Previewing Cleantech Forum 2014 in Stockholm with Richard Youngman
Fundraising is super difficult for startups as well as VC funds and it takes a long time during which existing and new relationships have to be nurtured. Fund investors (LPs) want to see more exits and return of capital rather than return on capital. To learn about the latest tricks of the trade and to network with the active VCs and startups it is not only a good idea to join ECO14 Berlin on 3-4 June but also to head to Stockholm to the 10th Cleantech Forum Europe 2014 (CFE14) on 19-21 May. As in the past, we support the Cleantech Group by participating and interviewing Richard Youngman (MD Europe & Asia) to give you extra motivation to join us – in case you still need it. The photos are taken at CFE13 in Bilbao.
Ecosummit: Hi Richard, 4 weeks to go until the Cleantech Forum Europe 2014 happens on 19-21 May in Stockholm. Why do you do it in Stockholm, what is so special about cleantech in Scandinavia?
Richard Youngman: Cleantech Forum Europe moves every year, as you know. And we haven’t been to the Nordics for five years. Sweden were very proactive and convinced us that not only would they be a great partner but also the need was fitting. Sweden has many good early stage innovation companies as do some of their neighbours, but they tend to find going to the next growth phase commercially and internationally very challenging. This was evidenced in the Global Cleantech Innovation Index 2012.
Our global network coming to Sweden gives them access and connectivity to the corporate partners and investors who are indifferent to borders and who can, therefore, play a role in crossing that growth chasm. We expect our typical 400-450 participants from across Europe and beyond, and a worthy celebration of CFE’s 10th anniversary in the location of the annual Nobel prize ceremony.
Ecosummit: Cleantech startups and VCs still have a hard time to raise money in 2014. What are the main reasons for this? How do you assess the market environment in 2014 and 2015 and how should startups trying to fundraise adapt to it?
Richard Youngman: Quite simply, it’s about returns and results. The track record of venture capital in cleantech but also beyond is not great in the 2000s. It is cyclically out of favour as an asset class. In cleantech, there are more good company and investment stories emerging to counter the damage of the headline-stealing bankruptcies as a result of the 2006-08 cleantech gold rush. Sustainable innovation investments still have some way to go to show consistent returns and, at an aggregated level, a track record that might have more LPs considering it more strongly relative to their traditional asset allocations made to PE/buyout/infrastructure funds which play to the conservative sentiment of “you don’t get fired for choosing IBM.”
I think the market is improving, for sure. 2014 has felt different and more positive so far. But the scarcity of early stage capital will continue to be a feature of 2014-15. Startups have to operate within that reality. They cannot fight it. That means having business plans that do not rely on raising too much capital. That means looking beyond VCs.
Ecosummit: Recently, we are seeing cleantech IPOs again, e.g. McPhy and Opower (Roderick Morris on the photo above). Do we currently have an IPO window? Which cleantech startups will or should do an IPO next?
Richard Youngman: Add Xeros in the UK and Fermantalg in Paris with a 450% over-subscribed IPO to the names you mention – and indeed there is clear evidence of an IPO window open. You won’t draw me on who will do an IPO next, though I am aware of some names looking at that option.
Right now, there is clearly more risk appetite amongst yield-hungry public market investors than for some years. For startups who are at or close to break-even, who have proven out their technology and who need €20-50M of growth capital, the public markets offer that alternative at better valuations than can be achieved privately. I expect a few more IPOs in 2014, in Europe as well as the US.
Ecosummit: In Stockholm, you celebrate the 10th anniversary of your Cleantech Forum Europe. Looking back, which key lessons for startups, VCs and corporates would you like to point out?
Richard Youngman: To hear our reflections on the last 10 years and thoughts on the next 10, you simply need to be at CFE14 in Stockholm! A key feature of my keynote on May 20 will be what progress has been achieved 2004-14 and how the 2014-24 environment and market context will be so very different. Our 10 Year Track will give airtime to interesting ideas, trends, lessons and opportunity sets to stimulate our thinking as to where innovation around energy and resources might be taking us in the years ahead of our 20th birthday party in 2024.
Parts of the clean technology portfolio are going mainstream (solar and LEDs are two examples). The concept of doing more with less is very in vogue, whether or not it comes with a strong sustainable bent to it. Drivers behind the need for more sustainable technologies are only getting stronger. These next 10 years will see much progress, with surprises in both directions.
A key thought for all of us is about time and the need for patience and perseverance.
Just as investors like Warren Buffet will talk about the importance of cumulative and compound returns (from re-investing dividends and interest) to the performance of an investment portfolio, something similar is true of innovation. The cumulative impact of innovations building on each other should not be underestimated. What a Solarcity can do today, for example, would not have been possible without the huge progress made in the costs, volumes and quality of manufacturing solar panels over the 2000s.
Just as we (startups and investors) have clearly been guilty over the last 10 years of overestimating how fast technology might be developed and how quickly companies could ramp up sales of their solutions, there is a danger now of underestimating how close we are to certain tipping points and breakthroughs in certain areas of clean technology and sustainable solutions. There are many smart investors keeping a close eye on this right now.
Ecosummit: Richard, thanks a lot for the interview and see you soon in Stockholm.