief 5 | Autumn 2020
Mobilizing private investments for the renewable energy transition requires credible policy support over the long-term. This Policy Brief discusses how Romania’s abrupt policy changes and inconsistent policy signals over the last decade have deterred private investments in the renewable energy sector. The example of Romania provides key policy lessons for other countries engaged in the energy transition.
Investors’ Preferences for E-Mobility Policies:
An Analysis of European Investors
CIES Research Paper 62 | 2020
Despite their potential for urgently needed emission reduction, electric vehicles account for a small fraction of the European vehicle fleet. Large scale deployment of electric vehicles requires considerable investments. While public policies are crucial for leveraging such financing, when ill-designed, they risk being ineffective or might even crowd-out investments. This study sheds light on investors’ policy preferences in the e-mobility sector. Based on behavioural finance literature, I propose that various a priori beliefs and investors’ country-contexts affect their evaluation of e-mobility policies. The policy preferences of European investors are examined through an adaptive conjoint analysis. The results indicate that policy preferences are dependent on investors’ belief in government intervention and the effectiveness of e-mobility technology. Furthermore, the existence of a domestic car manufacturing sector and the size of electric vehicle fleets affect investors’ policy evaluations. These behavioural aspects should, therefore, be incorporated into future policymaking processes.
What Drives Them to Invest in the Sustainable Mobility Transition? Evidence from a Conjoint Experiment on European Investors’ Policy Preferences
CIES Research Paper 61 | 2020
Substantial private investment is required if public policy objectives aim to increase the market share of Electric Vehicles (EVs) and prevent locking-in emissions-intensive development pathways. To maximize the effectiveness of future policies and successfully attract private capital, policy makers need to gain a better understanding of how investors behave, and of how policy design can drive investments decisions. This paper leverages an adaptive conjoint analysis (ACA) method to investigate the policy preferences of 41 European investors affiliated with different investment institutions. Findings reveal that investors’ characteristics as institution type and size of assets under management affect investors’ preferences over different e-mobility policy attributes. Furthermore, this study shows that behavioral factors, namely investors’ a-priori beliefs on the impacts of climate change and the COVID-19 crisis, play a role in determining investors’ policy preferences. By providing an analysis of investors’ behavior, this research can support policymakers to design more effective policy instruments to attract investments in electric mobility during and after the COVID-19 crisis.
Clean Energy Innovation and the Influence
of Venture Capitalists' Social Capital
CIES Research Paper 60 | 2020
This study contributes to the understanding of the enabling role that venture capitalists can play in bringing new innovative technologies to market, with a focus on clean energy technologies. Applying the structural model introduced by Srensen (2007) that allows to control for a potential sorting bias, I estimate the in influence of venture capital investor's social capital on startups' funding and exit performance, with social capital defined as the investors' eigencentrality and constraint within the network of investors. Looking at startups' first venture capital funding rounds in California between 2001 and 2019, this study finds a positive and signicant in influence of the lead investor's eigencentrality on the funding amount raised and the exit probability of the firm. Furthermore, a less constrained lead investor also increases the chance of the startup's eventual exit. But no differentiated effect for cleantech startups compared to other industries is found.