When it comes to growing a business, venture capital (VC) may be the only option. Investors in private equity (VC) are especially important in the renewable energy sector, where it can be more expensive to launch a company than in traditional technology. VC capital flowing into creative businesses is essential if we are to achieve our ultimate objective of a 100 percent clean energy system that operates around the clock.
Following a period of approximately $44.5 billion in investment between late 2009 and late 2011, many venture capitalists are wary of entering the renewable energy market again. Solyndra was involved in the infamous scandal at the time. The new energy economy proved to be a colossal disappointment. Cleantech businesses that provided significant returns to venture capitalists had lost their credibility. The federal government made significant investments in cleantech but also suffered significant losses, leaving taxpayers with serious worries. The entire incident set the tone for the rest of the decade that was to follow it.
Recent years (as of 2020), there has been a resurgence in cleantech investing, with a slew of boutique venture capital firms springing up that are only dedicated to cleantech investing. The companies in this field should either disrupt a specific part of the industry (e.g., smart grid business models and/or technology), bring out new efficiencies (e.g., building efficiency to solar efficiency), or improve operations. VCs are seeking for companies in this space that (e.g., improving forecasting).
An incremental benefit in the electricity industry can translate into a significant amount of revenue for a small startup attempting to disrupt the market, and venture capitalists are keeping an eye on things.
In this post, we have gathered a list of the best venture capital firms in the United States that are focused on renewable energy. We talk about who they are, how much deal flow they have invested in, what their thesis is, and other relevant topics. Take a look at our 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: 1
- Notable Investments: Arcadia Power, AutoGrid, Ecobee, Mosaic, Sense, Trifecta
Investing in ground-breaking energy startups and assisting them along the way through collaborations with utilities and other larger established organizations is the EIP’s guiding principle. According to their website, “Our utility partners benefit from insights into upcoming technology and business models to assist them in preparing for the utility of the future.
Opinion of a professional
It is critical in the early phases to recruit a venture capitalist (VC) who has ties in the industry. Money can be raised from any source, but connections are far more valuable than money. The ability of your firm’s technology to be adopted by existing companies at an early stage might result in a far faster exit, with either the partnered company purchasing your startup or a third-party company acquiring your startup.
- Location: Chicago, IL
- Funded: $22.5 million
- Founded: 2012
- # of Exits: 3
- 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 earliest renewable energy-focused angel investment groups in the United States, having been founded in 2000. E8 is comprised of a collection of cleantech investors that have all established themselves as having good track records. E8 matches each investment with a group of investors that were also involved in that particular round. These investors provide assistance to the startup in a variety of areas, including technology, hiring, and expansion. Consider it to be a type of energy incubator of sorts.
Opinion of a professional
E8 is a fantastic opportunity to pitch your firm to a large number of investors who are also industry experts in a short amount of time. Opportunities to network will arise as a result of this. Each investor contributes between $50,000 and $100,000 of their own money to each transaction. They have a vested interest in the outcome of the game.
- Location: Boston, MA and New York, NY
- Funded: $500 million
- Founded: 2005
- # of Exits: N/A
- Notable Investments
CEVG gives seed money to energy entrepreneurs in the early stages of their development. Additionally, they bring decades of energy knowledge to bear on the companies’ growth, in addition to providing financial assistance. Their investment philosophy is that enterprises with goals to reduce climate change while also providing financial profits are attractive investments. Multi-criteria are followed, including clean energy-focused investment, people who are experts, investment returns that must achieve particular standards, pre-money valuations less than $10 million, and enterprises based in the Eastern United States (among other things).
- 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 is a venture capital firm that partners with entrepreneurs who are developing digital solutions to energy grid concerns. Data Analytics, Cyber Security, Distributed Energy Resources, Mobility, Energy Storage, and Operational Efficiency are the primary areas of concentration for the company. They like to lead rounds with investments in the $5M-$10M area, but they may consider smaller amounts.
In the event that your company is a Software As A Service provider in the cleantech field (also known as Energy as a Service), you have a broader range of possibilities. The majority of venture capitalists invest in software-as-a-service firms. While they may be unfamiliar with cleantech, it is your responsibility to educate them on the industry’s growth potential. You will need to use vocabulary that is commonly used by SaaS organizations in order to be successful. Check out this article for such details.
Top 5 Things to Keep in Mind When Fundraising
1. Company Thesis
It is critical for entrepreneurs in the cleantech industry to have a thesis that is effectively supported. What exactly are you attempting to accomplish? What makes you believe it is so important? Where will it have the greatest impact? You may or may not have all of the specifics on “how” you intend to go about it. If you already understood the answer to that question to a hundred percent, you have already solved the problem. Venture capitalists are on the lookout for an exponential problem to solve. They are looking for a problem that will yield a significant return.
2. Expert Team
Experts are required for your startup. A world-class expert advisor, founder, or employee who has demonstrated that they have the knowledge to carry out the promises made in the company thesis is critical to the success of your firm, just as it is for a professional sports club.
3. Business Case
In the event that your company’s thesis is correct and you have the ideal personnel in place, how will you generate revenue? How will you create revenue in the first stages of your business? Have you identified the crucial alliances that you will require to move forward?
Make a thorough business case for your product or service. It is absolutely necessary!
I’ve seen far too many instances of entrepreneurs putting up a weak business case in conjunction with a subpar model. VCs will ask you for spreadsheets, so be prepared. Create a thorough spreadsheet that includes “growth levers” that are built in. If your company is in the Series A investment round or higher, this is critical to your success.
4. The Ask
VCs will almost always inquire as to how much money you are seeking and at what value you are seeking it. Make use of market research! What was the market worth of enterprises in your situation? What makes you so valuable that you are worth the money you are asking for?
You must be able to provide well-researched responses to these questions.
5. In Sync
While the factors listed above are significant, the ability of the founding team to work together is perhaps the most important. The worst thing I’ve witnessed is when the founders’ visions are explained in a different way than each other. If the founders aren’t on the same page, what makes you think the venture capitalists will be?
To summarize, this article outlined the top venture capital firms that are mostly focused on sustainable energy. As entrepreneurs, advisors, and employees in the cleantech industry, it is our responsibility to ensure that a similar situation to that of Solyndra or Enron does not occur, causing VCs to steer clear of the cleantech sector. Cleaning up the environment and using renewable energy sources is one of the “growth levers” for combating climate change, and it is critical that new money enters this industry.
Wishing you the best of luck with your fundraising efforts! Please get in touch with us if you have any questions or require assistance.