Do venture capitalists really invest in good industries? Risk-return perceptions and path dependence in the emerging European energy VC market

Venture Capital (VC) plays an important role in the commercialisation of innovation. Sectors like information and communication technologies and biotech account for two-thirds of all VC investments. Little attention has been paid to understanding how the venture capital market extends to new industries. Based on a survey of European energy technology VCs, we discuss the factors determining the emergence of a new market sector for VC investments. While there are sizeable investment opportunities, only 2–5% of all venture capital is invested in energy. Three factors can help explain differences between energy and other more popular VC sectors: • the perceived risk (market adoption risk, exit risk, technology risk, people risk, and regulatory risk) of investments in energy technologies • the perceived returns in energy VC investments • in an evolutionary perspective, the maturity of energy as a VC investment sector.