GCV Analytics defines the energy sector to include oil and gas, renewable energy, energy storage, management and equipment, grid and power supply technologies and energy analytics, among other areas. GCV reported 60 rounds involving corporate investors from the energy sector for the period September 2016 to August 2017. A third of those rounds (21) took place in the US and 12 in Germany.
Most of these commitments went to emerging enterprises from the same sector (36), with the remainder going into companies from the IT (7), services (5), industrial (4) and transport (4), among other sectors.
On a calendar year-on-year basis, total capital raised in corporate-backed investment rounds went up to $887m last year from the $560m allocated in 2015, a 58% decrease. The deal count also increased, rising by 33% from 40 deals in 2015 to 53 last year. This indicates the investment activity of corporate venturers from the sector is beginning to climb out of the 2014-15 trough, when the dealflow plummeted drastically from 76 rounds to 40, along with estimated drop in investment value from $877m to $560m.
The 10 largest investments by corporate venturers from the energy sector span a range of businesses.
Investment professionals from energy corporate investors told Global Corporate Venturing that recent developments in the oil and gas industry have had an impact on the venturing scene in this space, incentivising both entrepreneurs and investors to look for innovative solutions in the quest to reduce operating costs. Renewables, on the other hand, are interesting to investors, albeit still with some unknowns.
Imran Kizilbash, vice-president of Schlumberger Technology Investments, the venturing subsidiary of the oil and gas services group, said a side-effect of restructuring brought about by low oil prices was often greater entrepreneurialism. “Given the staffing reductions in oil and gas companies that are commensurate with the downturn, we have seen many of those talented people developing startup companies targeting specific technology areas. Small oil and gas innovation hubs are developing in places like Houston, Calgary and Denver.” See interview with Kizilbash
On the investors’ side, the economic challenges of the oil and gas industry appear to generate a collaborative spirit among corporate venturers representing major corporations. Kizilbash said: “With the recent reduction in oil prices, the corporate venturing units of some of the smaller independents have become defunct. The current list of CVC groups in oil and gas are essentially large international or national oil companies. Despite the downturn in the industry these CVCs continue to be very active, as are we. There is also greater willingness to collaborate across operator and service sectors at earlier stages, and more CVC units are willing to look at oil and gas investment opportunities.”
This willingness to collaborate is fuelled by the quest for reducing costs in the industry. Geert Van de Wouw, managing director of Shell Technology Venturing, the venturing subsidiary of Anglo-Dutch company Royal Dutch Shell, said: “In oil and gas [innovation], we have always been focused on reducing cost. We have an ongoing cost challenge in the ‘lower for longer’ environment. This means that technologies have to be able to substantially reduce costs for us to be interested. Regardless of whether oil prices may go up – or not – in the future, the lower-for-longer philosophy is a really helpful guide to us.”
Kemal Anbarci, managing executive of Chevron Technology Ventures, the venturing unit of the oil and gas company, noted the importance of Houston and its emerging innovation scene. “The thing we have in Houston, which makes us unique, is the convergence of energy, health and space industry. What we possibly need help in is corporate venture capital funds from both coasts of the US to look into our local ecosystem more closely. In addition to east and west coasts, we have the third [Gulf of Mexico] coast and Houston is the leader here. We want the venture capital from the other two coasts to come to Houston and widen the pool of capital.”
The venturing units of both Chevron and Shell are committed to helping preserve the vibrant innovation scene of Houston – seen as the oil and gas capital of the world – particularly after hurricane Harvey caused serious infrastructural damage to the city and surrounding area. Both units are jointly supporting an energy-related conference, organised by GCV, on November 1. (See interviews with Van de Wouw and Anbarci)
In addition to the oil and gas space, energy investors are naturally focused on the area of renewable energies, which are expected to challenge the role of fossil fuels and perhaps eventually replace them. Van de Wouw said: “Venturing will help us better understand how the renewable energy value chain will evolve over the coming five to 10 years. By spotting disruptive trends early and understanding who is investing in what and why, we gain better insights into what the winning technologies and business models will be in the future. Unlike in oil and gas, it is a lot harder to blueprint ourselves through the future in renewables, as there are more uncertainties associated with the maturation of this relatively young industry. At this stage, it is unclear who the winners are going to be.”
The leading corporate investors from the energy sector were Netherlands-based Royal Dutch Shell, Germany-based power utility RWE Innogy, France-based utility Engie and oil and gas company Total. Japan-based utility Tokyo Electric Power took part in the largest rounds, along with Total and oil and gas company Saudi Aramco. Shell and Engie were also the top investors in emerging energy enterprise.
