Financing cleantech startups as well as cleantech funds is a tough game. Investors aren’t happy yet with their returns. Consequently, startups and VCs need to reassess their strategies and look for long-term investors with strategic interest such as corporates, family offices and governments. To find advice from industry insiders we look forward to joining the Cleantech Forum Europe in Bilbao taking place on 16-18 April 2013. Ecosummit supports the event and we interview Richard Youngman, Cleantech Group’s MD for Europe and Asia, to warm up for the conference and discuss the current market environment. Richard will also speak at Ecosummit Berlin 2013.

Ecosummit: Hi Richard, 5 weeks to go until the Cleantech Forum Europe 2013 (CFEU13) happens in Bilbao. Having joined last year’s Cleantech Forum in Munich we are getting excited to visit Spain. Why do you do it in Bilbao?

Richard Youngman: The European Cleantech Forum, now in its 9th year, moves every year, as part of a deliberate desire on our part to help connect the more local cleantech communities in Europe to the wider pan-European one. In Bilbao, we found an interesting combination of industrial heritage, an inspiring story of urban transformation, and a highly welcoming local cleantech community, with strong connections to growth markets such as Latin America and North Africa. Add in a wonderful place to visit and we felt convinced – it’s high time our European Forum headed south.

Ecosummit: Cleantech startups and investors alike have a hard time to raise money in 2013. How do you assess the market environment this year and how should companies trying to innovate adapt to it?

Richard Youngman: To grow a startup, innovation and adaptation is required across the board. Technology is just a part of the challenge; how you go about financing yourself through the early stages is a critical success factor that certainly requires being and thinking differently. Yes, fundraising is tough right now, for companies and funds, and we see no reasons that that will change in the near future. Companies need to adapt to these realities and the changing identities of who has capital and appetite, and for what risk profiles. This means both seeking investment from further afield geographically, and from beyond the VC community, as well as minimising equity needs by adapting plans and business models, and indeed, where possible, negotiating favourable financial terms with customers.

Ecosummit: Let’s talk more specifically about the reasons for the recent capital scarcity for startups and investors. Why is capital so hard to get and what can we do about it?

Richard Youngman: I don’t wish to say too much now, as Cleantech Group, in partnership with Georgieff Capital, is going to release a report at the Forum on April 17th into the fundraising environment for European cleantech companies which will provide our analysis and our viewpoints on the current capital environment. However, the short answer to your specific question, is that, in plain and simple terms, investors have not seen good realised returns from private equity and venture investments into cleantech companies over the last few years. This has created a significant slowing of capital allocation decisions, especially at the earlier stages of cleantech company growth.

Ecosummit: What should cleantech startups do if they cannot find investors these days? Pivot the strategy, focus on cashflow from customers, become a lean startup, minimise the burn rate, hunt public money …? What other measures do startups you know take and which ones do you recommend?

Richard Youngman: All the things you mention are valid – find a way to stay alive, to stay in the game – or put it on ice and go do something else for a time. Maybe it is not the right time? Some startups I come across are very adept at leveraging programmes from a variety of international governments to fund particular projects – leading to funding to keep development going, while the search for equity investors carries on. Patient capital from supportive family wealth is also another approach I come across.

Ecosummit: The theme of the CFEU13 is “Reimagining Cleantech”. How do you reimagine cleantech? What are the key drivers of the necessary change in the business strategy of startups, investors and corporates to succeed in 2013 and beyond?

Richard Youngman: A tough question to give a short answer to – and the reason why we are having a whole Forum to gain different inputs on this!

In essence, we see that the underlying macro drivers underpinning the megatrend we labelled “Cleantech” back in 2002 are only getting stronger. To our mind, the broader definition of cleantech got hijacked by capital intensive plays in building manufacturers and vertically-integrated companies in areas such as clean energy (especially solar and biofuels) and transportation. For us, however, the cleantech theme was always meant to embrace a very broad cross-section of technologies and business models designed to offer compelling commercial economics while helping to solve global resource and sustainability challenges. So part of reimagining cleantech is to get back to where we started and ensure people’s focus is inclusive of technologies that are addressing environmental and efficiency issues confronting conventional energy production, new web-based resource sharing models (labelled “Cleanweb” by many) that are reducing the need for new goods, novel approaches to waste management and recycling and new software platforms to manage everything from water to traffic. Another aspect of reimagination is to ensure our minds are open to what we have learned from the past years about business models, to ensure we recognise there are cleantech companies making good progress and to understand why, and to ensure our approach recognises the potential leverage inherent in the scale and know-how of major corporations and in successfully addressing the demand and the needs of growth markets. We devote, for example, a whole afternoon at the Forum to exploring opportunities in Latin America.

All in all, “Reimagining Cleantech” is a call for people to reboot and look at this world again with different perspectives and fresh eyes. The megatrends are still there; we need to find the micro approaches to capitalise on them.

Ecosummit: Your company, the Cleantech Group, recently merged with GreenOrder, a sustainability consulting firm. Why did you do the merger, what changed since and how did it effect your market position and execution strength in terms of know-how, market reach, revenues and employees?

Richard Youngman: Cleantech Group has always evolved with its marketplace, to serve identifiable needs of key customer segments. The biggest change I have seen since I have been in this role is the growth in corporate involvement in cleantech, which has steadily increased in these economic down years – a contrarian trend to what we have seen in the financial community during this period. The merger with GreenOrder has significantly enhanced the capacity of our advisory and consulting business line to serve multinational corporations in the development of both their strategy and their implementation of programmes to accelerate innovation, both internally and externally. The worlds of sustainability and cleantech innovation inside corporates continue to converge. By joining forces with GreenOrder, the team that since mid-2004 has been the principal advisor to GE on the creation, implementation and ongoing development of its multi-billion dollar ecomagination initiative, we believe the twice-as-big (in revenues and headcount) Cleantech Group is well-positioned for the next phase of the journey.

Ecosummit: Richard, thanks a lot for the interview and see you soon in Bilbao.

Tags: Bilbao, CFEU13, Cleantech, Cleantech Conference, Cleantech Forum Europe, Cleantech Forum Europe 2013, Cleantech Group, Conference, Corporates, Ecosummit, Ecosummit Berlin 2013, Event, Georgieff Capital, GreenOrder, Investors, Reimagining Cleantech, Richard Youngman, Spain, Startups