Gina Domanig, managing partner at Emerald Technology Ventures, a multi-corporate-backed venture capital firm in Switzerland, Canada, Toronto and Singapore.
“Change has been quite dramatic. Not only the terminology has changed over the past 20 years, but the ecosystem has changed quite dramatically. If I think of 20 years ago, I think it is actually very nice to be considered an impact investor. Back then impact investor meant kind of a charity. So, we called ourselves sustainability and it was very difficult even to get the message out. But the dealflow back then in the early 2000s was very capex heavy, engineering projects looking for someone who cares. Even though today what we do is 50 per cent energy related, back then a lot of the deals were power generation.
So that has changed dramatically. The sector is, even within energy, a lot more capital efficient. I think the entrepreneurs understand capital efficiency a lot better than they did back then and understand the value proposition. Our co-investors have also matured as we have. We have all learned together over the past 20 years.
So, this is really driving returns, which is great, which will attract more capital. And we also see a lot of movement on the sectors that the startups are actually targeting. So, there is a much greater sense of urgency and so that leads us. Over the years we started very much on energy including water. Over the years we added advanced materials, obviously added industrial IT a number of years ago, and now are also looking at sustainable packaging, which is really affecting many kinds of players within the value chains, not just the traditional kind of packaging type converters. But it is also the people upstream and those downstream from them.
So, I think it is important for us to recognise not just where is interesting technology, where it could be a potential solution, but is there really an urgent burning need out there? Is there going to be the market pull, which will enable those companies to be successful?
I think it is super important that people are involved earlier in the financing, whether those are government or regional type of activities or other funds. We have chosen to focus on early commercialisation. We also find that to be the area where we have the largest impact as investors, not just being on the boards and giving them money, but also helping the companies actually scale.
Corporate venturing is not just North America, Germany, UK and Japan, but we have Thai investors and major corporations now – and Turkish. So, you see that corporate venturing is not only rolling out to the smaller size companies, but also to other geographies and to other sectors as well. I think that is good. The community is getting larger.
We have got almost thirty corporates and counting.
I think that that is great news for the startups as well, because it means these corporations, who could potentially be early adopters of their technologies, that could be partners to them, that could be potential exit opportunities for them. It makes it that universe is larger and is really keen to reach out, to and work with those startups. I think that is all very good.
Mark Frayman, BHP Ventures, the venture arm of Anglo-Australian mining, metals and petroleum company BHP
As we start to realise the extent of the opportunity in venture for our sector, for the company, we are trying to do it in a much more systematic and professional way. Mining as a sector is in some extent behind the energy sector for catching up.
Following that blueprint we are utilising the corporate venture vehicle, both to drive innovation in the core, to ensure competitiveness in our core asset, and there is a decarbonising element there in terms of our scope one and two emissions. But also in providing growth, and that is growth in our core business through looking at alternative extraction technologies, as well as exploration technologies, and then growth in the business itself. Some of that ties in with what Gina was saying, and even Barbara [Burger, of Chevron] and new business verticals, and in what the BHP of the future could look like, which could be quite different than the BHP of today in 50 to 100 years, and ventures is a way to seed that. BHP has done ventures transaction before, but this is going about in a much more systematic, arguably more traditional corporate venture form, like some of our peers.
There is lots [of potential areas to invest in around climate]. And it spans all those areas, including some low hanging fruit, like companies that have proven themselves in energy or elsewhere that could come across to our sector.
Some of those are unusual sectors that you would not think would target mining. That is in our first bucket of that strategy that I went through. But mining is quite different to oil and gas, whereby decarbonising and sustainability present challenges but the opportunity set is huge. That includes in our core business, like our copper and nickel business, that are really positively exposed to an electrifying world. Trying to find growth in alternative extraction technologies in those commodities, as well as other what our CEO calls future-facing technologies around the battery supply chain, or even things beyond traditional minerals. That is an area of focus for us, both in exploration and extraction.
Along the lines of some of the climate tech transactions you have seen, we look at things down the value chain, both relevant to our scope three footprint in steel making and looking a lot at green steel.
You get hydrogen technologies, that is a hard one for me. I am looking at recycling technologies and circular economy plays, waste to value plays.