Overall, corporate investment in energy-focused emerging enterprises went up from 2015 to 2016 in both deal count and total amount invested. According to GCV Analytics data, $994m was invested over 65 rounds in 2016, a 37% rise from the $725bn invested over 59 deals in 2015.
Deals
Energy corporates invested in a number of large rounds, raised primarily by energy, transport and industrial companies, although none of them exceeded $200m in total.
Jera, a joint venture between Japan-based energy utilities Tokyo Electric Power and Chubu Electric Power, paid $200m for a 10% stake in India-based renewable power producer ReNew Power. Founded in 2011 with $200m of financing from investment bank Goldman Sachs, ReNew develops, builds and operates renewable energy plants. In April 2016 it became the first India-based developer to commission 1GW of solar and wind projects. The company currently operates a portfolio of 1.5GW operational wind farms and solar plants in its home country and has a further 1.8GW of projects under construction.
France-based internet-of-things (IoT) technology provider Sigfox closed a €150m ($160m) series E round that featured oil and gas producers Total and Air Liquide, semiconductor and chip manufacturer Intel, cloud computing service provider Salesforce and conglomerate Tamer Group. Total, Tamer and Salesforce Ventures, the corporate venturing subsidiary of Salesforce, participated as new investors. Aliad and Intel Capital, the venture capital arms of Air Liquide and Intel, returned for the round. Founded in 2011, Sigfox has developed an international network that allows IoT devices to connect to the cloud affordably and energy-efficiently.
US-based electric bus manufacturer Proterra secured $140m from investors including energy companies Exelon and Edison Energy as well as carmaker General Motors, in a “series 5” round. General Motors and Exelon invested through respective subsidiaries GM Ventures and Constellation Technology Ventures, but the round was led by an undisclosed participant which provided $40m, while a further $60m was supplied by undisclosed new investors. Proterra has sold more than 300 electric buses to 35 commercial, municipal and university transit agencies in North America.
US-based metal 3D printing technology producer Desktop Metal closed a $115m series D round that featured a range of corporate investors – Saudi Aramco, retailer Lowe’s, home product manufacturer Techtronic Industries, internet technology group Alphabet, which invested through its GV subsidiary, and conglomerate General Electric, which took part through its GE Ventures unit. Desktop Metal has developed two systems capable of printing 3D metal parts. The first, Studio System, is small enough to fit in an office and can be used by engineers to create complex parts.
Germany-based solar film developer Heliatek secured up to €80m in financing, including $46.8m in equity led by Innogy, a subsidiary of energy utility RWE. The series D round included Engie, RWE unit Innogy Venture Capital, chemicals producer BASF and financial services provider BNP Paribas. Heliatek produces an ultra-light organic solar film, HeliaFilm, that is less than 1mm thick and can generate energy on such surfaces as the roof of a car or the exterior of a building.
Germany-based advanced battery technology developer Sonnen closed an $85m funding round featuring General Electric and energy equipment manufacturer Envision Energy. The round was filled out by Inven Capital, the corporate venturing arm of Czech energy utility CEZ, eCapital, MVP, Set Ventures and Thomas Putter, formerly CEO of asset manager Allianz Capital Partners. Sonnen’s systems connect with small-scale renewable energy systems such as solar panels and utilise intelligent software to manage energy use through the course of the day. Roughly 15,000 SonnenBatteries have been installed across the world.
US-based energy optimisation technology provider Advanced Microgrid Solutions (AMS) secured more than $34m in a series B round that included energy utilities AGL Energy and Southern Company. GE Ventures also took part in the round, which was led by investment firm Energy Impact Partners. AMS has built a technology platform, Armada, that combines energy storage and cloud analytics software to optimise distributed energy management for businesses and government customers, increasing energy efficiency and balancing energy resources.
US-based cloud storage service provider Panzura received $32m in series F funding from a consortium that featured Chevron and hard-drive manufacturer Western Digital. Founded in 2008, Panzura provides hybrid cloud storage software to enterprise clients. The technology offers the flexibility, capacity and economics of traditional storage and enables companies to migrate data to the cloud seamlessly.
US-based energy storage system producer Primus Power raised $32m from investors including Hong Kong-listed corporate services provider Success Dragon and platinum producer Anglo American Platinum. Founded in 2009, Primus produces battery-based energy storage systems that can sync with small-scale renewable energy systems, and which are generally used by data centres, the military, energy utilities and mining companies such as Anglo American that require portable off-grid power.
