Cleantech investment feeding corporate hunger
While businesses have been working hard to navigate the financial uncertainties of recent times, many have been doing so with an eye on the medium-term risks and opportunities posed by some of the big issues we face on a domestic and global scale.
This has led to the creation of new cleantech products and market offerings to satisfy the demands of new consumer and corporate hunger, writes Simon Pringle (above left), BDO head of sustainability and innovation & Tim Taylor (above right), East Anglia green energy lead.
A highly creative and innovative clean technology sector has begun to mature in centres such as Cambridge and across the East of England. As with any sector characterised by innovation, change and entrepreneurialism, the road from initial concept to market success is a tough one.
Here at BDO, we and our cleantech colleagues have spent several years reading hundreds of business plans and meeting dozens of management teams. We’re sure it won’t come as surprise to you when we say that they really have ranged from the sublime to the somewhat ridiculous.
However, despite the huge variety of individuals, products and projects that come through our doors, it is amazing just how many recurring themes there have been. Some of these have been written about in our recently developed innovation model.
We have been able to help achieve the commercial objectives of a good number of the management teams with whom we have met. Often those objectives have involved raising capital, selling a business or helping gain market insight, and finding partners for the next step in the development of their product.
Unfortunately for others we have had to explain that we were not able to help; at least not until some further commercial work had been done. More often than not this is because of the structure of the organisation, testing of the technology or expectations of the management team.
The simple truth is that we have seen too many really promising propositions fall into a similar set of traps. Many of these can be avoided by building a commercial development strategy to run alongside the technical development pathways with which most management teams are familiar.
The characteristics that investors look for in a management team are well known. Yes, the technical skills and expertise need to be there but a team needs also to exhibit a combination of personal credibility, sector experience, ambition and commercial acumen.
This also means active engagement with potential end users, alongside a well-developed understanding of relevant market dynamics, the regulatory landscape and the activities of competitors. As well as these individual attributes, prospective investors will almost certainly be looking for an ability to articulate the business plan and a commitment to do the ‘right things in the right order’.
Management teams often believe their technology to be closer to market readiness than others may perceive it to be; they can have unrealistic aspirations as to current and future value, or the amount of investment needed to build the brand and sales channels. The most ‘backable’ management teams treat innovation as a process because they know that a structured approach is most likely to lead to a profitable outcome.
Cleantech innovation is not just the preserve of start-ups. Significant amounts of cleantech innovation can be found in more mature businesses, which look to unlock value through spin outs and by encouraging management buyouts.
Divisions or subsidiaries that are either non-core or which are too small to get the attention they deserve might frustrate technical innovation (as well as their management teams). More forward-looking businesses recognise this, and can offer management the chance of a lifetime to strike out on their own.
As a response to the innovation and changing patterns in organisational behaviour, the opportunities for investment and M & A activity in technologies and applications are widespread. Of course, there is an emphasis on those opportunities for which the fundamentals are strong. Like any sector, a low technology and regulatory risk combined with a strong commercial opportunity and good quality intellectual property command attention.
However, with the big global drivers being increasingly mirrored by local corporate activity, there should be no surprise that there has been a dramatic increase in the amount of investment into opportunities that provide solutions for energy security, energy efficiency, demand side management and lower carbon, resource efficient innovation.
This can only be good news for the East of England region and the exciting businesses that are developing within it.