18 November 2013

Know Your Audience (and Its Bite Size), Say Corporate VCs to Cleantech Entrepreneurs

Grant Allen of ABB TechnologyVentures
"Get your stuff together before you meet with us," said Grant Allen of ABB Technology Ventures to an audience of entrepreneurs, investors, and corporate leaders gathered at the offices of Pepper Hamilton in Philadelphia last Thursday. "Do your homework. We're quite clear on our web site what we do. And make sure you have a crisp, compelling script, and a strong, committed management team."

This sentiment was echoed by Michael Smith, head of Constellation Technology Ventures at Exelon. "You need to know your audience," Smith said. "Talk to us like an energy company. We're looking for ways to keep Exelon relevant."

The event, "Energy Giants: Looking for Innovative Investments," was jointly sponsored by Pepper Hamilton and the Cleantech Alliance Mid-Atlantic, and featured Sumit Sarkar of NRG Ventures, in addition to Smith and Allen, on a panel that I moderated.
Michael Smith of Constellation
Technology Ventures

"Large companies aren't good at innovation," Allen offered, "our goal is to be a thorn in the side of internal R&D."

Sarkar suggested that the venture arms of corporations can sometimes be nimbler in response and are constantly scanning for technologies that offer improvements.

Each outlined what they look for in a company and how much they want to invest, their “bite size.”
There was, of course, some discussion about capital "light" companies or technologies, but given the range of their investment thresholds -- from $3M-$250M -- they understand the need for some capital outlay.

While traditional Venture Capital (VC) has been pulling out of the sector, corporate VC (CVC) has picked up some of the slack.

In 2012 for example, according to a recent study, of the total $6.46B investment in the sector, $2.7B came from corporates, up from $2.55B in 2010 and $1.7B in 2006. Q2 of 2013 saw CVC rise to 14% of total venture investment in the sector vs. only 8% in Q1. And 107 CVCs made an investment in the sector in the 1st half of 2013, versus 148 in all of 2012.

Sumit Sarkar of NRG Ventures
Corporate VCs are a little less risk averse than traditional VCs, in part because such companies are full of engineers who can scrutinize a technology's before an investment is made, but there seemed to be consensus that if the technology enables an existing technology perform better, it is going to be worth a look.

All three investors agreed that networking and investment pitch events can serve as a feeder for companies, but having an executive sponsor is best. 

The entrepreneurs in the room, representing everything from energy storage to software that helps increase the efficiency of long-haul truck drivers, seemed to nod in understanding or agreement.

At the cleantech CEO Retreat that I help manage for EY’s Global Cleantech Center this fall, a recurring meme developed around elephants dancing with mice. As small companies (the mice) began to dance with corporates (the elephants) either as strategic partners, customers, or investors.

Some of the concerns for the mice, obviously, were around how not to get crushed while dancing with elephants. But from the elephant side, how can mice get noticed and have something relevant to share?

Hopefully, the panelists at last Thursday’s event helped alleviate some of the stress between species on the dance floor.

(Disclosure: the author is co-founder of the Cleantech Alliance Mid-Atlantic.)