Fulcrum Bioenergy, a US-based developer of technology that turns household waste into fuel, attracted a $30m in investment from oil and gas company BP as part of a strategic partnership. The agreement means BP’s aviation subsidiary Air BP will receive 50 million gallons of low-carbon drop-in jet fuel per year for 10 years. Airline United provided $30m in funding for Fulcrum in June 2015, after its peer Cathay Pacific Airways had invested an undisclosed amount the previous year. Air BP will also be able to provide supply chain services for the blending, certification and distribution of fuel to commercial and military clients. Founded in 2007, Fulcrum has developed a process that converts municipal solid waste into jet fuel and diesel.
There were other interesting deals in emerging energy-focused companies that received financial the backing of corporate investors from other sectors, particularly those based in east Asia.
US-based electric vehicle-charging network operator ChargePoint closed a series G round led by carmaker Daimler at $125m, after raising an additional $19m from investors including industrial product manufacturer Siemens. BMW i Ventures, the strategic investment arm of automotive manufacturer BMW, also took part in the round. ChargePoint runs a network of almost 38,000 chargers for electric cars, buses and trucks, and serves more than 7,000 corporate and public customers.
Naval defence company DCNS and BPIfrance, the public investment bank of France, have joined forces to establish marine renewable energy company DCNS Energies with €100m. The funding round was also supported by Technip Group, an engineering firm focused on the energy sector, and BNP Paribas Développement, an investment subsidiary of financial services firm BNP Paribas. DCNS Energies will be responsible for industrial and commercial development of three marine renewable energy technologies – tidal turbine power, ocean thermal energy conversion and offshore wind energy generated by semi-submersible floats.
Cisco Investments, the corporate venturing vehicle of networking technology provider Cisco, took part in the $75m series D round announced by France-based internet-of-things (IoT) technology developer Actility. Cisco and financial services firm BNP Paribas joined a round that included telecoms groups Swisscom, KPN and Orange, contract manufacturer Foxconn, satellite telecoms company Inmarsat and industrial equipment and appliance maker Robert Bosch. Bosch and Orange invested through their Robert Bosch Venture Capital and Orange Digital Ventures units respectively. Actility supplies low-power wide-area network technology that helps businesses in the logistics, smart building, energy and utilities industries to manage IoT devices.
China-based portable charger rental service Xiaodian raised RMB350m ($50m) in series B funding from investors including internet company Tencent. Fosun Kinzon Capital, an investment arm of diversified conglomerate Fosun, also contributed capital. Incorporated in 2016, Xiaodian has installed portable power banks in stores and offices in a number of Chinese cities.
Trucking logistics services provider Huochebang participated in a $31.8m series B round for China-based online petroleum trading platform Zhaoyouwang. Founded in 2015 and also known as 51zhaoyou.com, Zhaoyouwang operates an online marketplace where businesses can buy or sell diesel, gasoline and kerosene. It also provides financial and logistics services related to petroleum.
Exits
Energy-focused corporate venturers completed only four exits between September last year and August this year. This modest figure is actually quite typical for such business. They tend to require more time to mature, thus making the investment horizon longer and respective holding periods longer for corporate venturers.
There were four reported companies energy-focused corporate venturers have either exited or acquired.
Corporates EDF and Eren recorded an exit from India-based renewable energy developer Acme Cleantech Solutions in a Rs5bn ($73m) investment by conglomerate Piramal Group. Acme has built about 600MW of solar power plants in India. It has another 400MW of projects in construction and has secured power purchase agreements for a further 500MW.
Energy and oil producer China Titans Energy Technology Group acquired Aquion Energy, a bankrupt US-based corporate-backed energy storage technology developer, for $9.16m. Aquion had developed aqueous hybrid ion batteries and system that uses saltwater electrolyte technology to store power generated by renewable energy systems. Investors in Aquion, which was spun out of Carnegie Mellon University in 2009, include power generator Exelon and oil and gas companies Total and Shell.
Unmanned aerial vehicle services provider Airware acquired France-based aerial data provider Redbird, providing an exit to energy utility Engie and its own Commercial Drone Fund. Redbird uses drones to gather information that can be analysed on its cloud platform, and serves mainly the construction, mining and quarrying industries. The company will continue to operate under its own name as well as serving as the European office for US-headquartered Airware.
BP exited UK-based ventilation system developer Breathing Buildings through an acquisition by ventilation product supplier Volution Group for an undisclosed amount. Founded in 2006 through a collaboration between Cambridge University and Massachusetts Institute of Technology with funding from BP, Breathing Buildings designs and manufactures intelligent natural and hybrid ventilation solutions.
