National Grid Partners (NGP), the corporate venture capital arm unveiled by energy supplier National Grid in November, has a remit to invest up to $30m per deal and is expected to exceed its initial allocation of $250m, founder Lisa Lambert has told Global Corporate Venturing.
National Grid hired Lambert as chief technology and innovation officer in January 2018 to oversee its innovation activities, and by November it had officially launched NGP, which operates from a base in Silicon Valley, mixing incubation and business development with CVC investments.
“We don’t have a hard and fast definition of how much we want to invest,” Lambert said. “We can invest as little as $100,000 and I have delegated authority to invest up to $30m per deal. It will depend on the opportunity – if you look at the investments we have made they’ve been kind of in that $5m to $10m range so far.
“If it exceeds $30m we just go to our investment committee and get authorisation for a larger investment. I expect we are going to be actively investing across all stages from seed all the way through to growth stage. Depending on the valuations you need to write a bigger cheque, and we have the latitude to do that.”
Lambert said NGP has an initial allocation of roughly $100m per year for its first three years, and is set to be allocated additional funds once that time has elapsed. It began investing in May and has built up a portfolio that includes grid management software producer AutoGrid, weather-prediction software provider ClimaCell and capital asset management platform SiteTracker.
NGP’s brief involves making returns on its investments but it also has a mandate known as Pathfinder, whereby it can seek out nascent technologies that may not be on National Grid’s radar yet, but which could prove important in future. Sectors such as power generation and transmission are no brainers and cybersecurity and smart vehicles are a given in 2019, but areas such as blockchain, edge computing and even space technology are also under consideration.
Lambert explained: “If you look at the forces shaping our industry, generation and wholesale, transmission and distribution as a percentage of revenue for the utility are all declining, and the market is moving toward metering and retail and services behind the meter – distributed everything from generation to distributed marketplaces, distributed storage and so on.
“Our goal is to help the core business grow its core capability to identify new capabilities where we can extend our business and beat the market before it disrupts us. We want to disrupt ourselves so to speak, by integrating these capabilities into our core operation so we have defensibility and competitive advantage as the market evolves. And it is evolving at a pretty rapid pace.”
Lambert mentioned the growth of companies such as solar installer SolarCity and various operators in areas like electric vehicles or smart appliances as a factor, businesses that begin on the edge but manage to grow exponentially as technology develops and which eventually exist as publicly-listed firms with 10-figure market caps. NGP aims to invest early while it can still get its foot in the door.
“Although the energy sector may not be getting disrupted at the same cadence as say, media, retail, telecom or banking – those are all industries that have been either totally or heavily disrupted – with energy, the disruption has begun,” she stated.
“We know how that movie plays out. They aren’t profitable at the beginning but they start growing and become profitable, and then all of a sudden they’re of substantial size, a lot of these billion-dollar market cap companies that were not even on the radar 10 years ago, and it is then difficult for National Grid or any company to acquire or even partner at that point.
“We have to stay ahead of the curve. While the companies are small, before they start growing and profiting, that is when we want to engage. Or job is to identify those foothold businesses, those new, disruptive market capabilities that are going to have an impact on National Grid, and partner with them early so that when our time comes we are prepared, we have a residential solar solution, a storage solution, an energy trading platform we are leveraging and using in the market.”
Lambert came to National Grid from a managing partner role at venture capital firm Westly Group but had logged 19 years at semiconductor technology producer Intel, most recently as managing director of corporate venturing subsidiary Intel Capital’s software and services group, finishing top of GCV’s 2016 Rising Stars list, and she told us that experience was a priority when hiring for NGP.
“We have got a good mix on the investing side of the organisation,” she said. “For energy and IT domain expertise as well as an extensive track record in investing, which I think is particularly important.
“So many CVCs get that wrong – they promote people from within that don’t have an investment track record and they end up losing money massively. We were not going to go that way. I’ve been doing this a bit too long, a bit smarter than that.”
NGP’s team is heavily weighted toward members with corporate venturing experience in particular, with Kareem Fahmy and Pradeep Tagare both having worked with Lambert at Intel Capital, and Dillon McDonald and Brian Ryan coming from roadside assistance provider AAA’s A3 Ventures subsidiary and data infrastructure software supplier Vector respectively. Experience in private firms is also useful, Lambert said, especially in forging connections, but corporate venturing work was a particular advantage.
“Everybody has at least corporate experience,” she added. “And that is important because the corporate model is different to the private model. It has a strategic mandate whereas the private model does not, and it is important to know how to operate within that context.
“We have to work with the operating businesses and understand their strategies, we need to have good relationships with them and bring deals that are valuable to them. We need a good engagement process with them, and those are all things you do not have to contemplate if you’re a private venture firm but they are very important on the corporate side.
“It’s not easy navigating a big company and you need to be able to do that so we have the right investment strategy and are investing in the right deals, but you also need to be able to do that on behalf of the portfolio. A part of our value proposition is that we are going to bring our corporation to them as a potential partner or customer, so we need to be able to navigate the company, and the more experience you have doing that the better.”
