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In light of climate change and escalating global energy demand, more emphasis is being placed on emerging clean technologies — ranging from renewables and energy storage to nuclear power. Although these technologies have tremendous potential, they require lots of innovation, and innovation needs abundant capital.
The issue: early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies. Why is this? In general, clean tech companies lack the startup advantages of agility and flexibility.
“Moving fast” works for products such as consumer mobile apps and SaaS solutions. The clean tech sector, on the other hand, tends to involve highly regulated, capital-intensive, mission-critical infrastructure.
That has hurt both returns and well-intentioned impact. According to Cambridge Associates, venture-backed companies have returned, on average, -15% internal rate of return (IRR) since 2000. Contrast that to venture-backed companies in healthcare, which returned 24% in IRR over the same time period.
Why clean tech lacks funding
While noble in its aims to make the world a better, cleaner, safer, healthier place through technology, clean tech venture capital has suffered simply because clean tech does not fit the traditional venture capital model. Central to the venture capital model is the ability to de-risk new ideas and significantly capitalize the most promising ones, allowing for liquidity via M&A or initial public offering (IPO).
Early-stage financing for clean tech hasn’t been plentiful, and it’s stifling the growth of new energy companies.
This construct allows for the return of venture capital dollars, plus appreciation that enables VC firms to raise new funds. These capitalization events also allow the venture-backed company to accelerate growth and maximize market impact.
How this construct works is evident when comparing healthcare and clean tech. In healthcare, new innovations are de-risked by VCs. More mature innovations are acquired or reach IPO every year. As a result, the average annual ratio of dollars raised via an exit to VC-invested dollars since 2012 is 1.8. This ratio is only 0.2 for clean tech, an 800-plus percent difference in the wrong direction. This has resulted in poor returns and limited capitalization of clean tech companies.
Enter (or reenter) the SPAC
Given the state of the world’s environment and lack of abundant energy in emerging economies, we need to collectively fix this issue. Special purpose acquisition companies (SPACs) are significantly improving clean tech’s venture capital construct. According to Investopedia:
SPACs are companies with no commercial operations that are formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company.
Also known as “blank-check companies,” SPACs have been around for decades. In recent years, they’ve become more popular, attracting big-name underwriters and investors and raising a record amount of IPO money in 2019.
In 2020, more than 110 SPACs completed transactions in the U.S., capitalizing these companies with more than $29 billion.
In 2020, SPACs capitalized clean tech companies with almost $4 billion of capital, including Fisker, Lordstown Motors, QuantumScape, Hyliion, XL Fleet and others. This helped push the ratio of funds raised at exit to venture capital invested in 2020 from the previous 0.2 average to a much healthier 0.6, a 200% improvement.
In 2021, we will likely see even further improvement. Why? Because there are 43 active SPACs looking toward or finalizing merger targets with a clean tech focus, potentially providing $12 billion in growth capital. Even if there are no more new SPACs in 2021 and a historically low average of M&As and IPOs, 2021 promises continued improvement for clean tech investment.
Don’t let Nikola tarnish the pack
One of the most high-profile clean tech SPACs was Nikola Corporation. The battery-electric and hydrogen-powered truck maker has attracted much fanfare since going public last June through a reverse merger with special purpose acquisition company VectoIQ. The company’s market capitalization soared and things seemed to be going well, but things became controversial later in the year when the company was accused of making false statements about its technology and other things.
Although examples such as Nikola have the potential to tarnish the emergence of SPACs as a way to spur clean tech investing, they shouldn’t. There are plenty of examples of emerging companies that scream quality and integrity. For example, Stem*, a leader in the energy storage optimization space, is now going public, pending SEC approval, via the Star Peak SPAC.
Public markets are receiving the SPAC with enthusiasm. Assuming the merger happens, Stem will be capitalized with greater than $450 million of cash to accelerate growth and drive impact. It’s an illustration of SPACs as a positive venture capital construct that is needed to make clean tech work and become a thriving sector.
As a long-time clean tech venture capitalist myself, it is interesting that public investment via the SPAC may be the correcting element for the clean tech VC construct. For years, I assumed that corporates would step up their M&A activity at premium valuations to solve this issue, but I’ve spent a long time waiting.
Judging by activity, corporates seem content to continue playing the still very important investor/nurturer role, versus the “owning” role. Regardless, capitalizing promising clean tech companies can only mean one thing: clean-tech-related impact is coming like never before as these companies require and use capital to scale.
New and more diverse approaches to finding and funding new, great clean tech companies are sorely needed. SPACs are going to be the tool needed to bring clean tech up to par with sectors such as healthcare. It’s a development that will benefit all of us.
*Stem is a Wind Ventures portfolio company.
Source: https://techcrunch.com/2021/01/28/spacs-are-the-construct-vcs-need-to-fund-cleantech/
You’d be forgiven for being skeptical about the iPhone 12’s stellar performance this past quarter. It’s been a rough couple of years for smartphones — a phenomenon from which not even Apple was immune.
