Gaule: Give us a brief description of your fund.
Adams: The BP Alternative Energy (AE) Corporate Venture Capital Fund was set up in 2006. The team of 11 are based in UK, US, China and India.
We have a strategic mandate but we would not exist if we did not deliver a fnancial return. The team creates deep strategic insights into innovation for the BP group and then shapes options for investments aligned to the AE core businesses of biofuels, solar, wind and carbon capture storage.
The team also looks for longer-term strategic options in car-bon markets, energy effciency, energy storage, water and electric transport. We invest off the balance sheet and by the end of 2010 we will have invested $100m capital with a mandate to invest around $25m per year. We have already gained returns from some fund investments and are targeting frst investment exits from 2012.
Gaule: What have been the most interesting recent deals to illustrate your approach?
Adams: We have done synergistic investments in companies that have strong alignment with our core businesses. We are just completing a deal with a company in the US that has engineering capability for micro-organisms that will accelerate our ability to reduce costs for ligno cellulosic [woody] biofuels. This has been a joint effort with the biofuels business unit where we have a joint development agreement and equity investment happening in parallel.
BP AE Ventures has also invested recently in the Swedish cleantech company, REAC Fuel, which is developing a new method for treating biomass to extract fermentable sugars.
We are doing step-out investments in new areas. One example is GMZ Energy, a spin-out from MIT/Boston College, which is developing advanced thermo-electric materials.
Multiple-end markets exist, such as waste heat recovery, but we have found a superb early market entry in China and have established a subsidiary to bring manufacturing to a scale which will drive costs down and facilitate multiple market entries.
Gaule: What is your current view of the venture capital (VC) market and the role of corporates in maintaining new start-ups?
Adams: There is investment activity related to funds raised a few years ago in the boom times but the clean-tech sector is now facing some real headwinds. The high capital investment requirement and the long development times make these difficult for VCs with information technology models – we have always said clean-tech would be more akin to biotech investing with its long development times. New fundraising is difficult but the biggest challenge we foresee is that exits are very limited.
The market necessitates a different approach and I believe corporates will have to step up and become more active using their scale and global reach. It is also important to recognise the clean-tech revolution is global and not just confned to the west, and the dynamics in China or India are very different from the dynamics in the US.
Gaule: What is the relationship between your team and the core BP businesses?
Adams: A corporate venture team will die if it is not intimately connected to the core business. Our team is seen as a crucial bridge into the innovative entrepreneurial start-ups challenging the status quo across much of the clean energy space.
But the key to the future will be how we build innovative partnerships between smaller dynamic start-ups and the large corporates such as BP. That is how we can bring innovation to scale in the energy industry.
Our primary internal relationships are within the alternative energy division, although we are also closely connected to the corporate technology and strategy teams, and are increasingly being asked to look at opportunities in the oil and gas side of the business.
Gaule: What do you do to relax when you are not managing the corporate relationship and building ventures?
Adams: It always feels an honour and pleasure to be working in an area that I am passionate about and that is so important for the future. But I really enjoy spending time with my family and watching the children grow. My indulgences are road cycling and playing the piano.