The challenge of any new fund in a new market space is to show both potential as well as returns. Ignite, the UK’s first energy-based impact investment fund, has done both with its first exit coming in mid-2015, two years after it was set up in 2013.
The fund, which won GCV’s Corporate Impact Venturing award 2016 in January, has broader goals than just making quick exits. It had three clear goals. First, to create commercial benefits for the parent company, UK-listed energy utility Centrica, by working with new, disruptive and profitable business models and technologies.
Second, Ignite’s investments and partnerships would give Centrica’s employees the chance to broaden their experience and increase their skills by working as mentors or non-executive directors. Finally, the fund was a way to support social enterprises, which deliver positive outcomes – from increased employment to reduced carbon use – to the communities in which Centrica operates.
Julia Rebholz, Ignite’s managing director and group director of sustainability at Centrica, told GCV Ignite aimed to invest a minimum of £10m ($14m) over its first 10 years, with individual investment ranging between £50,000 and £2m.
She said: “We have developed a model that has already supported 19 enterprises and invested in 11, and we are delivering sustainable financial returns. Our enterprises have supported 10,000 people in the UK, have created 44 jobs and 68 people have been trained as a result of our investments. In addition, we have generated a pipeline of projects for the corporate entity to the value of £100m, and we have completed our first exit with a healthy return.”
This exit involved E-Car Club, a pay-per-use electric car club sold to rental firm Europcar in July 2015. It was the second business Ignite invested in. As well as a taking an initial £500,000 stake in 2014, Ignite worked with the company to define and quantify the social impact of its operations, and provided a non-executive director to offer strategic advice. An employee from Centrica subsidiary British Gas was seconded to help develop sales and customer insight capabilities.
Rebholz said: “The success of this exit from our perspective was that, although we knew we were selling to another large corporate, we actually embedded the outcomes in the deal structure. So E-Car are going to continue to work for the impact outcomes in terms of their mobility agenda and supporting people in communities to have greater access to transport where local funding and government subsidies have been cut.”
Much of Ignite’s work is devoted to ensure that social businesses are ready to receive funding. The organisation’s pre-investment program involves selecting up to 10 enterprises a year and matching them with a suitable mentor from within Centrica.
Rebholz added: “On top of that, we run a residential program in partnership with a business school, where we look at strategy and all the elements of running a business and help them develop a business plan.
“We also provide them with a social impact and outcome specialist who helps them understand the impacts of the activities they undertake, as well as how they are going to measure their business in a non-financial way.”
Rebholz said Ignite was unique in that it is a corporate which is investing for both outcome and innovation. “You will see impact funds and corporate venturing funds but you do not really see corporates blending both.”
The fund had developed at a time when she had been program director of Direct Energy, the North American subsidiary of Centrica, between 2010 and 2012. Following eight years within Centrica UK’s strategy and projects team.
Rebholz said she had been proposing that Direct Energy deal with the challenge of dealing with macro-threats to the business but had been preparing to leave when headquarters said they were looking at what would become the Ignite fund and whether she could help them. She did and this former graphic designer and business analyst has created a picture for how corporate venturing can tackle society’s biggest challenges while remaining relevant to the parent company.