How to succeed in clean energy investing by really trying

Clean Energy Venture Group has invested in 39 companies since its start in 2005, and those companies have earned more than $500 million in follow-on investments from large venture capital firms and major energy companies. It counts businesses like energy software company MyEnergy — which was acquired by Nest (now part of Google) in 2013 — in its portfolio.

Not bad for an investment group that joined a high-risk industry just before the 2007-2009 recession — more than 90% of clean tech companies funded after 2007 failed to return initial capital.

The private investment group, with offices in Boston and New York City, invests in early stage clean energy startups. It was founded by Daniel Goldman and David Miller, PhD ’07. In 2017, Goldman, Miller, and Temple Fennell, MBA ’14, started spinout fund Clean Energy Ventures. Clean Energy Ventures announced on Oct. 15 the close of a $110 million venture fund. The fund focuses on first-round investments in clean energy technology startups.

In an interview, Goldman and Miller shared insight into what they look for before investing in a company, what they avoid, what’s worked inside their own organization, and more.

What do you look for when you’re considering investing in a company?

Goldman —  “We’re looking at capital intensity opportunities, we're looking for things that can have an impact on global greenhouse gas emissions. We want to see companies that can grow to scale, and when they grow to scale, they can have impact on approximately 100 million tons a year of greenhouse gas emissions, or we like to say maybe over a 30-year period, on the order of 200 gigatons cumulatively of carbon emissions reduction.

“There's obviously lots of ways to measure that. … But we have our own metrics we're using now. We ask the companies to do their own calculations and evaluate whether they make sense in the context of their overall business plan, and that's certainly a key criteria for us.”

Miller — “A core philosophy for us is that the financial performance, the commercial performance of the company, and the impact and emissions savings are inextricably tied to each other. So that if the company is financially successful, then by definition they will have a massively positive impact on the world, and vice versa; if they have a massive positive impact on the world, then by definition they will be financially successful.”

What are some red flags you look for when adding to or managing your portfolio?

Goldman — “We are very hands on, we always have been from the very beginning. Not heavy handed, just hands on. If we're investing in the company and they really don't need our help, for whatever reason, it's probably not a good fit.

“We also use a leadership expert who helps us assess teams, and to the extent a team is not interested in taking an assessment or working with our leadership expert, that's sort of a warning flag for us. We ourselves are constantly learning to improve our productivity and improving how we look at opportunities. We want our teams to be constantly improving, and wanting to improve. If they're not interested in that element of it, it's probably not a good fit with us. We want leadership teams that are really interested in continuous improvement, learning and growing.”

 

How does Clean Energy Venture Group manage its own people?

Goldman — “One of the most important underlying themes we have is a highly collaborative, open environment. I think one of the things we've learned over the years building Clean Energy Venture Group — which turned out to be a large number of people, 30-plus members now — is that groups can make better decisions and get diversity of viewpoints leading to better decisions than each one of us can do as an individual. It might take longer, it might be more complex, it might require compromise, but at the end of the day I think we have made better decisions because of that.”

Miller — “We believe in continuous improvement. We can always get better, and so it's always a matter of how do we be our best selves and our best organization and how do we continuously improve that? And also, the philosophy of finding the absolute best people to work with. Constantly looking at ‘Who's better than me? Who's better than us? Who's going to add to our team so that we can grow our own internal team?’ We're bringing folks that can augment us and challenge us and take us into new areas. That's the same things we advise for our companies, that they always look to bring in people who are even better than themselves.” 

You got your start just before the 2007-2009 recession, which was devastating to many businesses and individuals. How did Clean Energy Venture Group not only survive, but thrive during the economic downturn?

Miller ­— “I think the actual best time to start a startup might be during recession when the economy is down.

“Obviously there are impacts, we have to be careful and we have to look at the markets for our companies — our companies have global markets — but the fact that we're investing in capital-efficient companies that can become profitable without huge amounts of investment, and then grow from there, these are the kinds of companies that can grow along with the economy even if they're starting at a down time.”

Goldman — “A lot of the companies we're investing in are reducing cost or improving performance. If you think about the pressures of a recession, companies may even be looking for those kinds of solutions even more than under normal economic times, because they're doing everything possible to improve their margins, improve their profitability. It becomes even more of a requirement to find lower cost, more efficient, higher performing alternatives during a recession. In some ways it's a good market for selling products and services that are energy efficient, or perform better.”

This interview has been edited and condensed.