Enlarge /. Former Energy Minister Ernst Moniz speaks at an ARPA-E event in 2016.
In 2009, the US Department of Energy began funding energy research through the Advanced Research Projects Agency – Energy (ARPA-E) program. The aim was to take more risks than traditional federal efforts and new technologies for renewable energies. Private investment had declined due to slow returns, but the huge societal benefits of clean energy were seen as a justification for government support. The hope was that the funding could expedite the time it would take for new technology to mature before private investors found the technology more attractive.
At least that was the idea. A team led by Anna Goldstein of the University of Massachusetts Amherst found that ARPA-E's first class is now old enough to check in. She and her colleagues looked at a limited sample of 25 startups and found some interesting ways these companies seem to have beaten the competition – and some where they haven't.
Best in class
The 25 startups selected in the first round of ARPA-E were compared to several other groups of companies that were born around the same time. The first group consists of 39 companies that applied for ARPA-E funding and did not receive it, but received an "encouraged" runner-up rating. In the next group are the 70 companies that have received funding from the Office for Energy Efficiency and Renewable Energies (EERE) with corresponding government stimulus spending. Finally, there are nearly 1,200 other clean energy startups that have found funding elsewhere.
Each group was compared based on the number of patents pending and the amount of funding found since then – either from venture capital investors, acquisitions of other companies, or the IPO for equity investments.
In terms of patents, the ARPA-E winners enjoy a significant advantage over the other groups. Around 80 percent of them have successfully applied for at least one patent. Trying to account for launch characteristics such as patent activity prior to ARPA still shows that the winners filed patents at about twice the average rate. This couldn't just be due to the infusion of money. DOE project managers work with the winners and monitor them over time. They can help guide companies through the patenting process. Companies also have an incentive to show progress in order to stay in the program, and patents are a great way to do that.
It gets darker as researchers look for evidence that this has led to success in securing additional funds. The ARPA-E winners were more likely to find funding than the ARPA-E near misses, but the differences with the other two groups of startups are small. When analyzing for specific types of funding, the researchers see some potentially interesting numbers. For example, the ARPA-E winners were slightly more successful in obtaining venture capital, but the difference is within the error bars due to the small sample size.
Enlarge /. So the groups stack on patents (above) and venture capital financing (below).
There are some obvious limitations here. It is possible that some of the differences can be explained by the fact that ARPA-E selects companies that are more likely to succeed than ARPA-E funding causes all of the success. However, as the researchers point out, this would not necessarily affect the program as it would mean that it was good at picking the best startups. On the flip side, it could be that these were riskier startups that would have underperformed without the boost from ARPA-E.
There are also some differences in the type of technology these startups have developed. ARPA-E is designed to focus on technologies that receive less private funding, and it accepts more applicants within specific topics. This first class of ARPA-E applications had a much larger proportion of energy storage startups than the overall group, which for example used more solar and wind startups.
With some signs of positive – but not overwhelming – success for the first group of ARPA-E winners, the researchers say there may be additional ways to maximize the program's impact. They write:
It is not surprising if ARPA-E alone has not fully resolved the “valley of death” problem for innovative cleantech companies, which proved particularly acute during the demonstration phase, ”they write. “Complementary innovation strategies such as increased funding for demonstration and commercialization, in-kind contributions from national laboratories, and targeted procurement programs may be required to allow expansion beyond the R&D phase and to ensure that cleantech innovations can and will use additional private funding Transition to the market.
Nature Energy, 2020. DOI: 10.1038 / s41560-020-00683-8 (About DOIs).