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Innovating to Net Zero: Can Venture Capital and Start-Ups Play a Meaningful Role?

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  • Silvia Dalla Fontana
  • Ramana Nanda

Abstract

We show that patents related to clean energy generation and storage, changes to industrial production, and carbon capture and sequestration—where breakthroughs are seen as being particularly critical to addressing climate change—are more than twice as likely to cite fundamental science than other net-zero emissions patents, highlighting their “deep tech” focus compared with innovation in areas such as energy efficiency, information and communication technologies, and transportation. Interestingly, firms backed by venture capital (VC) have patents that are significantly more likely to cite fundamental science compared with other firms, including in these deep tech sectors. Net-zero related patents granted to VC-backed firms are also three to five times more likely to be among the group of highest-cited patents, indicating the distinctive nature of innovations commercialized by VC-backed firms. However, VC still accounts for a tiny share of all patents related to net zero, and the patenting focus of VC-backed firms has shifted away from deep tech in recent years. We discuss the growing literature on the potential frictions facing the commercialization of science-based deep tech innovations and touch on potential solutions that might enable VC to play a more meaningful role in supporting the transition to net zero in the coming decades.

Suggested Citation

  • Silvia Dalla Fontana & Ramana Nanda, 2023. "Innovating to Net Zero: Can Venture Capital and Start-Ups Play a Meaningful Role?," Entrepreneurship and Innovation Policy and the Economy, University of Chicago Press, vol. 2(1), pages 79-105.
    • Handle: RePEc:ucp:eipoec:doi:10.1086/723236
    DOI: 10.1086/723236
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    Cited by:

    1. Köppl-Turyna, Monika & Köppl, Stefan & Christopulos, Dimitris, 2023. "How to support cleantech start-ups? Lessons from European venture-capital deals," Research Papers 25, EcoAustria – Institute for Economic Research.
    2. Sarah Armitage & Noël Bakhtian & Adam Jaffe, 2024. "Innovation Market Failures and the Design of New Climate Policy Instruments," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 5(1), pages 4-48.
    3. Islam, Md. Monirul & Shahbaz, Muhammad & Sohag, Kazi, 2025. "Financial innovation and clean energy technology development: Policy vs. geopolitics," Renewable Energy, Elsevier, vol. 246(C).
    4. Hege, Ulrich & Li, Kai & Zhang, Yifei, 2025. "Climate Innovation and Carbon Emissions: Evidence from Supply Chain Networks," TSE Working Papers 25-1608, Toulouse School of Economics (TSE).
    5. Fehder, Daniel & Teodoridis, Florenta & Raffiee, Joseph & Lu, Jino, 2024. "The partisanship of American inventors," Research Policy, Elsevier, vol. 53(7).
    6. Arora, Ashish & Fosfuri, Andrea & Rønde, Thomas, 2024. "The missing middle: Value capture in the market for startups," Research Policy, Elsevier, vol. 53(3).
    7. Kurtyka, Oliwia & Mabrouk, Rania, 2025. "Does adoption always follow innovation?," Resource and Energy Economics, Elsevier, vol. 83(C).

    More about this item

    JEL classification:

    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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