CleanIsrael Network Event April 10 2011: “Carbon Trust – Lessons from commercializing cleantech technologies”
UK Industry experts shared insights on trends & strategies that can help innovative Israeli cleantech ventures meet with success in the global market
In the dynamic and uncertain waters of the rapidly developing cleantech sector, startups will improve their chances of success by navigating carefully and making smart decisions on their commercial focus and business model from the outset. To help its members make the right decisions, CleanIsrael invited experts Jason Eis, heading up Innovation Strategy for the Carbon Trust, UK and Richard Youngman, MD Europe & Asia, the Cleantech Group to share their insights, experience and expertise on the topic. Both speakers indicated that while today’s trends show that currently it is more difficult to obtain funds for new ventures, nevertheless the megatrend bringing cleantech to the mainstream continues. The UK and global markets are expanding and more and more varied sources are seeking innovative cleantech technologies in which to invest.
The event kicked off with opening remarks by Ariella Grinberg, an analyst at ICV, and Gabby Czertok, CEO of HydroSpin and Managing Director of CleanIsrael, who co-hosted the event for the CleanIsrael Network. Next on the agenda was Richard Youngman, MD Europe & Asia for the Cleantech Group, the world’s premier intelligence service on global cleantech innovation, who previously spoke at CleanIsrael in 2008. He gave a brief analysis on how VC funding for cleantech companies has evolved since his previous appearance in 2008. From a peak of US$8 billion in 2008, the bulk of which was invested in large-scale, capital-intensive renewable energy and infrastructure technology companies, the volume of investment has decreased slightly but the number of transactions has grown. Until the market hears reports of success and positive returns on the big cleantech endeavors of the last few years, focus within the sector will remain on resource efficiency projects characterized by secure business models involving smaller investments, partnering and risk-sharing. See graph below.
In addition to cleantech-specific VCs, investments in cleantech are also being made by private, usually low-profile individual and family office investors, as well as by large corporations carrying out technology scouting to broaden their portfolios. Signs of stronger interest from public equity investors are evident in the performance of the Cleantech Index. Youngman concluded that the cleantech theme has gone from niche to mainstream, from renewables to energy efficiency and from California to China in a short space of time: new startups must take
these changes into account when strategizing their market entry.
Source: The Cleantech Group
The primary presentation on commercializing cleantech technologies was delivered by Jason Eis, responsible for setting strategic direction for RD&D programs and planning commercialization support for new ventures at the Carbon Trust, a not-for-dividend company aiming to accelerate the transition to a low carbon economy, through various programs including collaborative RD&D between technology developers and buyers, as well as integrated package of grants, advice and networkingfor cleantech entrepreneurs. A former McKinsey project manager and currently a policy advisor to the British government, Eis shared his insights on the complex and dynamic cleantech playing field, where the rules of engagement are still not clear. He recommends that in order to survive in these market conditions, cleantech ventures must analyze public policies and invest their attention as much in understanding how such policies drive the market demand for their technologies, as they would traditionally focus on the technology itself. Eis gave several examples of cleantech market uncertainty in the form of technology alternatives that are dependent on differing infrastructure which the market will eventually have to choose between, such as electric versus fuel cell vehicles or CHP versus heat pumps. To date countries don’t yet know where they will invest and policies
are often contradictory; effective cleantech companies’ business models recognize and negotiate these issues by supporting and influencing industry and government standards, and by partnering with corporate leaders that have technological staying power and can help them facilitate market access.
Eis described how the Carbon Trust offers a commercial deployment-oriented approach to R&D by bringing together “convened consortia” of large technology buyers in specific subsectors, such as offshore wind, to identify challenges and barriers and define R&D projects oriented toward commercial opportunities, hence reducing the risk to innovators.. These programs are open to innovators across the world, and they are currently defining new program areas for the next 3
years. This experience and knowledge guides the Carbon Trust in the advice it offers to startups while also positioning them to offer more services and funds to new ventures.
The Carbon Trust also offers incubator services to fast track new entrepreneurs across the cleantech “Valley of Death”. Services include grants, broad networking opportunities and advice using a proprietary diagnostic tool. They have assessed 2000 and supported 300 ventures to date and have capacity to scale up by at least 2-3x this volume. For each million pounds Carbon Trust invested, the companies were able to raise 13 million in private funds, and 67% of the ventures they supported achieved commercial investment. Eis stressed the increasing role of corporates in cleantech that startups can engage as part of an effective business strategy.
Eis cited other UK agencies offering assistance and financing such as the Technology Strategy Board and the Energy Technologies Institute. Moreover, public funds for cleantech in the UK will be available in the near future via the Green Deal and the Green Investment Bank, the latter is expected to offer £2-3 billion in public money to leverage up to £15 billion in private funds. Overall the message was that Israeli cleantech ventures would do well to include the UK in their investment and development programs and the Carbon Trust is very interested in investigating Israeli cleantech ventures.
Both speakers indicated that they find Israeli cleantech ventures to be of interest. When asked how he characterizes Israeli cleantech, Richard remarked that Israeli ventures tend to be highly technical, and because the local market is small, most ventures’ route to market involves a challenging cross over a geographical divide at a relatively early stage. To succeed in these tough circumstances, Richard recommends that the entrepreneurs be very realistic in evaluating the time it will take them to get to market and to set business plans accordingly.
Jason’s observations largely concurred; he commented that in many areas of the cleantech sector the role of buildup and achieving maturity in your local market before extending out globally is very significant. This factor creates a tough challenge for Israeli cleantech startups that face more difficulties breaking into foreign markets than those in other high-tech sectors; at the same time, he notes that Israeli ventures tend to be outward- oriented early on relative to ventures in other major markets.
The event drew a large audience with representatives from cleantech startups, venture capital funds, established firms and academia. The atmosphere was positive and the speakers answered many questions and met with several attendees one on one after the presentation. The general presentation was preceded by a closed Round Table session focused on innovation in efficient energy & water management in buildings that enabled CEOs and managers of interested startups, such as TriDiNetworks, Emefcy and Panoramic Power among others to present their ventures to the guest speakers in advance and get some valuable individual feedback and have more detailed discussion. Thanks go to the Carbon Trust and to Israeli Cleantech Ventures for co-sponsoring the event.
By Shelli Zargary,
Shelli Zargary, a veteran marketing and marcom professional with some fifteen years of experience in the Israeli high-tech sector, has joined CleanIsrael to assist with marketing activities.