MAKING THE CLEANTECH INVESTMENT
Cleantech is still a relatively new business sector. It is innovative by nature, expanding rapidly, and the rules of the game change very quickly. For example, cornbased biofuels switched from multi-billion dollar climate change-busting hero to starvation-fuelling villain within a year, closing down all sorts of exciting new business opportunities in the process. It still may be worth a fortune to the less scrupulous, but for how long?
This can make cleantech a tricky customer for investors. Most innovation companies begin with seed capital sourced from what people in the business call ‘the four f’s’ - founders, friends, family and fools. If that early money is enough to get them to the stage where they can demonstrate something with real potential, they may be able to convince venture capitalists or ‘angel investors’ to provide funds in return for a share in the company. Those investors may also join the company’s board of directors, adding their own experience and expertise into the endeavor.
Beyond that, if the company still has less money than it has earning potential it will either look for: larger venture capitalist investment; some kind of partnership or buy-out from a larger firm; approaching one of the major banks; or even a ‘float’ on one of the various stock exchanges, where the general public can buy shares in what they are doing.
The money is certainly out there for the right cleantech ideas. The recent report from WWF and the Cleantech Group showed how venture capital investment in innovative cleantech companies around the world rose consistently from 2002 to 2008 and peaked at more than US$9.5 billion. The financial crisis dampened some of this enthusiasm, but the upward trend resumed in 2010, and 2011 showed the largest first half-year investment on record, at over $4.7 billion.
But is that kind of investment available here in New Zealand? Many kiwi innovators bemoan a general lack of funding here, with the big money still locked up in property development and a few other traditional sectors. But that doesn’t tell the full story. Sir Stephen ‘The Warehouse’ Tindall’s K1W1 investment fund, to take just one example, has put serious money into what he terms ‘green growth’ companies. These include the Photonz Corporation, which makes the pharmaceutical ingredient EPA out of algae, and Wellington’s Drive Technologies, manufacturers of high efficiency electric motors and fans.
Susie Reynolds, executive director of the Angel Association New Zealand, which supports the country’s angel investors, says it’s all about getting the right idea backed by the right team.
“Angel investors want to make a difference in their community, whether that be local, national or international. They are in it for the rich rewards, and the ability to give back, share their experience and create jobs,” she said. “Cleantech ticks all those boxes.”
Some major banks are also getting in on this action. Westpac was recognised by the Sustainable Business Network as Sustainable Business of the Year in 2011, and has just launched a joint initiative with Meridian Energy to help finance the installation of solar panels on dairy sheds nationwide. The ‘Solar Shed’ package provides a reduced-rate, three-year loan covering the cost of installing an electricity generating photovoltaic system.
Various ‘business incubators’ around the country are also helping to cook up New Zealand’s cleantech ideas, including Auckland’s Icehouse and Otago’s Upstart. These bring together experienced entrepreneurs, academic know-how
“They are in it for the rich rewards, and the ability to give back, share their experience and create jobs. Cleantech ticks all those boxes.”
and financial services to help get new innovative businesses off the ground. New Zealand Trade and Enterprise, New Zealand’s Government-backed international business development agency, supports several of the incubators, but also works to directly support the exporting aspirations of businesses in the sector.
That said, according to the International Energy Agency global fossil fuel subsidies are still running at approximately US$700 billion per year, while worldwide governments are only putting in approximately US$57 billion to support the cleantech revolution. This chimes with the current New Zealand Government, which is focusing on continuing to expand fossil fuel extraction, providing annual subsidies of $46 million.
However, cleantech companies are managing to get a slice of Government investment through programmes like the $200 million New Zealand Venture Investment Fund.
Biotelliga’s Stephen Ford.
Photo: Steven McNicholl