A recent delegation of UK cleantech companies visited San Francisco with the hope of luring investors to take a stake in their technologies – which are tackling some of the world’s biggest problems
In downtown San Francisco, a room steadily begins to fill with investors. From VC firms, wealthy individuals and business angels to institutional investors, it’s a who’s who of the investment community in California’s thriving cleantech sector. Meanwhile, a nervous-looking gaggle of British entrepreneurs pace the floors, gripping coffee cups and preparation notes.
The investors have gathered to hear the pitches of 15 of the UK’s most promising cleantech companies brought to San Francisco by the Clean & Cool Mission for a week of presentation perfection, investor meetings and media interviews. The pitch to investors is the culmination of weeks of preparation and an intensive few days of practice pitches.
The dress rehearsals were all worth it, it seems. Alexander von Welczeck, managing partner at Clean Power Capital, a VC and advisory firm, says the standard of companies on the Mission was very high. “We’ve been involved in a lot of business development and trade missions for cleantech companies. Comparably, this is a very good one – in terms of both quality and quantity.”
He’s right about one thing: the mix of companies on the San Francisco trip was staggering. From agri-tech to building efficiency software, renewables to biofuels, the diversity on offer is assuredly enough to get any investor salivating. But just what is it that’s whetting the appetites of investors across the pond? Von Welczeck says agri-tech is an area that is ripe for investment. “It’s really technologies that are enabling and making agriculture more efficient, with smaller footprints, less water, less energy and better crop yields. There are a lot of very interesting technologies there,” he explains.
Just as well then that Clean & Cool, which is supported by UKTI, had invited three agri-tech companies to come and tout their wares in the Valley. The first, Azotic, has developed a seed-coating solution that cuts the amount of nitrogen farmers need to use on crops. This drastically cuts costs as well as some of the associated environmental problems, such as contamination to local water supplies caused by run-off from fields. The second, ADFerTech, transforms liquid waste into solid fertiliser and NGB turns biodegradable feedstock into biogas for energy production – thereby reducing harmful greenhouse gas emissions from agriculture.
Peter Blezard, CEO of Azotic, says the biggest challenge is not attracting investors’ attention – he’s not interested in VC money – but developing partnerships with the big nitrogen producers. “They obviously have a vested interest in keeping their factories open. But building more factories is not an option. We don’t want more nitrogen factories when there’s a way to obviate it. Nature can sort this out so we just need to give nature a helping hand – but the vested interests keep putting nitrogen onto crops.”
For those who are currently wishing to court investors, it’s clear that the West Coast is where they predict the money will come from. Tim Kruger, founder of Chess, which is developing technology that generates electricity by using a process that removes carbon dioxide from the atmosphere, says there isn’t the same appetite for ambitious cleantech projects amongst European investors. “There is a VC community in Europe but they can make good money just investing in projects that have already proven and are bringing in revenues. This is fine for little, incremental innovation but if you want to make a big difference then you have to do something disruptive and that means there often isn’t the market right there when you start,” he explains. “Therefore it’s higher risk but it’s also higher potential upside as well.”
But entrepreneurs from the UK are facing stiff competition in the Valley from other nationalities, warns von Welczeck. “It’s fair to say the centre point for accessing growth capital for high-growth, high-tech cleantech companies in the San Francisco Bay area. As a result of that, we see the whole world trying to come here. There are delegations constantly coming from India, China, Germany, Scandinavia, Israel and Spain – as well as the UK. Everybody is trying to gain access to the capital which is essentially readily available here,” he says.
Dr Mike Pitts, lead specialist on sustainability at Innovate UK, who accompanied the Mission to San Francisco, says US investors are increasingly likely to look across the Pond. “We’ve heard people say they’re much more open to UK businesses than they have been. Cleantech is still an area that people think is really important.”
Besides, the big wins for the mission companies weren’t necessarily measurable in pounds and pence, he continues. “There are some companies here that are too early for investment and they’ve come out to learn what it takes to be in that position, which is one of the aims of the Mission for us – to help people get investment earlier than they would have done. There are also some quite late-stage companies, which have already got some investment and are planning their next ones. And then there are some guys who are looking for that investment right now,” says Pitts. “It’s just a case of finding the right investor.”
Green Fuels Research (GFR) is one of the Mission companies that is looking for money in the near-term. After establishing Green Fuels, which sells bio-diesel processors, 12 years ago in his dad’s garage, James Hygate started his new company, GFR, in 2013, with the aim of making sustainable biojet fuel a commercial reality. Biojet fuel is a hot topic at the moment: there’s an international target that says 6% of aviation fuel must be biofuels by 2020. GFR’s aim is to sell its equipment to existing biofuels plants so they can upscale to produce jet fuel. They will also receive an ongoing royalty.
But all of this is dependent on Hygate and co-founder Paul Hilditch, securing some serious investment. “If we want to roll out 50 plants in two years, which is what’s needed to meet the targets, we need $40m (£26m). Investors will get really quick returns but figuring out how to go about raising that money is difficult,” explains Hygate.
Over the course of the week, a topic that crops up regularly is the location of founders: will UK entrepreneurs need to consider moving Stateside if they are successful in securing funding? Hamish Corner, partner at Pennington Manches, a law firm that recently opened its first office in the Bay area, thinks so. “If an investor likes what they see, they might say, ‘we need to see you out here,’ ‘we need you to open an office here,’ or, ‘you need to have people out here’. The personal dimension is so important; quite often investors will say they invest in people and technology, in that order. Companies need to be open to making that commitment.”