Van Lierop: To Find Their Prince, Corporate Investors Keep Kissing Cleantech Frogs

With a kiss, the frog becomes a prince. Or so the fairytale goes. For corporate investors seeking their own prince among a lake of cleantech toads, well, it’s not always a happy ending. But that doesn’t keep them from trying.

Sometimes you have to kiss a lot of frogs before magic happens, explains Chrysalix Energy Venture Capital cofounder and CEO Wal Van Lierop at the recent Cleantech Innovation Summit. “But the princesses are starting to emerge,” he goes on. How do you know when a frog will become a prince, Van Lierop asks? “That is what we have to focus on because this is really what cleantech 2.0 is all about.”

The corporate investors championing cleantech today appear to be coming around to the idea that it takes a lot of effort (or dollars invested) to find that one prince of a venture whose technology will simultaneously reduce cost, reduce energy usage and improve the business’ environmental impact. It’s a philosophical shift—one that’s taking the emphasis off clean technology’s potential to replace carbon-based fuel sometime in the distant future, and exploring how it augments the core business today.

“That is what currently the resurrection of cleantech is all about,” Van Lierop says. “It’s about penetrating clean technologies into the core business of large corporations. The result is staggering when it comes to the total addressable market. The total addressable market of what we call cleantech in the early years was about $500 billion. But now that cleantech is penetrating into the core business of large organizations, the total addressable market is at least $3 trillion to $4 trillion.”

In some cases, corporations are looking at cleantech opportunities with the potential to immediately complement the existing business. Examples include Glasspoint, which produces solar steam generators to enhance oil recovery in declining reservoirs while reducing cost and the need for natural gas, and Minesense, which develops advanced sensors to find valuable minerals in low-grade ore.

Aligning Investments with Core Business

Waste Management has been venturing in cleantech for the past seven years, recognizing the potential for innovation to either disrupt its business or lead to new opportunities for growth.

“We transcend a whole lot of subsectors, but the best way to think about it is we look for innovations that can take any fraction of our waste materials and convert them to something of higher value,” says Joe Vaillancourt, VP of corporate venturing at Waste Management. “Our long-term goal is we are trying to position our company for a non-landfill reality at some point in the future.”

Today Vaillancourt’s group focuses on three themes for its investments: transportation, recycling and the conversion of materials into energy. Those are three areas with an immediate impact on the core business of collecting and disposing of–or recycling–waste. That’s led to a portfolio of about 30 companies across the spectrum of cleantech.

“We’re pretty agnostic – we’re not looking to sort of bet on a winning technology or company,” Vaillancourt says. “What we’re really trying to do is bring a customized solution set to our customers.”

A similar theme runs through Saudi Aramco Energy Ventures, an investing wing of the Saudi Arabian Oil Co. The group is looking at everything from chemicals to renewables, including power generation and energy efficient technologies.

“On the energy efficiency side, any time we can have large, high users of power generation have any sort of energy efficiency component to it to conserve that aspect, I think it’s incredibly important,” says Cory Steffek, managing director of North American Venture Capital for Saudi Aramco. “As a national oil company we’re supplying energy to the kingdom. If we can shift those assets to more energy efficient ones, that’s more hydrocarbon that’s freed up for the international market.”

Like Waste Management, Saudi Aramco looks at clean technologies in the context of the value they add to existing business. For instance, last December Saudi Aramco led an investment in Novomer, a sustainable chemical company that has developed a “catalyst technology” that allows carbon dioxide and renewable feedstocks to be converted into industrial chemical products.

“Sustainable innovation for us is about better asset utilization,” Steffek explains. “It becomes important to the extent that technology facilitates either new business growth or higher profit margins, so we really look at it from a slightly different lens of being not just sustainable, but being important as part of a product in a portfolio or part of an energy efficiency mandate.”

Saudi Aramco focuses its investing in three areas: upstream technologies, downstream technologies and renewable energy. Upstream can include ventures such as drilling and exploration, while value-added chemicals such as Novomer or innovations in microbial conversion technologies would be considered downstream investments. Renewables are the firm’s largest bucket of investments and covers everything from energy efficiency and power generation to water technologies. Steffek says Saudi Aramco looks to invest between $5 million and $15 million initially, going up to as much as $30 million with the right company.

Another investor, Canadian Cenovus Energy specializes in steam-assisted gravity drainage (SAGD), a relatively new technology for oil recovery. “Our company and our industry recognize that, because it’s new and commercially viable today, there’s a lot of room for improvement and there’s a lot of things that we can do with technology,” says Juan Benitez, senior specialist at the Cenovus Environmental Energy Fund.

Examples of how Cenovus is investing in cleantech to enhance its business include finding technologies to convert waste byproducts of the SAGD process. Last year Cenovus invested $2.5 million in Skyonic, a firm that specializes in the conversion of carbon dioxide emissions into profitable products like baking soda and hydrochloric acid for fracking. It has also invested $2.5 million in Saltworks Technologies, a group that’s developed an energy efficient process to convert salt water into fresh water.

Total Energy Ventures, the VC wing of oil and gas giant Total, is another group that sees the potential for clean technologies to supplement its business, with investments that span bioproducts, waste-to-energy conversion, storage and sustainable mobility. “We see a drastic change in what energy will be in the next years,” says Total Energy Ventures CEO Francoise Badoual. His firm’s objective is to recombine the path of innovations by investing in young companies with an aim to help in industrial upscaling and commercial deployment.

In 2013 Total invested in and joined the board of Wireless Seismic, a Texas-based company that provides cable-free seismic data acquisition systems to the oil and gas industry. The technology delivers data in real time and could improve the safety of operations in difficult terrain.

Investing is only a first step in incorporating a new technology into the business. Experts admit that each company has its skeptics, and that a big part of the job is to create internal partnerships across business units to help drive adoption or to build a strategy that allows for success.

The corporations investing in clean technology acknowledge that not every venture is going to pan out. But they also understand the ones that do succeed have the potential to dramatically impact the business going forward. It makes all those frogs worth kissing.

“What we’re talking about with cleantech 2.0 is sustainable innovation for large industries in transition,” Van Lierop says. “It’s about technologies that can simultaneously reduce cost, can reduce energy intensity and can improve the environmental footprint.”

 

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