Matthias David van den Heuvel
This thesis aims to provide novel analyses and data that improve the understanding of the financing of investments in clean technologies. In particular, this thesis explores the role that private and public actors play in supporting young innovative firms. The first chapter of this thesis exploits original data on about 1000 startups that have participated in Venture Kick, the leading Swiss venture competition. We study the circumstances under which venture competitions' certification and cash prize impact startups' future survival and funding prospects. On the one hand, we observe that the certification only has a significant effect on startups whose quality can be more objectively assessed by experts (e.g., hard sciences startups). On the other hand, we find that the competition's cash prize only extends the runway of startups with low running costs (e.g., internet & mobile). These results highlight industry-specific heterogeneity in the effect of early-stage startup support, which bears implications for the design of entrepreneurial programs.The second chapter takes a step back and looks into the role of two prominent actors involved in financing new clean technologies: venture capital (VC) and governments. This essay examines the reasons behind the failure of the VC boom in clean energy startups in the early 2010s. We find that lackluster demand for clean energy products and a lower potential for outsized returns make clean energy firms less attractive to VC than startups in ICT or biotech. Conversely, characteristics such as high-capital intensity or long development timeframe seem to be less important. These findings suggest that the most effective way for governments to improve the attractiveness of early-stage clean energy investments is to implement demand-side policies rather than to provide direct financial support. With demand-side policies in place, governments could then try to plug the remaining funding gaps themselves by targeting startups with limited potential for outsized returns.In the second half of this thesis, the focus shifts onto governments' environmental policies and how they affect private investments in clean technologies. In the third chapter, we develop novel news-based indices of US environmental policy using text-mining techniques. We show that our general environmental policy index and sub-topic indices (e.g., renewables or climate negotiation) meaningfully capture the evolution of environmental policy in the United States. Using these indices, we find that greater salience of environmental policy is associated with increased VC investments in clean technologies and reduced stock returns for high-emissions firms. In the fourth and last chapter, we study the impact of policy uncertainty on private investment decisions. To do so, we construct a novel index of environmental policy uncertainty (EnvPU). This index reveals that uncertainty is pervasive in the history of environmental policy and is often synchronized with election cycles. We find that increases in our EnvPU index are associated with lower VC investments in cleantech startups and higher volatility in green firms' stocks. The findings from Chapters 3 and 4 suggest that, while the increased salience of environmental policy can boost investments, policymakers should ensure that their actions do not exacerbate policy uncertainty and hinder investments towards a low-carbon economy.
EPFL2022
