By being part of the corporate family but still investing with a clear exit focus, corporate venturing has nothing to do with strategic investments but is instead concerned with influenceon corporate strategy through successful entrepreneurial innovation.
It is very important to derive and execute consistently an investment strategy that is fit for purpose for the fund sponsors and limited partners. In the case of Innogy Venture Capital, the investment strategy is fit for purpose for renewable asset owners.
Innogy’s corporate sponsor, RWE Innogy, is investing billions of euros in renewable heat and electricity generating assets. At the same time, these assets are not yet cost competitive but generate returns based on a favourable regulatory environment.
Technology innovation, therefore, will play a role as a bridge to a sustainable cost competitive situation, where renewables are no longer a special category.
Showing the strategic aspect of a venture capital activity for an asset owner will mean new market segments, new value chains and new business models.
As a result, Innogy Venture Capital is positioned as an early-stage technology risk-taker, an area which is one of the most disliked these days in the venture capital community and, therefore, quite a differentiator for us.
Another advantage for Innogy is the fact that having a renewable asset owner means there is a future user and customer base for Innogy’s portfolio companies and not a competitor as in some traditional corporate venture capital business models.
Finally, adding technological and financial expertise, leveraged through your sponsors, helps to put the odds with regards to the success of the portfolio companies in their favour.
Maybe it is this combination that allowed Innogy to achieve the finalclose of its first fund, Innogy Renewables Technology Fund I, at €115m ($150m) in a combined secondary and growth transaction.
The structure of the deal allows Innogy to expand the portfolio at a time where most technology risk-takers are not willing to invest and valuations are getting to rock bottom.
Innogy sees this as an extension of the traditional corporate venturing model – aligning investors by need rather than by corporate boundary.
The new investor joining RWE Innogy is Conetwork Erneuerbare Energien (CEE), an investment company specialising in renewable energy sources, primarily wind power, the photovoltaic and biogas sectors, biomass-fired combined heat and power plants and near-surface geothermal energy.
CEE’s shareholders are institutional investors based in Germany and family officeswith a long-term interest in the renewables market. CEE is managed by Lampe Corporate Finance, which belongs to Bankhaus Lampe Group.
This type of investment partnership offers a way out of the funding gap for renewable-sector focused entrepreneurs.