Respondents on our advisory board were loath to pick a small investment of the year.
The nature of venture capital is such that many of these investments will shortly come undone, and so it is perhaps foolhardy to attempt to pick one worthy of the prize. Yet the asset class is also all about picking small investments, so we are keen to make this new category a regular part of our annual awards, selecting deals that seem interesting to our editorial team.
We think the $40m round raised by US-based desalination company NanoH2O last year is a worthy winner of this difficult to pick category, for the company secured new investments from Total Energy Ventures, the corporate venturing unit of the France-based oil major, and BASF Venture Capital, Germany-based chemicals group BASF’s venturing unit.
Such cross-sectoral backing from what appear to be the first corporates to enter the deal is interesting in itself.
Also of note is that the pair of corporate venturing units joined fellow co-lead Keytone Ventures and top-flight Silicon Valley firms Khosla Ventures and Oak Investment Partners in the syndicate, as well as the Clean Energy & Technology Fund of the world’s largest pension fund, Calpers.
The company had previously raised between $65m and $90m in funding, according to Global Corporate Venturing analysis.
Arguably it is a sign of the times in venture capital, and of corporate venturing’s general resurgence, that two corporates came into this interesting deal, with a product in the market, alongside some of the deepest pockets in Silicon Valley, which have already invested heavily.
Financial investors have begun in general to eschew capital-intensive deals, and we believe some corporates will be rewarded for filling in.
The deal was Total’s first investment in water innovation, although it expected to do more. Véronique Hervouet, senior vice-president of investments at Total Energy Ventures, said at the time of the deal: “Water and energy are closely interlinked.
“You need water to produce energy and you need energy to produce water. We are looking for other water investments. Those investments should make sense vis-à-vis our own industrial activities.”
She added: “Some of the applications NanoH2O will develop could be directly relevant for the oil and gas industry.
Desalination is a significant topic in several of our operations today, be it in hydrocarbons or chemical production, desalination is one dimension getting more important and more energy efficient.”
Michael-Jean Nettersheim, an investment manager at BASF, said at the time of the deal: “When BASF Venture Capital invests there is always something of relevance to BASF. This is an interesting technology and we think we can add some value in the company’s plan to expand its production.”
He added: “The technology creates customer value through higher energy savings and it needs to purify less water to achieve the same water quality.
“As you know from reading newspapers shortage of water supply, and especially drinking water, is a big problem. That makes us feel it as an attractive market and as BASF is in the water business, this is something we feel we can assess the potential of.”
We will be watching to see how NanoH2O progresses alongside its corporate backers and will be keen to see if our bet it was the small investment of the year is proved right.
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