At the moment, the sky is the limit and the pipeline is almost too deep. Which in part, just reflecting on the answer to the question “this time it is different”. It is not just a regulatory push or social push. It was a true business case in this and a real economic case for the company and for the investments themselves.
Geert van de Wouw, chief executive at Shell Ventures, the oil major’s venturing unit
[As to] how is the parent company’s relationship with the venture unit changing, I think it has only strengthened. The trend towards energy transition and climate change in the large international oil companies was set in years ago. I think the covid situation has only accelerated that opportunity.
So, at Shell, we established a new energies business back in 2016 to 2017. And increasingly we see that the things that we have invested in, or that we are investing in, at Shell Ventures are being deployed in that new business, which is really encouraging.
And at the same time, you see tech companies like the Microsofts and the Googles and the Amazons in this world pledging large climate funds and looking for partners. And so that is an opportunity for us to partner and leverage the energy skills that we have in our industry with the same patient capital and long-term vision that some of these tech companies bring in. We are at the end of the day aligned along our zero carbon footprint ambitions. So, it is good to see the tech industry and the energy industry merging in terms of its interest and starting to collaborate.
You have to recognise that we are suppliers to each other. They supply web services to us and software and all kinds of capabilities. And we are a supplier of energy to their data centres. Increasingly data centres by the way, are of course a large consumer of, thankfully, renewable energy going forward, and that is where the ambition is with some of these tech companies.
So, there is a really nice opportunity for collaboration between the two, where on one side we need to digitalise our business and our companies. And on the other side they need to drive towards zero carbon going forward. So that is where both industries meet quite nicely.
David Hayes, chief investment officer at BP Ventures, also an oil major subsidiary
Clearly, we have made some pretty large announcements in terms of what our future direction is going to be and how we want to get there. I think what it does talk to is the pace of innovation is going to have to increase in order to meet those objectives.
So, we were born out of BP’s original alternative energy business back in 2007. What is different now is we are a much bigger commitment in terms of dollars to reposition us from an oil and gas company to an energy company. That is going to require a much more rapid pace of change. You have seen BP Ventures now supplemented with BP Launchpad, which has our growth, scale up engine and also an incubation group that is going to be working much earlier on in the pipeline. I think what you are seeing is not only BP’s commitment to ventures and working with entrepreneurs and startups and bringing innovation from outside in, but also then trying to innovate at a much quicker pace than perhaps we have done traditionally. So, somewhat business as usual for the ventures team, but I think the envelope that we are going to be able to invest in is also broadening.
A few years ago, when we had the New Energy Frontiers model created, we moved from traditional oil and gas and some of the renewable energy stuff into advanced mobility and digital transformation, and those themes will remain. And what we will probably add to that is an increased focus in renewable electro.
I think geothermal is back on the menu after being absent for about 10 or 15 years and I think hydrogen is obviously there. I think to the points that Geert made, this is all in partnership, right? So not only has BP made the commitment for itself to get to net zero, there is a commitment to help people on the planet get there as well. I think for our regions and cities solutions team, you are going to see us looking to find innovative solutions to help others decarbonise as well, whether that is industries, whether that is cities, whether that is regions.
So, to the points made earlier, this cannot be done one company at a time, it is going to have to be in partnership, it is going to have to be through a collaborative approach.
I think it is exciting. We would not be doing this if it were not good business. I think it is good business and the returns are there. Let us face it, we
need to get there. We need to get there soon.
Nikunj Jinsi, founder of Future Capital, ex-International Finance Corporation
Up until about a year ago, I was with the International Finance Corporation where I set up and ran the venture group, where we put to work roughly $1.5bn.
Both as a direct investor, as well as a limited partner into general partner that manage VC funds] that are typically early stage in nature, seed and series A. Around 12 years ago, we started looking exclusively at cleantech at 1.0, a much longer spectrum of renewables.
If you look at the title of this panel, This Time It Is Different, Is It?, I believe the answer is full-heartedly, yes.
What we did at IFC was not just making investments there, direct as well as into the fund managers, but we never gave up while our remit expanded.
The $1.5bn we invested was not all climate technology, but the majority of it covered climate technology. Our remit expanded and we never stopped investing in the broader climate technology space. I think the need for that is much more and much broader within emerging markets than people appreciate and realise, especially post pandemic.