Funds
Over the past year, corporate venturers and corporate-backed VC firms investing in the energy realm secured over $2.72bn in capital via 31 funding initiatives, which included 16 corporate-backed VC funds, five new venturing units, eight accelerators and two incubators.
On a calendar year-on-year basis, funding initiatives registered a significant increase last year in both count and total capital raised – $3.86bn over 27 initiatives, up from $694m over 13 initiatives in 2015. This increase evidences the enormous interest in the space from a variety of investors.
A group of executives and entrepreneurs launched a clean energy investment fund called Breakthrough Energy Ventures (BEV) that will collaborate with corporate partners. Bill Gates, co-founder of software provider Microsoft, is chairman of BEV and one of 20 individuals who jointly agreed to provide over $1bn to launch companies as well as to make early and growth-stage investments. Others include Jack Ma, chairman of e-commerce group Alibaba; Mukesh Ambani, chairman of conglomerate Reliance Industries; Hasso Plattner, co-founder of software producer SAP; Jeff Bezos, founder of e-commerce firm Amazon; Richard Branson, founder of conglomerate Virgin; and Masayoshi Son, CEO of telecoms group SoftBank. BEV started investing in 2017 and will focus on the commercialisation of research that helps reduce greenhouse emissions in technologies such as electricity generation and storage, transportation, industrial processes and agriculture.
Ten oil and gas companies announced a plan to establish a $1bn fund to invest in research and startups focused on low carbon emissions technologies, through the Oil and Gas Climate Initiative (OGCI). The OGCI Climate Investments fund will use new technologies owned by member companies and identify ways to cut the energy intensity of both transport and industry. The 10 OGCI member companies – BP, China National Petroleum Corporation, Eni, Pemex, Reliance Industries, Repsol, Royal Dutch Shell, Saudi Aramco, Statoil and Total – together represent a fifth of the world’s oil and gas production. Each of the 10 companies will invest $100m in the fund, which is expected to last for 10 years and complement other investments made in reducing emissions.
Idinvest Partners, a France-based investment firm with several corporate partners, reached the €250m first close of its latest fund. Idinvest Growth Fund II will make growth-stage investments in Europe-based digital, healthcare, energy and smart city technology developers. It is expected to close at between $318m and $424m. Formed by insurance firm Allianz in 1997 as AGF Private Equity, Idinvest was spun out and renamed in 2010 through a management buyout. Limited partners in its past funds include Allianz, media company Lagardère Group and public relations firm Up Group.
Netherlands-based energy company Eneco is preparing to back later-stage companies after two senior hires in the summer. Eneco hired Yme Bosma as its head of corporate venturing, and Joeri Kamp as managing director of ventures and innovation, in June 2016. The moves took place about a year after the company reserved €100m to build up a strategic venture portfolio, with deals including relatively small companies.
US-based industrial product and software producer Honeywell unveiled a strategic investment vehicle called Honeywell Venture Capital and announced plans to provide about $100m to startups through the unit. Honeywell provides a range of products ranging from aerospace systems, chemicals and fuels to safety and monitoring equipment and home building and control technology. It has made strategic acquisitions in the past but done very little in the way of corporate venturing. The $100m figure represents Honeywell’s expectation of the fund’s initial size, and Honeywell Venture Capital will target companies that could grow more quickly through access to the firm’s resources.
The Russia-China Investment Fund (RCIF), backed by sovereign wealth funds Russian Direct Investment Fund and China Investment Corporation, partnered TUS Holdings, the enterprise arm of Tsinghua University’s Science Park, for a $100m vehicle called the Russia-China Venture Fund (RCVF). TUS Holdings and the RCIF are anchor investors in the fund, and are seeking additional institutional investors from both countries to reach the target size. The RCVF may be extended beyond its $100m goal depending on interest and opportunities. RCVF will focus on sectors such as big data, cloud, biotech and biomedicine, new materials, clean energy, smart technologies such as robotics, data transmission and fintech.
Canada-based venture capital firm Pangaea Ventures raised about half the C$105m ($80m) target set for its fourth fund, which included several corporate backers – ceramics product maker CoorsTek, petrochemical product manufacturer JSR Corp, chemicals producers Mitsubishi Chemical Holdings and Sekisui Chemical, consumer goods provider Henkel Corp and semiconductor technology supplier Lam Research Corp. Pangaea makes strategic investments in advanced materials technology developers in the energy, electronics, health and sustainability sectors.
