Published on July 22nd, 2013 | by Guest Contributor2
Three Ways to Attract Cleantech Investment
Below is an excellent, exclusive guest post from Dr Nawal Al-Hosany, the director of sustainability at Masdar. Enjoy!
Without a doubt, the global economic downturn has temporarily slowed efforts to address climate change and advance the technologies necessary to usher in a sustainable, low-carbon future. Limited access to seed capital and venture funding for promising clean tech companies is perhaps the clearest example of this. Access to funding is critical to developing, maturing, and bringing to market new technologies. And while the economic downturn has made investors more cautious, addressing the energy and climate challenge has only become more pressing.
A great deal rests on the ability of private and public sectors to discover technologies that address energy, water, transport, and construction. In the absence, or limited availability, of traditional financing mechanisms, such as funding from banks or through venture capital, clean tech companies have had to become as innovative with their funding as they have been with developing their technology. The following are three alternative funding methods to help companies seek additional investment to make their technology scalable and commercial.
Rather than borrowing money from banks, companies can gain funds directly from individuals looking to invest their savings. The power of the internet has seen the advent of websites such as Kickstarter and Crowdcube, which allow businesses of all types to raise funds. Cutting out the middleman means cleantech companies can gain investment by directly capturing the imagination of investors by showcasing their innovative products and ideas.
Some start-ups have even offered sample products as incentives to invest, giving the saver a tangible link to what they are supporting. B-Squares is a notable success story. The solar-powered electronics business attracted nearly six times the investment they were hoping for on Kickstarter, partly by distributing their innovative products to those who pledged funds.
Whereas the traditional form of investment in start-up companies has been the provision of capital, there are other forms of investment that can be equally beneficial to businesses. For example, mentoring and networking opportunities, to operational costs like legal consultation, office space, or broadband internet are also valuable to new companies.
Prime examples of this are business incubators that help accelerate the development of early-stage companies. For example, the Los Angeles Clean Tech Incubator offers flexible office space and CEO coaching and mentoring, as well as access to experts and academics. It is a non-profit partnership between the public, private, and educational sectors that has provided resources to companies that range from plasma lighting to solar-powered charging docks.
The UK-based Carbon Trust is another example of an organisation that provides non-monetary investment for clean tech businesses. Alongside its wider remit of reducing the carbon footprint of companies, it has a number of partnerships with private sector companies that seek to build and develop a pipeline of low-carbon innovations in the UK. The incubator scheme (part of the Department of Energy & Climate Change (DECC) Energy Entrepreneur Fund), provides support to world-beating technologies that could reduce the UK’s carbon dioxide emissions by developing the technical and commercial case, building a defendable Intellectual Property (IP) position, promoting a strong management team, and helping secure investment.
Business incubators can also create a community between participating companies – providing an opportunity to share best practices. For example, the New York City Accelerator for a Clean and Renewable Economy timetables specific problem-solving sessions for its members, where experts are on hand to provide guidance and ideas.
Prizes & Recognition
Another source of funding that is often overlooked are prizes and recognition. While prizes are competitive, the process of even applying for them helps companies define their business model and determine the best way to promote their technology to external stakeholders. Prize success can validate a company’s technology or product, and the public recognition that follows demonstrates it as a viable, promising investment – hopefully drawing the attention of private investors.
The Zayed Future Energy Prize is one such energy prize for cleantech companies to consider. Launched in 2008 to recognise those who have made significant contribution to sustainability and renewable energy, the $4 million prize acts as a catalyst for innovation, encouraging companies to push their research further. While market forces are traditionally the key drivers for finding solutions to global challenges – such as energy access and climate change – additional catalysts like prizes can incentivise innovation when the market leaves a gap. This is particularly true today, as we have a weakened global economy, which could use an extra boost.
The rapid growth in the numbers of cleantech companies can only be good news as we pursue the next era of technological advancement. Although it is important that great ideas are not stalled by a lack of funding, it is also necessary for cleantech companies to be as innovative in seeking this finance as they are in developing the technologies of the future.
Dr Nawal Al-Hosany is director of sustainability at Masdar, Abu Dhabi’s renewable energy company. She is also director of the Zayed Future Energy Prize; an annual $4 million award which recognises people and organisations that are committed to addressing today’s pressing sustainability challenges.