Cleantech, Renewables & Sustainability Investment - Deal Flow

It’s encouraging to see creative ideas around fund raising for Cleantech, renewable & low carbon technologies – The Founders Club for example “where dealmakers club together” ... looks good, Par Equity - is this the largest Advisory board gathering of the great and good? There’s even talk of some novel and interesting off-grid (pardon the pun) boutique social stock exchanges emerging too.

But they all want the same thing - post revenue / growth potential businesses to invest in - so supply & demand will be a problem for the smaller players wanting quick returns.
This week also saw a Government announcement about the establishment of a Green Investment Bank operating on a commercial basis and involving both public and private sector capital. £1 billion will be raised from the sale of “mature government-owned infrastructure-related assets” (will we have anything left soon – even Dover Docks appears to be up for sale?). This would be matched by £1 billion of private sector investment ... I haven’t seen the detail yet but I’m sure the latter will be a challenge given the state of Corporate businesses today – and again its targeted on investment into heavyweight large complex infrastructure projects.
So – who’s tackling investment into the start up and innovation side of emerging green technologies?

There’s an ever increasing funding gap between early stage “fresh out of the shed entrepreneurs” and “high growth” ready businesses.

Ultimately this will impact deal flow at maturing business “high growth” stage. Inevitably this will get tighter and more and more investors will be chasing fewer deals... that will be interesting as the tables may turn a little perhaps.

By Debby Lloyd
Managing Director, EcoSearch

Fundraising in Cleantech and Renewable Energy

Here are some sound bites from the trench this week on fundraising challenges faced by “Smallco” (the small company working in renewable energy and cleantech). This is the often forgotten £2m and under brigade – of which there are a fair few out there – comprised of both product and services companies.

Smallco in Entrepreneurland is being hindered by the lack of investor appetite for the smaller deal. As a result they are falling between the crack of “too small for the big investors” and “too big & long term to tie up angel money”.

Everyone wants to invest in green

Smallco has to kiss a lot of frogs at the moment. For the smaller businesses preparing for marathon pitching rounds, this means time away from the day job which can be painful when you still need to grow the business.

With relatively few specialists and lots of new entrants rarely are investors truly knowledgeable about the technologies and complexities of businesses operating in this space. So the fund raising process takes even more time as they grapple with the due diligence, alien concepts, opportunities, issues and longer technology development lead times, research etc.

Most people recognise that there is a lack of mature companies around and the “big deals” are rare. The smaller deal dynamics are inherently resource hungry with an owner manager driven situation, and are also a long way from maturity.

Greed and speed factor is high

It is simply not a natural fit with some of these businesses who need nurturing and mentoring as well as cash. This is not the same cycle as dot.com – there is a lot more upfront investment and a slower burn on return. That doesn’t stop the comparisons being made on the investment journey.

So, for angel style investors who wish to spread risk and become involved in a range of cleantech and renewable deals (because, let’s face it, there is risk involved), I can’t help but think there is opportunity here. A venture fund, formed by a collective pool of small-deal VCs, could work together and provide their expertise and contacts along the way. This would strengthen the likelihood of success and in return would create a natural nursery pool to spin into bigger things … plus there would be a lot of fun along the way.

If this sounds like you, call me to discuss, I’ve a number of clients who fall into this category and could be interested in connecting with you.

By Debby Lloyd.

Managing Director, EcoSearch

Image by Perrimoon