Getting Green Funding – Innovation Capital Group

Notes from June 17, 2009 meeting. Note: meeting is being recorded and will be available on the ICG128 website.
Panelists:
Christine Sullivan (Moderator) – introduce yourselves and answer the question, what is green.
Jospeh Boyce – of Greentech Media. Focuses on solar clean energy, enabling software – smartgrid and carbon accounting. Globally solar is doing very well – 40% CAGR past 10 years, and $5 billion globally. Solar tipping point vs. coal/oil is coming. A lot of the opportunities for jobs are in manufacturing and engineering. Not a big fan of the term green. Too big, too nebulous. Non-CO2 emitting power generation and transmission is where he focuses.
Emily Reichert – Warner Babcock Institute for Green Chemistry. Chemistry is relevant to everyone’s life. Green chemistry is a way to do chemistry in a way that is sustainable and responsible. Looking at materials, the energy involved, least toxic chemicals. Warner Babcock Institute, founded in 2007. First Green Chemistry program is at UMass Lowell. Wilmington, MA has first for-profit chemistry institute. Works with F500 companies on sustainable chemistry. Warner Babcock has 25 different scientists. A green company makes products or provides services that are more sustainable. Also, companies that are being run in a more green way. Toxic materials have a high overhead, so there is an ROI story. The picture is a lot broader for green than energy alone. It includes sustainability.
Edward Melia – P3 Ventures Group - venture capital firm, investing in early stage companies on the cutting edge. Companies in portfolio have, for instance, patented genetically engineered bacteria; or tidal energy companies. In addition to direct investment, they do private placement. He did some consulting work with the Obama transition team, so they do some work with portfolio companies to access ARRA monies and DOE monies. Defines green as green energy, but there is the same problem as products that claim to be organic. The government or some agency needs to define what a green product is. Right now, it’s a sales and marketing tool.

What does a green company need to do to get green funding?
Joe: a lot of the rhetoric is subsidy driven. The most critical thing to think about is whether the business is viable in a non-subsidized environment. This is critical. Germany is paying a lot of money to sustain the green jobs it’s created. Spain did a lot of power projects and is now rolling-back.
Emily: you need to treeat this as you would any business. You need to have vision. You need to have technologies to create products that people want to buy. Vision and strong technology portfolio.
Ed: three pillars: 1. intellectual capital – patents, etc. 2. financial capital, 3. human capital. One of the best ways to succeed is to have the right people in place. Make sure that you focus on these fundamentals, plus have a great idea.
Emily: they create intellectual property portfolios then take the property out for funding. A lot of the time, their partners are established companies.
Audience questions:
Ed, does your company deal in first stage monies?
Yes, they do finance ideas on occasion.
What time horizon do you look for in stage 2?
3-5 years, they typically exit to larger venture capital companies.
What about scaling into production?
Ed: they help companies with finding large private equity funds.
Joe for solar, typically it’s a construction loan. But in productin, there are power purchase agreements. There are tax advantages to PPA. But th etax equity market has jammed up because the investment banks don’t need to shield profits. In a biofuel plant, you are more likely to get a large private equity investment.
Audience comments:
The number one concern is feedstock. The proven process is key, so people are having difficulty with the $20-$50 million pilot facility. This is a difficult area for venture capitalists to play.
Ed: there is a lot of experimentation and we don’t know what is going to work – distributed wind, microbes, etc.
Is a balance of business people and technologists needed, so they can help bring a technology into market and make th right bets.
Ed: absolutely. Cultural fit is key. Functional expertise is a given, but psychometric assessment is important. You needd a team, the better tools assess an individual in the context of a team and the entrepreneurial environment.
Joe: less planned obsolesence in energy. More you are making a long-horizon investment. it’s more of a long-term dividend model. Solar has a lot of technology coming down the road. In it’s current form, you need to show some proof that the technology works and has been around.
Joe: once your product is developed and scales it is sold into utilities, they don’t want change, they want stability and to make money. But in the early stages, it is more of an inovation model.
For the stimulus money, how do you think it’s going to be utilized and how can it be accessed?
Ed: the answer is not clear right now. It”s clear in some sectors like retrofitting buildings. Money is flowing here, but there is a bottleneck on the workers that are certified. You can’t get the money standing alone, you need to collaborated with other companies and at the state level. The money is following the path of least resistance, so you need to go to established channels like the Commonwealth Fund in MA.
Is there a green bubble and is the stimulus money making a bubble more likely:
Ed: yes, there will be a pop of the green bubble. Right now, money is rushing to the industry. Yes, but don’t see it happening until credit market thawing. It’s a cycle.
Which technology is more at risk?
Emily: what drives business is government and legislation. For instance the REACH legislation in Europe. All ingredients must be disclosed and all toxicological data for each ingredient must be disclosed. In CA, they are following that initiative with Green chemistry disclosure bill. They anticipate their (Warner Babcock) demand increasing.
Audience comment: the sustainable chemistry issue will filter up the supply chain.
Joe: sees green as a macro issue with a 20 year trend.

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One response to this post.

  1. Posted by cr12 on June 16, 2009 at 3:34 pm

    a great company who is looking to raise capital as we speak is http://www.e3bank.com : they operate on a triple bottom line and strive for sustainability. they have a lucrative business model they still caters to environmental fundamentals.

    Reply

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