Cleantech Venture Investors and Energy Policy Risk: An Exploratory Analysis of Regulatory Risk Management Strategies

The energy industry is a typical example of a heavily regulated industry, and particularly large incumbent energy firms have developed significant expertise in non-market strategies (or corporate political activity). New entrants to the energy industry, such as clean energy technology ventures, are also exposed to regulatory risk (and opportunity), but they do not have the means to engage in non-market strategies to a similar extent as large incumbent firms. On the other hand, the success of investments in these firms significantly depends on managing regulatory risk. However, little is known empirically about how venture investors perceive energy policy risk and what they do to manage it.
Based on a survey among 60 venture capital firms in Europe and North America, we attempt to close this gap in the current literature. We build on our survey data to develop a typology of regulatory risk management strategies adopted by these investment firms.