The Impact

How to unlock GW of solar capacity

To: The Impact Readers

Howdy 👋

New podcast! You all seemed to love our last show so you’re going to love this one where Max Webster from Version One VC came on to explain how bitcoin mining and solar can enhance the economics of currently backlogged solar farms.

He also mentioned the kind of companies he is looking to fund in the energy space – so make sure to watch until the end to see if you should pitch him your startup!

Also we ran a follow up piece on the hugely popular project finance vs. VC below – this is one highly packed week of content.

Enjoy.

– Swarnav S Pujari

In Your Inbox: The potential value of bitcoin mining with solar; A follow up to Project Finance vs. VC with HG Ventures; Wave Power systems are getting the funding they need with new grants.

📻 PODCAST UPDATES

How Bitcoin Mining Can Catalyze Solar Development w/ Max Webster

Max Webster from Version One VC came on our show Contrarian Climate to explain why he thinks including Bitcoin in every solar system can deliver immense value to existing solar systems.

Basically his entire thesis is summed up as – Bitcoin is the buyer of last resort for excess and unused solar.

In this conversation we dive into the depths of how and why he believes the relationship between the rise of Bitcoin and the falling prices of solar are directly related. Bitcoin in theory could help accelerate the adoption rate of solar.

Check out and subscribe to our Youtube Channel for future episodes!

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📃 POLICY & FINANCE

Project Finance vs. VC, the Middle Ground – Corporate VC, Q&A with HG Ventures

By Daniel Kriozere • is a Business Analyst at Lawrence Livermore National Laboratory and aspiring investor & advisor to clean-tech startups.

The HG Ventures team (Image: HG Ventures)
The HG Ventures team (Image: HG Ventures)

This week Ginger Rothrock, Senior Director of HG Ventures, talks about HG Ventures in relation to the broader investment ecosystem.

HG Ventures launched back in 2018 as the corporate venture arm of the Heritage Group, a multibillion-dollar private Midwest conglomerate in the traditional industrial sectors of construction, environmental services and specialty chemicals.

How does HG Ventures differ from institutional VCs?

As the corporate venture arm of the Heritage Group, we look at leveraging the people, the assets, and the relationships of our operating companies and our R&D group to support STEM entrepreneurs in scaling their business.  We are a group of investing professionals that can bring the knowledge and expertise one would expect of an institutional VC, but also provide access to markets in which we operate.

We have a hybrid model – so, we are a corporate venture arm in that we invest $50M per year off the balance sheet. This puts us in the range of a $350M-$500M institutional fund. Our initial investment is between $1M-$10M, and we have capital set aside for follow-on funding. To date, we have deployed somewhere around $120M. Our investment process is like that of an institutional VC, in terms of timing, termsheet, and deal docs.

Also, we have patient capital, and I am not measured in the same way in which my institutional venture colleagues are measured. My LP is my corporate, The Heritage Group, and the leadership understands the time and capital it takes to get from the lab to commercial in the materials science and sustainability sectors, or even to positive EBITDA. As a result, we as a venture group don’t need to drive liquidity events. We’re a 90 year old industrial company that has historically bought and built companies for life.   Future M&A is also not a focus for our group.

What does HG Ventures offer its portfolio companies? How is this different than institutional VCs?

The main filter we use for investment opportunities is: can the Heritage Group help? So how does HG Ventures help entrepreneurs? How do people add value more than money?

This depends on the company. It can be a deep market insight, such as development of a supply chain or simple pricing intelligence – how much certain chemicals are selling for. We can provide talent resources (from The Heritage Group) if companies are struggling with purity or scale up. Also, we have a bunch of plants and processes – we welcome founders to visit us, and let our engineers look at your drawings for your plants. Pilots are another thing we can provide.

A lot of the companies in our sectors face these first pilot or sales cycle risks. These startup companies are selling their products to industrial corporations, which don’t exactly move at startup speed. Startups need validation from others, so we’ve been a pilot tester and a customer for about a third of our portfolio companies. It’s also a significant part of our Techstars program focused on material science and sustainability. The way HG Ventures operates creates a win-win scenario, for the startups and The Heritage Group.

What is the relationship between The Heritage Group and HG Ventures’ portfolio companies?

While we want to bring lots of value to our startups, we want to act like an independent venture fund. We do not require any business unit sign offs to do investments.

We sit on companies’ boards, and we must be a fiduciary for that company. So, any business relationship between our startups and the Heritage Group is an is an independent transaction that we encourage and support, but do not necessarily get involved with. Some of the startups we have invested in have The Heritage Group as a customer.  Others may be customers of our customers (especially for Heritage Environmental, the largest private environmental services company in the US that manages waste streams for over 1000 industrial clients).