Financial services firm Wells Fargo invested an additional $20m in its $10m cleantech and startup incubator Wells Fargo Innovation Incubator. Launched by Wells Fargo and the US Department of Energy’s National Renewable Energy Laboratory (NREL) in 2014, the incubator aims to accelerate the development of early-stage cleantech, and initially concentrated on technology that could reduce the environmental impact of buildings. Participants are eligible to receive up to $250,000 in non-dilutive funding from Wells Fargo as well as technical assistance from NREL experts and beta testing at a facility run by Wells Fargo or one of the initiative’s strategic partners. The decision to increase the capital available to the fund was made as it widens its focus to take in sectors such as transport, microgrid technologies and sustainable agriculture.
US-based hardware technology startup community Hardware Club achieved a first close of its inaugural fund, with contract manufacturing services provider Foxconn contributing to the €25m fundraising effort. French state-owned investment bank BPIfrance also supplied capital, as did financial services firm Crédit Mutuel Arkéa, venture capital firm Mistletoe and undisclosed additional backers. Hardware Club Fund 1 will support seed-stage hardware startups, with a particular focus on France-based businesses developing smart home technology, healthcare technology, connected transport and smart buildings. The vehicle will invest between €150,000 and €1.5m per deal and the initial capital is expected to last until 2025.
US-based venture capital firm Better Ventures closed its latest fund at $21m thanks to a commitment from insurance provider Prudential’s corporate social responsibility group. The fund’s limited partners include the Schmidt Family Foundation, Treehouse Investments and individuals such as Chris O’Neill, chief executive of cloud collaboration software provider Evernote. Better Ventures generally supplies between $250,000 and $400,000 to early-stage startups, though it also provides follow-on capital in series A and B rounds. The firm focuses on businesses that make renewable energy affordable, but also backs companies in the cleantech, healthcare, human resources and financial services sectors.
People
Jonathan Tudor, a managing director of oil major BP’s corporate venturing unit and a Global Corporate Venturing Rising Star, has accepted “an offer I could not refuse” and joined UK-listed energy utility Centrica as its London-based head. Tudor was originally venture director at Castrol InnoVentures, a division of BP before its reorganisation into BP Ventures over the past year.
Girish Nadkarni, former president of Switzerland-based power and automation group ABB’s corporate venturing unit and member of Global Corporate Venturing’s Powerlist 100 last year, has joined France-based oil major Total to lead its corporate venturing unit. He said he would move to Paris this month as president of Total Energy Ventures (TEV). In turn, Francois Badoual, former CEO of TEV in France, has moved to San Francisco to be president of New Energies Ventures USA.
After Nadkarni’s departure, Grant Allen stepped up to head ABB Technology Ventures and cover the US and Americas and has increased the amount the group invests to about $50m a year, including $10m for venture capital fund commitments and six to eight direct deals.
Andreas von Richter, partner at Ecomobility Ventures (EMV), a multi-corporate venturing firm set up by France-based companies, left to join peer Aster Capital. Aster Capital, formerly Schneider Electric Ventures, backs startups based in Europe, North America and Asia, and has three corporate limited partners, Alstom, Schneider Electric and Solvay, as well as the multilateral European Investment Fund. Before joining EMV, von Richter worked for Saudi Aramco Ventures and before that for General Electric between 2005 and 2013 as a vice-president at its venture capital unit, focusing on the energy, water and transportation sectors.
Susana Quintana-Plaza, who had led innovation activities for Germany-based energy utility Eon, joined industrial conglomerate Siemens. As senior vice-president of technology and innovation at Eon, Quintana-Plaza had led a team making 16 investments through the Eon Strategic Co-Investments (SCI) group since 2014. Philipp Ulbrich was appointed as the new head of Eon SCI and will oversee a budget of more than €100m for scouting, testing, development and the initial launch of new products and business models at the group, as well as its corporate venture capital activities.
Louis Albanese joined investment advisory firm Catamount Wealth Management after more than three years at Saudi Aramco Energy Ventures, the corporate venturing vehicle of oil and gas producer Saudi Aramco. Albanese was an investment manager and principal at the unit, and has been appointed vice-president at Catamount, where his father Louis Albanese is president and managing partner.
Kirk Coburn, founder of US-based, energy-focused Surge Accelerator, joined oil and gas company Shell’s corporate venturing unit, Shell Technology Ventures, in Houston, Texas. He had shut down Surge in April 2016 because of a “lack of industry support,” according to news provider Xconomy. The firm had raised four funds and invested in 43 energy technology startups in its first three years of operation.
