“Investors first came into cleantech with the mentality of VCs, and within a span of 5 years they lost $25 billion that was not recovered,” says Kevin Loo, Vice-President of China Hi-Tech Fund.
Now, he says, there’s a shift towards approaching cleantech investments less like SAS or tech startups, and more like traditional companies with a focus on teams with a good idea of where and how to commercialise and implement products.
Kevin moved into private equity two years ago and is at the forefront of investing in sectors of greentech which, not long ago, were struggling to turn a profit: “We made an investment in China's largest thermal energy storage company. I realised that the cleantech space in this sector is entering a transition phase where it's not only helping the environment, but also becoming profitable. It’s taking on less government subsidy, despite there being more subsidy.
“There's a general shift in mindset from what is ‘out there’ to ‘what can we capture currently’ and that’s very exciting. For the cleantech space to not lose heat as it did for the past years, it needed that boost in active, commercialised projects – something more concrete.”
With a love for science fiction and a background in applied mathematics and business administration, for Kevin, investing in the green revolution is about conquering our own planet and laying a solid foundation before we enter the next era of space exploration.
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What do you see as high growth potential areas in greentech?
I see smartgrid and microgrid as very high potential.
In terms of infrastructure, most metropolitan areas already have great energy and utility services in place, but as you move into more rural areas, there’s plenty of energy sources but not a lot of infrastructure in place.
Smartgrid is an area we are currently actively looking for portfolios in.
That as well as energy efficiency. In terms of cleantech, one aim is to make the energy source more clean, the other is to reduce the cost and energy used. A lot of buildings in New York have an energy efficiency rating of C, so there’s huge room to improve that.
I’m slightly biased towards energy storage.
It’s very underutilised and there’s huge potential. Half of all energy worldwide is spent on heating, and there’s virtually no coverage on energy storage compared to battery storage, so I think as soon as investors realise and come to terms with just how big the market is, as well as how quickly the market can be captured, there's going to be a huge profit on this.
There’s a shift towards renewable energy projects, wind, solar, and in order to do that, we’ll need a massive amount of energy storage. The focus right now is battery because it’s how energy providers can provide electricity as well as transportation.
Who would you like to receive a pitch from?
We're looking for mature companies that are strategically aligned with our portfolio IP and clientele, which is energy storage and storage management. About 10 years ago we made investments, very early investments, in a lithium-ion battery company, and we built one of the largest large-cell battery factories in Russia.
In terms of IP alignment, our portfolio uses heat pumps to capture energy from the environment, that can be in terms of air, it can be recycled energy, or geothermal, and if any entrepreneur has any IOT, for example, they’ve developed a blockchain marketplace, we’re happy to look at ways where we can expand beyond thermal energy storage and move into a marketplace. If your IP is IOT we can think about ways to bring two companies together and improve energy usage. There are a lot of different ways, and you can be very creative in terms of IP – if you think your IP could interact with energy storage.
If you have clientele that have heating needs, say you’re providing microgrid services to some remote locations, and they have an unstable grid and they’re actually looking for ways to smooth that out – those are the type of clientele that are readily convertible to us.
In the next 3-5 years, we will be looking at microgrid and smartgrid. There’s going to be huge commercialisation of energy generation. We’re also going to be looking at technologies related to photovoltaics. I think the PV industry has been experiencing the morse law – it’s really pumped for a quantum leap in terms of efficiency and cost reduction.
What three tips would you give to green techpreneurs pitching to investors?
The goal of saving the planet and making it a better place for our children is noble but we want to look for entrepreneurs as well as owners that have a good understanding of the market and know how to capture it.
How your product or service is 10-15% better than your competitors is not very convincing to us, because we’ve seen some products being 10-15% inferior to other ones, but if they can sell better, that makes for a better business.
Be very business-oriented when pitching
Make sure the idea of your product is properly conveyed, but ensure that you know how to capture the market as well as how to commercialise and scale, it's very very important.
Have presentable information
We've run into a couple of instances where they had a great team, but when we asked questions they were scrambling through documents. Make sure you come in prepared.
Be very prepared to address the question; ‘how easily can your product or service be leapfrogged?’
If you’re looking to scale, scaling is not a matter of a year or 2, it could be 3-5 years and in that time, the exponential decay of product costs could definitely replace your market share. Be ready to address the leapfrog question. Do you have a great sales team?
If you have a great product, we’re willing to buy your IP, but a great company requires knowing how to sell the product.
What’s the number one reason you think a pitch fails?
It’s simply being underprepared. It happens a lot. Be detail-oriented and organised in your thoughts. You need to have the details sorted and the story has to make sense before someone like us will look further into your documents.
Do you have a favourite quote?
You make the road by walking. If there’s something you want to do or explore without distracting from your main focus, I think you should definitely take that journey.
Is there a philosophy you follow?
Be slightly delusional with the ability to execute. Make a grandiose plan, and engineer solutions and a path there. Even if you don’t get there, you’ll get somewhere pretty close.
What’s your advice to green techpreneurs?
Don't be discouraged if you make a pitch and someone goes ‘isn't this target market too small?’ If you can occupy a niche, that’s a great footing from which you can expand into other areas.
If what you’re doing is below the pay grade of whoever you’re pitching to, it probably isn’t going to end up working anyways. There are always PE firms and VC firms that are happy to be involved in whatever you're working on, so don't be discouraged, keep it up and try to ensure you develop a sellable product and you’ll have success.
………………….if Kevin could teleport himself into his future, he’d be in Singapore making investments in leading-edge technologies; “on the current trajectory most of the tropical and subtropical regions are projected to be barely liveable, and Singapore has always defied logic in that sense. They're building infrastructure that specifically addresses climate issues to ensure it’s liveable and future-proof, that’s somewhere I’d like to see.”
His dream house would be tech-filled, futuristic, and have an energy-efficiency rating of A; “I want something exciting and modern; maybe some water would come from the building to cool the surface.”
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