Expert Blog – March 7, 2022
Radboud Dood is Investment Manager for Energiefonds Overijssel. His expertise is investing in innovations in the field of CO2-reduction. In this blog he explains why new technologies and products are important for the acceleration of the energy transition.
We are faced with an important social task: to switch to fossil-free energy sources as quickly as possible. Innovation is playing an increasingly important role in this transition, because the current state of technology is insufficient. I sometimes say: “We not only need more solar panels, but also better solar panels.” And that also applies to other relevant technologies that contribute to the success of the transition.
StartGreen has the capabilities to support innovative initiatives, both financially and practically – in implementation. We can help start-ups and energy projects to make the right choices, tap the right product-market combinations, but also to structure the organization, by assigning the right people to specific tasks.
From idea to product
The type of person needed, varies per development phase of the innovation. The technique comes from the so-called 'willie-wortel' (Gyro Gearloose) type: an inventor. A good idea is step one, but if that doesn't get to large-scale implementation, it can't be successful. An entrepreneur is therefore needed who, with a good team around him, can further develop the idea. We support initiatives that turn a scientific invention into a successful production company: from technology development to using the technology in a product and then building a successful company around it.
To give an example: Energiefonds Overijssel invests in Cooll Sustainable Energy Solutions.This company makes an adsorption heat pump that heats buildings more efficiently. The technology was developed by the University of Twente and has now been technically validated by the Fraunhofer Project Center.The pump also has a Kiwa safety mark, so we now know for sure that the technology is doing what it's supposed to do. Cooll is now in the phase where their innovation is being applied, with which they are achieving market validation. The next step is to set up large-scale production.
Spread of risks
A general rule of thumb is that of the 10 initiatives invested in early phase, about half become successful. And eventually 1 or 2 of these 10 initiatives will become real hits (the so-called stars.) The other 2 or 3 ripple on: we don't make a profit, but we don't make a loss either. For that reason, as an investor you have to spread your risks, as Karel also described in his blog Success is in the mix.
An important factor for success are the people behind the innovation. Our ultimate goal is to work with them on an improved version of the original plan. Therefore, in the research phase (due diligence) we not only focus on how well thought out the plans are on a technical and financial level, but also on the team that the entrepreneur has gathered around him or has yet to gather.
Besides providing financing, we add real value to the company during the development process of a risk-bearing investment. Bringing a new invention to the market is certainly not linear: it is an unruly process that goes in fits and starts. You simply cannot calculate everything on paper. During the ride, the situation may change; I want to know if entrepreneurs can deal with that. Can they move with the changing market? This requires sufficient flexibility and a good relationship of trust with the entrepreneur.
Changed playing field
A solar park has a much lower risk. We can calculate exactly how big the investment should be and then we provide a loan. The plug goes in and then the solar park usually does what it is supposed to do; the loan is repaid and the interest can be paid. There is nothing exciting about that. This enables us as a fund to also take risks in the field of innovative technologies. Of course, we weigh those risks very carefully in advance.
Ten years ago, we were one of the few parties to finance solar parks as a public investor. Now commercial parties: developers and banks - are also playing their part in this. This means that there are now fewer market failures there. That is precisely why we, as a public investor, must also take on a different role in this changing playing field. We can offer our added value precisely by supporting innovations that contribute to our goal: to help accelerate the energy transition.
'The pond with companies that we can support is not only getting bigger, but also deeper'
The province of Overijssel agreed on broadening our scope.This means that we will not only focus more on energy savings or sustainable generation, but also on circularity. In addition, the decision allows us to support innovations at an earlier stage of development: the pond of companies that we can support not only grows larger, but also deeper. And if an innovation falls outside our (geographical) scope, we refer to other funds within StartGreen: North Holland Sustainable Energy Participation Fund, Borski Fund or Oneplanetcrowd.And if we cannot help them within StartGreen, we refer them to other funds.
In order to help shape this broadening of scope, we want to fill 2 to 4 million with smaller investments; at a fairly early stage in a relatively simple way, so without too much paperwork. Doing so, we hope of course to pick several potential stars. The double return is very important here: the investment must not only have a good financial return, but also certainly contribute to the energy transition.
Full steam ahead
By giving impact companies the opportunity to flourish, we help accelerate the energy transition. Sustainability is becoming increasingly important, also for me personally. I would like to leave a better world for the next generations. It is my mission now to gear up for technologies that are needed at this moment in time. Innovation is key, for the current state of technology does not enable us to realize our task.