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Cleantech Startup Companies Get an “Innovation Advantage” from Federal Funding

Anna Goldstein

Anna Goldstein

Government funding and support for clean energy technology give startup companies in that field an “innovation advantage,” according to a new paper and a policy brief published by lead author Anna Goldstein, a senior research fellow in the Mechanical and Industrial Engineering Department and director of the UMass Energy Transition Initiative. Goldstein and colleagues found that cleantech startups funded by the Department of Energy (DoE) Advanced Research Projects Agency-Energy (ARPA-E) patented more than similar businesses with other sources of funding.

See media coverage: ScienceDaily, Ars Technica, The Entrepreneur Fund, UMass News Office release.

According to articles released by the UMass News Office and various media outlets, this research, published in Nature Energy, makes the case that funding from the ARPA-E agency has accelerated innovation in clean energy technology. ARPA-E is an energy version of the Defense Advanced Research Projects Agency.

The study revealed that startups with ARPA-E funding in 2010 later patented at twice the rate of other similar firms. This innovation advantage was not shared by cleantech startups with other government funding.

The researchers compared data from 25 startups that received ARPA-E funding with a range of similar companies, including some that applied and were not successful, and some that received funding from another DoE program. They found that startups supported by ARPA-E thrived in terms of patented inventions, but inventiveness alone did not translate into greater success with venture capital fundraising, survival, being acquired, or going public.

“ARPA-E is a fantastic tool for stimulating invention, because [it works] at the interface of cutting-edge science and breakthrough ideas in energy technology,” said Goldstein. “Other programs need to step up as well and help these innovative companies develop their new technologies into commercially competitive products.”

Erin Baker – an MIE professor, associate dean in the College of Engineering, and director of the Wind Energy IGERT – was also an a co-author of the Nature Energy study, as were Laura Diaz Anadon at University of Cambridge and Claudia Doblinger at Technical University of Munich.
ARPA-E was established in the DoE using a portion of funds from the 2009 American Recovery and Reinvestment Act. The agency was intended to accelerate energy technology innovation by funding “high risk, high reward” research in the model of DARPA.

“Startups have a lot of exciting ideas for improving clean energy technology, but they struggle to find private investors who are willing to take a risk on R&D,” Goldstein told the UMass News Office. “Getting an ARPA-E award allows them to take a break from fundraising and advance their technology.”

The authors called for additional government support to help cleantech startups survive the so-called “valley of death,” in which many early stage companies fail for lack of private investment. Policies such as “increased funding for demonstration and commercialization, in-kind support from national laboratories, and targeted procurement programs” can help fill this gap, the researchers noted in their paper. (October 2020)