A new cleantech-focused investment fund is forming in Seattle.
The Element 8 Fund is emerging from the Element 8 angel investing group (formerly the Northwest Energy Angels) as a way to give individual accredited investors a chance to broaden their portfolios in the sector.
The Element 8 Fund will be a separate legal entity from the angel group, but it will have a lot in common, including people like Lars Johannson, co-chair of the angel group and one of the managers of the new fund. Susan Preston, also on the Element 8 board, is the new fund’s manager.
Element 8 Fund 1 will reflect the mission of the angel group to invest in and help build successful cleantech companies in the Northwest and beyond, Preston said.
She offered scant detail in terms of timing and size of the fund to ensure they remain in line with SEC rules on soliciting investment, Preston said. “As a first fund, it will not be a really large venture-level fund, but will be large enough, we believe, to make a material difference and impact on the companies we invest in,” she said.
Preston wears lots of hats in angel investing and was recently recognized for her contribution to the field with the Angel Capital Association’s Hans Severiens Award. In addition to this new role with the Element 8 fund, she is managing member of the new Seattle Angel Fund, affiliated with the Seattle Angel Conference (but also a separate legal entity). She is also general partner of the CalCEF Clean Energy Angel Fund.
Preston said the Element 8 Fund will be an active fund, meaning investors will be invited to perform due diligence on companies and participate in investment decisions.
Johannson said angel investors betting on early-stage, high-risk companies need to make at least 10 to 15 investments to have a balanced portfolio and a shot at making a decent return. That’s a tall order for many individuals when the typical investment is $25,000 to $50,000 in each company, not to mention the time required to perform due diligence on each one.
“The main benefit that we see with participating through a fund is that as an investor, you can get diversification more easily than when you make your own investments,” Johannson said.
Reflecting on the proliferation of these so-called sidecar funds in Seattle (Alliance of Angels has a seed fund, too), Preston said it’s a sign of the maturation of in the angel investment industry.
“There is a willingness to trust people who have been in this, investing for a longer period of time,” she said. “A lot of people who have sat on the edge and said, ‘Well, I’m interested but I don’t have time,’ are now pretty keen about expanding their opportunity in angel investing through putting money into funds, as well as doing some of their own investing.”
