Surviving the 'Valley of Death': how to find funding to navigate deep waters
Greenbackers' Robert Hokin links up market players to keep greentech firms afloat
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“We live and breathe and find water in the ‘Valley of Death,’ says Greenbackers Investment Capital Managing Partner Robert Hokin. “We're pathfinders in that area and we're very passionate about catalysing investment needed to make things happen to build a more sustainable society.”
Robert is a trailblazer. Once an enthusiastic skipper for tall ships, he’s now thrown his energy into finding funding to help greentech companies get through the ‘Valley of Death’ – it’s the infamous part of the journey where businesses often run out of initial funding and hit roadblocks or sink if they fail to commercialise fast enough.
The Chicago-born sailor-turned-technologist-turned-corporate troubleshooter says he was looking for "the next thing” in 2005 when he “crashed headlong into cleantech” – and he’s been at it ever since.
In the past 15 years, he saw cleantech grow from “an alternative asset class that’s kind of nice to have” to an investment opportunity that’s front and centre: “There's pressure on boards to be more receptive and proactive to the sustainability agenda, fossil fuels have come out of favour, funds are finally seeing the economic opportunity in investing in net-zero. These elements were absent as recent as five years ago, but they have come into play in a huge way.
“There's a tidal wave of potential and pent up capital waiting to come into the sector, but on the innovation side of things, early-stage companies with great programs may not know how to access it.
"Governments are focused on net-zero, corporates are trying to green their supply chain, investors are looking for the next level of return," says Robert.
Greenbackers operates in the middle of that dynamic, linking up the market players to keep the cogs turning in the most promising greentech SMEs: “My partners and I see it as an economic, environmental and societal necessity, but the entrepreneurs who invent and develop these technologies were struggling and continue to struggle to access private capital and see the adoption of their products and services. We thought we could assist these companies in navigating that path to funding faster and more effectively.”
Now, from his adopted home in Glasgow, Scotland, he’s gearing up to launch a £50-£100 million fund with his partners next year to transition from fund brokers into investors.
This issue is sponsored by Greenbackers Investment Capital: Join their COP26 SuperPitch Launch on 20 May 3:00 p.m. GMT
What are hotspots for greentech investment right now?
We're seeing some hotspots in E-mobility and in the production of green hydrogen, there are opportunities in agtech and the convergence of AI – intelligent computer-generated farming is an interesting space.
The oceans have become a hotspot as well; oceantech is an area we're interested in, not just offshore renewables, but the generation of power at sea for underwater ROVs. There’s also agtech happening in the sea with seaweed or kelp. There could be ocean-based agricultural solutions, not just for human consumption but for animal feed.
We're tracking about 2000 companies right now, we're cabled into about 150 accelerators, there's all kinds of stuff happening and it can all be profitable.
What sort of greentech companies do you most like to receive pitches from?
We get about 1000 pitches a year and typically we look at the seed stage, so they have raised a round of funding previously to prove their concept. We're interested in series A, which are scaling up opportunities, and Series B which are profitable – working on volume sales, refining their business model going forward.
We are strongly engaged in the COP26. We’re working with the Scottish government to help technology companies looking to accelerate. We have a COP26 super pitch: we will select 26 companies we think are suitable for our investor network and help them get funding. Right now, we've got a lot of companies that are clamouring to get into that, but we always have room for more.
We’d love to hear from good companies that have developed technology and who are looking for seed or series A funding.
Do you have a rule of thumb for determining which companies you’d like to recommend for investment?
We make an assessment of the technology’s viability.
Are there patents in place, or is there a licensing arrangement that is pretty secure? Can the technology actually address a definable problem or market need?
What’s the addressable market?
How global or how local is it? What's the potential of that company to actually capture a segment of the market?
We look at the management and their ability to perform their skillsets.
And what are the financial fundamentals of the business and how are those are being managed? And then we look at the overall plan, the milestones the company have met and the ones they hope to meet. Investors like to see milestones.
Do you have an outstanding success story from a company you’ve helped to find investment?
One of the companies we supported in their early days was an outfit in the EV charging space called Osprey. We helped them raise a series A funding round – we took them to an investment bank that we knew was interested in the space. Since then, they've been rapidly rolling out charging spaces and infrastructure across the whole of the UK. They've been bought out by an infrastructure fund so there was a successful exit for the initial investor, which is always good news because if it's an investment bank, they're going to recycle the capital.
You have a company that is going places, investors that came in and made money, and a technology programme that is helping the faster rollout of electric vehicles which are critical to the transportation space in the UK going forward. It's a triple win.
What are the most common investment mistakes you’ve seen?
For entrepreneurs, it's potentially focusing on the money in an investment and not on the resources that an investor can bring to the table such as introductions and supporting the team.
For investors, it's not making a positive contribution to the board or allowing the company to breathe. Some may try to hothouse their investment and push the company too fast too far to get an exit in 3-5 years. Cleantech benefits from more patient capital.
Do you have a favourite quote?
When I close off a conversation it's ‘onwards and upwards.’ I have seen a lot of challenges in this sector, but I'm an incurable optimist. I am gratified for what I see – increased focus on our sector – and I tell my team, we’ll get in life what we focus on.
Where will you be travelling to when lockdown lifts?
We have a strong German bias. My wife is a historical fiction writer, she writes about World War II and post World War II, so Berlin is a focus. We have a son that lives over there, and we’ll probably start to spend two-three months a year in Berlin so I actually get to see him. There's also a great tech scene there and a great funding support ecosystem in Germany that I'd love to get closer to.
….…………...if you could teleport yourself into your future, what would you be doing, if you could be anywhere, doing anything?
For me, this is the only game in town. I'm not the retiring type. I love what I do, I love the companies and the exchanges of ideas and helping these companies go and grow. This sees me out.
Further Reading:
The next hot investment is water
Investment vehicle stocks are hot, but will investors refocus attention on batteries?
A networking event you should go to:
The COP26 in Glasgow from November 1st-12th
Greenbackers Investment Capital’s COP26 SuperPitch Launch on 20 May 3:00 p.m. GMT
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