I do not think you have a choice other than looking at rebuilding in areas that will be along the green value chain and in sustainable businesses and industries. Looking at disruptive plays and technologies in disruptive new sectors are going to be critical. So a couple of examples that may not have been included in the earlier era in terms of sectors that one looks at, [are] mobility and logistics.
Some notable ones in a company called Kobo360 in Lagos, Nigeria, which looks at using smart data and big data to apply smartly towards the long-haul trucking industry, such that you will have more efficient uses of cargo.
Similarly, on the east side of Africa, in Nairobi, Kenya, we invested in Twiga Foods, which is a supply chain play for perishable foods. Taking it further, earth observation, which 12 years ago I would have never thought of as being climate tech, let alone it being applied towards emerging markets. We invested into a play called Planet Labs out of San Francisco that has unique data sets that are able to monitor data that are very, very applicable towards both the mining industry and the agriculture industry. It has strong implications on the food security space, which is incredibly important within developing markets. And I can go on and on. There are examples of sustainable package plays, investments we have made out in India. The work is cut out for us.
So, to your point, is there a use for this in emerging markets? Absolutely. There is a use, we never stopped. After I stepped down at IFC, I have been involved in setting up a similar venture focus on climate technologies, which has a European base predicated very much on the European Green New Deal.
Some of the lessons learned from the first round, if you will, are that, especially for emerging markets, the traditional venture model does not lend itself towards successes. You are seeing successes on use cases come up now, but they are very much driven by a whole bunch of stakeholders being involved, normally public market policymakers and regulators being in the right state of mind. Corporate investors like many on this call being properly involved and also other financial instruments being involved in the investment side, as well as having more permanent capital involved well into the cap table and the value chain.
Sustainable portfolio companies
Whitehouse also hosted two sessions in which corporate VC executives introduced portfolio and partner companies advancing sustainability.
BP Ventures and Finite Carbon
Nacho Gimenez, managing director of Europe & Middle East at BP Ventures, introduced Sean Carney, president of Finite Carbon, a US-base forestry carbon offset services company. Founded in 2009, Finite Carbon provides services to help landowners or industrial forest carbon project development and commercialisation services, so landowners can create and monetise carbon offsets and industrial clients can offset part of their carbon footprint.
Gimenez commented on tackling climate change: “We are focusing on decarbonisation activities and helping the world to get to net zero. We need three agents: government, companies and society. We need government to set the regulatory framework. We need companies and investors to invest and develop solutions and finally consumers through their choices to start demanding better things. There are going to be sectors that are going to be hard to decarbonise so changing investments though forestry will be the way to go. This is about including credits in our portfolio on the way to net zero but it is not going to make us reach net zero.”
Carney explained about his company: “What is different today is the advanced technology. Satellites, artificial intelligence and machine learning were complete unavailable to a small business like ours a decade ago and that has changed.” He also explained: “Every year Finite Carbon offsets 2% of carbon emissions in California. We have enrolled three million acres so far. We have developed an online platform for measurements of trees and use satellite images to estimate carbon reduction. It tells landowners how much money they could get for their trees or how to improve an existing forest by planting bigger trees.”
National Grid and Leap
Leap is a startup that helps small-scale producers of renewable energy access the larger grid and its founder and CEO Thomas Folker, who was introduced by Dillon McDonald, vice-president of incubation at energy utility National Grid.
McDonald pointed out the strategic and financial orientation of National Grid as a venture investor: “We are certainly strategic but we are financial first, looking for great new businesses to invest in early.”
Folker described his company’s solution as an aggregator of aggregators and, modestly: “In the worldwide [energy] transition, Leap plays a tiny role. It is a software platform to aggregate and sell power to the wholesale market. Anyone who generates extra electricity can sell it to the grid.”
Chevron Technology Ventures and Carbon Clean Solution
Pawel Konzal, venture executive at Chevron Technology Ventures introduced Aniruddha Sharma, CEO of Carbon Clean Solution, a developer of a carbon capture technology. Konzal commented: “We see the importance of carbon capture, utilisation and storage. There are, however, some challenges to be resolved such as the cost and Carbon Clean is trying to solve exactly that.”
