Venture capital (VC), despite conventional wisdom, is not just for the development of advance technologies. Venture capital is defined as investment focused on the development of private, young, and [hopefully] fast-growing companies. The global oil and gas industry has thousands of such companies, but their access to venture capital has not always been strong.

In the early 1980s, VC investments in the energy and industrial-energy field made up more than 20% of all venture capital; by 2000, however, this had fallen to only 1%. The growth of a number of startup sectors was instrumental in both growing the pool of venture capital funds and in attracting their interest. These startup sectors included communications equipment, computer hardware, computer software, biotechnology, medical devices, and Internet-specific investments. The Internet and dot.com boom of the late 1990s clearly garnered a dominant share of the capital.

When the dot.com bubble burst, and with energy prices rising in the 2002 to 2008 period, the energy sector gained a bit of that interest back, rising to roughly 3% of all venture capital in 2007. However, it appears that most of this investment is focused on so-called clean tech (clean technology), rather than the traditional fields of oil and gas development. The oil and gas industry does not represent great promise for venture capitalists.

 

Most new energy technologies take extremely large quantities of capital (often averaging more than $100 million), and typically more than 10 years to full-scale commercialization and profitability.