For many startups, Venture Capital (VC) may be the only way to grow. Especially, in the clean energy space, where it can be relatively more expensive to startup a company as compared to traditional tech, VCs are crucial. With the ultimate goal to reach a 24/7 100% clean energy grid, VC funds flowing into innovative startups are a must.
Many VCs, however, are hesitant to enter the clean energy space again after investing over $44.5 billion between late 2009 to late 2011 and then going bust. This was the notorious Solyndra scandal. The new energy economy was a bust. Trust was lost in cleantech companies providing substantive returns to the VCs. The federal government invested and also lost a ton of money leaving taxpayers with doubts in cleantech. The entire scandal set the precedent for the next decade.
Recently (as of 2021), there has been a resurgence of cleantech investing with many boutique VC firms popping up that only focus on such investments. VCs are looking for companies in this space that either disrupt a specific part of the industry (e.g., smart grid business models and/or technology), bring forth new efficiencies (e.g., building efficiency to solar efficiency), to improving operations (e.g., improving forecasting).
An incremental benefit in the power industry can translate to a large sum of revenue for a small startup trying to disrupt this space and the VCs are watching.
In this article, we have compiled the top venture capital firms in the USA that are clean energy focused. We discuss who they are, how much deal flow they have invested in, the thesis, and more. Check out the top picks:
Best Venture Capital Firms in the USA: Clean Energy Focused
Here is our list of the top VC firms (in no particular order of rank).
- Location: New York City
- Funded: invested $1.1 billion across 3 funds
- Founded: 2015
- # of Exits: 8
- Notable Investments: Arcadia Power, AutoGrid, Ecobee, Mosaic, Sense, Trifecta, Powin,
EIP thesis is to invest in groundbreaking energy startups and then assist them along the way by partnering them with utilities, and other larger established companies. A quote from their website, “Our utility partners benefit from insights on emerging technologies and business models to help them prepare for the utility of the future.”
In the early stages, it is crucial to find a VC that has connections. Money can be raised from anywhere but connections are worth much more. If your startup technology can get adopted by established companies early on, this can result in a much faster exit with either the partnering company purchasing your startup or a third-party company.
- Location: Chicago, IL
- Funded: $22.5 million
- Founded: 2012
- # of Exits: 4
- Notable Investments: see here
Energy Foundry (EF) invests in early-stage startups with excellent technologies and excellent teams. EF works closely with their startups to provide the resources and introductions they need to grow further.
- Location: Seattle, WA
- Funded: $37 million
- Founded: 2006
- # of Exits: N/A
- Notable Investments: Arcadia, Level10
Element 8 is one of the oldest clean energy-focused angel investment groups in the United States. E8 boasts a group of cleantech investors who all have excellent pedigree. E8 partners each investment with a group of investors that participated in that round. These investors assist the startup with technology, hiring, growth, and much more. Think of it as an energy incubator of sorts.
E8 is an excellent way to pitch your startup to a large group of investors who are also industry experts. It will open up opportunities to network. Each investor pools in $50-$100,00 of their own money into each deal. They have skin in the game personally.
- Location: Boston, MA and New York, NY
- Funded: $500 million
- Founded: 2005
- # of Exits: N/A
- Notable Investments
CEVG provides early-stage seed capital for energy startups. They not only provide funding but bring forth decades of energy expertise to assist the companies to grow. Their thesis is to invest in companies that have targets to mitigate climate change and provide financial returns. The adhere to multi-criteria: clean energy-focused investment, people who are experts, investment return must meet specific levels, pre-money valuation less than $10M, and companies located in the Eastern U.S.
- Location: Oakland, CA
- Funded: $7 million
- Founded: 2013
- # of Exits: 9
- Notable Investments: WattBuy, Leap, SparkMeter
Powerhouse does not only invest capital into startups, but its main thesis is to connect startups in an incubator-like fashion to industry giants for partnerships. They are a network-driven investment fund.
- Location: Chicago, IL
- Funded: $150 million
- Founded: 2016
- # of Exits: N/A
- Notable Investments: Volta, Aquilon, Aurora
Energize Ventures partners with startups that are digital solutions to energy grid problems. Their core focus is in Data Analytics, Cyber Security, Distributed Energy Resources, Mobility, Energy Storage, and Operational Efficiency. They prefer to lead rounds with investments in the $5M-$10M range.
If your company is a Software As a Service (SaaS) in the cleantech space (or also sometimes known as Energy as a Service), then you have more options open. Most VCs invest in SaaS-type startups. While they may be new to the cleantech, your job is to educate them on the growth potential. You will need to use terminology that most SaaS businesses utilize. Check out this article for such details.
Top 5 Things to Keep in Mind When Fundraising
1. Company Thesis
It’s crucial for startups in the cleantech space to have a properly backed thesis. What are you trying to do? Why do you think it’s important? Where will it impact the most? You do not necessarily have the entire details on “how” exactly you will do it. If you knew the answer to that 100%, then you already solved the problem. VCs are looking for an exponential problem to solve. A problem that will provide them a large enough return.
2. Expert Team
Your startup must have experts. Just like a sports team out there recruiting the best players, your startup should have world-class expert advisors, founders, and/or employees that have shown they have the expertise to do what they are promising in the company thesis.
3. Business Case
If your company thesis is correct and you have the right team in place, how will you generate money? How will you generate revenue in the early days? Did you identify critical partnerships you need to move forward?
Put together a proper business case. It’s crucial!
All too many times, I have seen startups put together a subpar business case with a subpar model. VCs will ask you for spreadsheets. Put together a detailed spreadsheet with “growth levers” built-in. If you are in Series A funding round or above, this is crucial.
4. The Ask
VCs will definitely always ask you: how much are you asking for and at what valuation? Do your market research! What were companies in your situation valued at? Why are you valued at the amount you are asking?
You need to have well-researched answers to these questions.
5. In Sync
While the above factors are important, probably the most important is for the founding team to be in-sync. The worst thing that I have seen is when the founders are explaining their visions differently. If the founders are not on the same page, why would the VCs be?
To wrap up, the best VC firms that are clean energy-focused were laid out in this article. As founders, advisors, and employees in this space, it is our prerogative that another Solyndra or Enron situation does not happen to cause VCs to shy away from the cleantech space. Renewables is one of the “growth levers” to improving climate change and it is extremely important that new money enters this market.
Good luck with your fundraising! If you have any questions or require assistance, please reach out.
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