Sharma said he had met Chevron at a previous GCV event and that his company is “looking to develop projects and take them to scale in the next 20 months”. He cited a recently signed partnership with Japan-based industrial conglomerate Marubeni, where the company has launched what he described as a service “on a pay-as-you go basis”. Carbon Clean had also deployed its solution in partnership with consumer goods manufacturer Unilever in one of its plants in India, where captured CO2 is turned into green chemicals that are used to produce cosmetics.
Sharma also added: “We are seeing a massive transition where people prefer to purchase green products rather than grey.”
Caterpillar Ventures and CarbonPoint Solutions
Michael Young, the managing director of Caterpillar Ventures, the venturing arm of industrial machinery producer Caterpillar, introduced Paul Dunn, president of CarbonPoint Solutions.
Young said: “Our core vision is highly aligned to Caterpillar. While it is great to be idealistic, for 95 years our customers have been demanding cost effective and reliable products and they need cost effective and reliable solutions. “That is what we aim to invest in as well.”
Dunn explained that what differentiates his company’s technology is the ability to concentrate CO2 in the carbon capture process and make it economically viable.
Caterpillar Ventures and Synova Power
Young also introduced Van Morris, chief executive of Synova Power, a waste-to-energy technology developer. The former explained the rationale: “The world´s waste problem is getting bigger and bigger. There are so many resources that are being buried in the landfills.”
Morris said his company’s solution revolves around plastics circularity: “Why do we not make new plastics from plastic waste rather than virgin oil? There are two key notions: chemical recycling is going to be a big business and we believe Synova has a technological advantage.”
Morris added that he believes the company’s advantage lies in being able to process “a large percentage of the feedstock of recycle plastic that is out there”.
“Synova has patented a technology that tackles some of the hard to deal with tars that are found in recycling processes.”
HG Ventures and Puraffinity
Another solution designed to clean pollutants is Puraffinity, whose chief executive and co-founder Henrik Hagemann was introduced by Ginger Rothrock, senior director at HG Ventures, the venturing unit of environmental services company The Heritage Group.
Puraffinity has developed a technology to capture chemicals that eliminate water pollution.
Hagemann described Puraffinity’s technology as a “precision tool to capture chemicals in water selectively, as we have seen an increasing need and demand to target specific chemicals, particularly difficult pollutants, using biobased reusable materials.”
Rothrock commented on the strategic fit: “A lot of clients [of the Heritage Group] are dealing with water purification issues. In addition, on the consumer side, more and more consumers are interested in this space.” She characterised this type of solution as a “need-to-have, not a nice-to-have”.
Hyundai Air Mobility and SMAL
Adam Slepian, global head of partnerships at Hyundai Air Mobility, a division of carmaker Hyundai, introduced Ricky Sandhu, chief executive of SMAL (‘Six miles across London’), which designs landing and take-off platforms for the urban mobility aircraft of the future.
Sandhu pointed out there are already some customers in the UK, as the company aims to service not only air taxis but also cargo and delivery drones.
Slepian said: “As Hyundai is now moving into the aviation space and our goal is to create a vertical take off and landing aircraft to move people around cities. We are focused on the future of air mobility. However, Hyundai started historically as an infrastructure company so it is great to have an infrastructure company [like SMAL] in our portfolio as well.“
Denso and Bond Mobility
While flying cars may be far away from full adoption, the residents of scores of cities already have access to smart, alternative modes of transport such as electric bikes.
Bond Mobility offers premium electric bikes and its company’s chief executive, Raoul Stöckle, was introduced by Tony Cannestra, director of corporate ventures at automotive part manufacturer Denso.
Cannestra explained the strategic fit of the investment in terms of opportunities in emerging modes of transportation: “The boom in e-scooter and e-bikes sharing has a place in the overall world transportation structure.
These other modes of transportation are very interesting to us, as they are different from our traditional business and we are exploring what roles we could play in terms of smarter vehicle, infrastructure and so on. We are starting to see and embrace these different modes of transportation.”
Stöckle described the product and service of Bond Mobility as follows: “Premium quality Swiss-design e-bikes with a machine learning system telling us where bikes will be needed around the clock.” He also explained that the company incentivises users to move them via bonus points, driving operating costs down.