HG Ventures can invest in startups that are adjacent to The Heritage Group business sectors. ;we can also invest in startups that may eventually disrupt our existing business(es).

How do you think about your investments?

We choose investments similar to traditional VC, in that we care about the team, market, and product (typically in that order). We invest in companies where we can help.

The sectors we invest in are: construction/infrastructure, environmental services (waste, circular economy), specialty chemicals, materials (construction, chemicals, synth bio, waste), automation.
Our investments are stage and geography agnostic, with our first check size typically $1M-$10M. Anything that is pre-seed falls more into alignment with our accelerator program with Techstars.

How does HG Ventures think about climate impact?

Our entire company has been focused on sustainability and, relatedly, climate impact since the very beginning. We’ve got a 50-year-old sustainability business, and we’ve been doing zero waste and waste reuse programs long before it was popular – it’s just good business. Our construction business was one of the industry leaders in use of recycled materials.  Our fleets are converting to electric.  So, this new “VC focus” in measuring sustainability and climate impact is something that has been an inherent value of ours since inception.

Is there anything else that you want others to know about HG Ventures?

I’m very excited about this whole democratization of entrepreneurship. So far, we’ve seen universities include entrepreneurial programs for scientists and engineers and an online ecosystem flourish with individuals sharing advice and resources. However, there seems to be a lack of content relevant to the STEM entrepreneur, relatively speaking.

One of our big ambitions for the future is to develop our brand and reputation as a source of capital for these STEM entrepreneurs. We’re starting to figure out how to develop and distribute meaningful resources on topics like ideation, company formation, fundraising, industrial scale up, etc.
It is my intention that STEM entrepreneurs gain easy access to content tailored to their specific questions and needs, and I want us to be a bigger contributor and a positive contributor to this growing ecosystem.

Outlook

As I explore the problem of investing and financing innovation to combat climate change, I am convinced that traditional investment is not the solution. As I wrote about previously, the path forward will include finding a new way to assess and underwrite technology risk to help earlier stage technologies deploy, as well as creating new vehicles/structures for funding.

Corporate VC provides a unique offering, relative to other financing options in the climatetech/cleantech sector. This cooperation between The Heritage Group and HG Ventures enables deployment of capital into solutions that may not normally be a great fit for VC or project finance.

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📃 POLICY & FINANCE

Wave Power Is Approaching Affordability With New Grants Flooding In

By Matt Morris • Matt is an Impact Investment Fellow with Vectors Angel and an independent consultant for renewable energy and cleantech startups.

Funding in the hydro space to harvest wave power is heating up. (Image: CalWave)
Funding in the hydro space to harvest wave power is heating up. (Image: CalWave)
The renewable energy industry is often viewed as a blue ocean market for new technologies aiming to decarbonize the world’s power supply. Recently, some nations have turned their attention to Earth’s blue oceans to add to the world’s energy mix. Last week, the Engineering and Physical Sciences Research Council announced a £7.5 million investment into wave energy collector technologies. This comes on the heels of the United States’ $22 million investment into marine energy R&D and testing infrastructure in December 2020.
 
Waves are one of the most energy-dense renewable sources on the planet, far exceeding the amount of energy that can be generated by solar and wind. Globally, wave energy has a theoretical capacity to create 2 TW of power. By capturing even a fraction of this, wave energy collection systems can become a legitimate, reliable source of power for microgrids, coastal nations, and island nations.

Why does this matter?

  • Waves are predictable are a predictable power supply that follows seasonal trends. Because of this, electricity from waves provide a reliable, flexible renewable power solution, aiding both the community and easing scheduling and optimization constraints for utilities
  • Waves are consistent. Unlike wind and solar, the resource never runs out (so long as gravity exists).
  • Approximately 3 billion people live near the coastline ( < 200 km). Incorporating wave power into the power grids globally can provide renewable power to 50% of the global population

Future Outlook

While the world’s coastlines will not be covered in wave energy collectors (WECs), the addition of such technology provides a stable, consistent renewable resource with little detriment to marine life. Unlike offshore wind, which (at the moment) requires drilling into the ocean floor and erecting massive structures that some people living on the coast may not want to see outside their homes (*cough* Cape Wind), buoyant devices capable of capturing energy without becoming an eyesore may be able to grab more attention and acceptance should WECs obtain competitive LCOEs.

Investment in WEC research at the lab scale is crucial right now, as PacWave, the DoE-funded wave testing site in Oregon, is scheduled to begin construction South Site this summer, and is expected to be completed in 2023. This facility will be larger and deeper than the North Site, which is closer to shore and in shallower waters, allowing for large, high-power rated systems to begin field testing and solidify researchers’ proof-of-concept of mid- and full-sized systems. Successfully technologies emerging from this test site will pave the wave for wider adoption of wave power.

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Writers: Swarnav S Pujari, Daniel Kriozere

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