This post was originally published at Greentech Media.

Among VCs (and their LP backers), cleantech is on the outs right now.  So says this pretty good article from the past week.  And it reflects what we’ve been saying here in this column for a while — there’s a shakeout underway in the cleantech venture sector, with many generalists abandoning dealmaking in cleantech to head for “easier” returns in social media, and many sectoral specialists having a hard time raising new funds.

But there’s a revolution underway in cleantech, and it’s being led by the entrepreneurs.

In my recent “Cleantech venture capital in 2015″ presentation, I talked about the need for a new truly capital-light style of company-building in the sector (which I whimsically called “Cleantech.VC”), but I’ve seen very little evidence of VCs in the sector “getting” this yet.  One intriguingly different effort is Sunil Paul’s “CleanWeb” approach, but for the most part when cleantech VCs say they’re into “capital efficiency” they’re still focusing on the same old approach that delivered mediocre results during the past decade — backing proprietary technology, major new product development, chasing commodity price curves, not rethinking service delivery models in the sector, etc.  A recipe for spending significant capital to develop great new products, but with slow market adoption.  As I described in the presentation, there will continue to be an important role for this approach to cleantech venture capital, but it will need to be more sectorally focused so VCs can more effectively open up channel partnerships and pathways to the market, and it simply can’t be the only way we build cleantech startups…  Meanwhile, Cleantech.VC style investing doesn’t require a big fund to be effective, so in a time when LPs are generally down on putting money into cleantech venture capital, it might be the way we see the next wave of cleantech venture firms arise.  Maybe.

Just spend some time with the startups in Boston’s Innovation District and Greentown Labs, however, and it starts to become clearer how the next wave of cleantech startups are being launched, even ahead of any Cleantech.VC venture model catching on.  Some of this next wave of startups will be hardware, but many will be software and/or services.  Many will be bootstrapped or at least run very lean until they have actual revenue. “Lean Startup” approaches will be adopted, formally or informally.  Business model innovation will often be stressed over technological innovation.  They will sometimes marry energy-related market opportunities with Web2.0 and social media business models and platforms.  Most strikingly, they will be led by young underpaid entrepreneurs, bringing a heck of a lot of fresh energy and a strong sense of mission to the sector.  And they’ll therefore be able to make a relatively small amount of angel and grant money, and low-rent space, go a long way… I was invited to speak to a group of these entrepreneurs this past week; some free grub and beer for the entrepreneurs, and a few words by me on the current political climate.  The crowd made me feel old… which was awesome and invigorating.

I’ve backed my share of well-staffed cleantech startups with nice headquarters, and I will continue to do so.  I’m certainly not saying that all of cleantech will switch over to this lean cleantech startup model.  But I’m excited to see it start to emerge.  It won’t get much attention from business journalists at first, because these startups won’t be taking in big venture rounds, and they won’t have big P.R. and press outreach budgets.  But the revolution is happening.  Go spend some time in your local cleantech incubator, and with your local university’s energy club.  You’ll see what I mean.


Rob Day

Rob Day is a Partner with Black Coral Capital, based in Boston. He has been a cleantech private equity investor since 2004, and acts or has served as a Director, Observer and advisory board member to multiple companies in the energy tech and related sectors.

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