a mixture of equity and debt financing.
The debt funding—which Day calls “deployment” or “project” capital—covers the initial equipment expenses and future maintenance costs; the investors own the equipment and get paid back via service contracts with the end customer, Day says. The equity investment is separate and follows traditional venture capital terms.
Black Coral has structured investments in Clean Energy Collective and OneRoof Energy in this way, Day says. Other investment firms with similar funding models include Generate Capital and Ultra Capital, he says. Day thinks this approach will start to become more common, “but it remains a rare model so far.”
Lars Johansson, an Element 8 board member, thinks the broader investment community’s interest in cleantech is rebounding. It helps that the scope of the industry has expanded, and in some cases cuts across multiple areas that are hot right now, like financial technology, the Internet of Things, data analytics, and more.
“In the cleantech boom years in the late 2000s, interest was mostly driven by interest in solar and biofuels,” Johansson says. “These days we see much more diverse opportunities across many sectors.”
For example, smart thermostat maker Nest is a consumer tech and connected device play, but it also aims to help make homes more energy efficient—thus a cleantech angle. HoneyComb makes camera-equipped drones that survey farms and kick out data used by farmers to evaluate crop health, help increase crop yields, and lower costs—a sustainability/drone/data play that attracted funding from Element 8 members. And so on.
“Cleantech is no longer a category, it’s more a lens to view the world,” Day argues. “These are attractive as investments if you just stop viewing the world through a 2008 lens. People will recognize that cleantech is back, but cleantech is very different than it used to be.”