Frankly, after staring down these macro trends over the last couple of years, it seemed like the days of phone-fueled earnings reports were behind the company as its expanding services portfolio started to become its primary financial driver.
For the final quarter of 2020, Apple earnings surpassed $100 billion — a first.
I capped off my mobile coverage last year with an article titled, “Not even 5G could rescue smartphone sales in 2020.” Among the figures cited were two year-over-year drops of 20% for the first two quarters, followed by a global decline of 5.7% for Q3. As we noted at the time, a mere 5.7% drop constituted good news in 2020.
The straightforward premise of the piece was that COVID-19 subverted industry expectations that 5G would finally reverse declining smartphone sales, even if only temporarily. That all came with the important caveat that Apple’s numbers would likely have a big impact the following quarter.
Ahead of yesterday’s earnings, Morgan Stanley noted, “In our view, the iPhone 12 has been Apple’s most successful product launch in the last five years.” Such a sentiment may have seemed like hyperbole in the lead-up to the news, but in hindsight, it’s hard to argue, with five years having passed since the launch of the first Apple Watch.
The iPhone X was more of a radical departure for the company, but the 12 is proving to be a massive hit. The recent launch of Apple Silicon Macs juiced sales in that product category rising 21% year over year, but ultimately the company’s computer business is a drop in the bucket compared to phone sales.
Cybersecurity startup CybSafe, a ‘behavioral security’ platform, has raised $7.9 million in a Series A funding round led by IQ Capital with participation from Hanover Digital Investments (HDI) GmbH and B8 Ventures. The investment round will be used to focus on expanding its enterprise and mid-market client base. CybSafe is a SaaS product with a per-user-based, subscription licensing model.
As most people in tech know, the big concern with security isn’t so much the system as the people. Indeed, 90% of UK data breaches are generally due to human error, for instance.
CybSafe’s ‘behavior-led’ platform manages these people-related security risks using behavioral science and data analytics by delivering personalized cyber support for users. The company already has 350 clients in 15 countries, including Credit Suisse, Air Canada, HSBC and NHS Trusts.
Launched in 2017, the company was founded by cyber resilience and intelligence expert, Oz Alashe MBE, a former Lieutenant Colonel in the British Army and UK Special Forces who was the first black officer to serve in the Parachute Regiment and UK Special Forces. The team includes former UK Government cybersecurity specialists, behavioral scientists, data scientists, and software engineers.
CybSafe
Alashe says the platform helps users develop security skills and habits through “accredited microlearning content, adaptive support material, and personalized nudges. The combination of contextualized, just-in-time, and on-demand content ensures people get the help they need. They get it whenever they need it. And they get it in the way that is most likely to help them.” The platform is available in 9 different languages.
CybSafe is delivered via a mobile application or within a browser, showing ‘bite-sized’ guidance, alerts, and notifications.
CybSafe’s competitors include KnowBe4, Wombat Security and Infosec, but Alashe says CybSafe’s strength is that it addresses security awareness for the average person: “Security awareness is dead. It’s ineffective. It’s inefficient. And it’s broken. CybSafe uses behavioral science and data analysis to deliver security behavior interventions that work. It has efficacy rates of over 90% for some behaviors to prove it.”
The team includes Jonathan Webster, CTO who previously worked on Her Majesty’s Government Digital Services; Dr John Blythe, Head of Behavioural Science, and a Chartered Psychologist with the British Psychological Society.
New numbers from Canalys show a slowing in the major smartphone decline we saw for 2020. The past year was, of course, a major blow to an industry already suffering a slide. Hope that the arrival of 5G would right the ship were dashed by Covid-19.
Things are looking up, fueled in large part by a killer quarter for Apple. The company posted its earnings last night, putting much of its success at the feet of the iPhone 12. In spite (or perhaps because) of pandemic-fueled delays, the handset arrived in a perfect storm – the beginnings of a “supercycle” that see customers upgrading devices in a kind of critical mass.
Numbers are still down for the fourth quarter of 2020 – but they’re down by only 2% per the firm. That’s due in no small part to what amounted to the iPhone’s best quarter, as the company introduced four 5G-sporting handsets. Canalys shows a 4% increase for Apple, as the device arrived to a wider 5G rollout just in time for the holiday season.
The company snagged the global number one spot, with Samsung taking number two in spite of a 12% decline. Chinese manufacturers Xiaomi, Oppo and Vivo rounded out the top five, all seeing double digit increases, y-o-y.
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The category is expected to see a rebound this year, after suffering declines due first to supply chain concerns and then larger economic issues, stemming from the pandemic.
“The introduction of COVID-19 vaccines is also boosting business confidence for 2021, allowing them to plan and invest,” analyst Ben Stanton says of the figures. “Going forwards, there will be obvious economic ripple effects as government stimulus fades, and there are ongoing concerns around new virus strains. Overall though, sentiment in the industry is positive, and 2021 will see the smartphone market rebound after a 7% decline in 2020.”
Another report from Canalys notes more positive news for the PC market, showing a 35% y-o-y increase, courtesy of tablet and Chromebook sales.
