Clean Energy Trust’s Mid-Year Update
Dear Friends of Clean Energy Trust,
Summer arrived with a vengeance this past week here in Chicago after a rainy and chilly start. Temperatures outside pushed 100 degrees, A/C units were whirring, and our friends at ComEd were likely on edge with the increased grid stress. Enjoying a bit of refuge indoors, I took a moment to write this update on Clean Energy Trust’s progress so far this year and to preview some of our priorities for the remainder of 2019 and into 2020.
It’s an exciting time as we are gearing up to celebrate our 10-year anniversary in 2020. Despite our concerns over worsening climate data and stubborn global emissions levels, and our frustrations with Federal dysfunction on energy and climate policy, we are the most optimistic that we have been in years. Outside of the political rhetoric, public sentiment is growing that we need to act with alacrity on climate. Across the country, there are ambitious efforts underway at the state and city levels that give us hope.
Equally importantly, we are witnessing the private sector embrace positive changes in their businesses and operations that will have lasting and meaningful impact. What is most encouraging about these developments is that they are increasingly driven by objective economic and business rationales enabled by technological advancement and innovation. Costs are dropping. Performance is improving. Digitalization and sophisticated analytics are enabling optimization. New materials and chemistries are pushing through past limitations on form and function. Moreover, these transitions are creating well paying jobs and driving economic development. We released our annual Clean Jobs Midwest employment survey in April and the data shows that over 737,000 people are employed in the clean energy sector across the 12-state Midwest region, with 4 percent growth in 2018.
At Clean Energy Trust, we see these positive developments as validation of the “theory of change” that governs our strategy. Namely, we believe that entrepreneurship and innovation are powerful forces that can be harnessed to solve environmental challenges, create jobs, and generate attractive business and investment opportunities.
- We have made 31 seed investments since 2014. This makes Clean Energy Trust one of the most active Seed Investors in the Mid-Continent region of the United States. Please let us know if you would like to review our Portfolio Book with brief descriptions of the companies we support.
- Our investment portfolio currently has an IRR of over 11 percent. This conservative calculation incorporates anticipated losses for certain investments and only marks up valuations when there has been a price established by a third-party.
- Our early investments and active engagement with our companies are helping to attract additional investment into the sector: to date, our portfolio has raised nearly $23 of additional investment for every $1 that CET has invested. And, we are anticipating several additional funding announcements in the near future.
- Our work has compounding impact. Not only do we help “crowd-in” additional capital to support portfolio companies, we also put our donors’ contributions to work again-and-again via our evergreen fund structure. The returns we realize from investments are redeployed into new investments. Here is the breakdown to date:
- We have had 4 profitable exits
- The original investments were funded by $300,000 in charitable contributions
- The investments delivered realized gains of $413,000
- $713,000 was made available to be put to work in new investments
These results buttress our confidence that our model is working. We are now positioned to add “renewable fuel” to our investment engine. As highlighted below, a key initiative for Clean Energy Trust going into our tenth year will be a significant campaign to raise additional philanthropic support for our 501vc® model. We are committed to ensuring that the entrepreneurs and startups in the region have every opportunity to succeed. If you are interested in supporting our work, please reach out to me and let’s have a conversation!
Onwards!
Chief Executive Officer
2019 Highlights
- Clean Energy Trust successfully held its 2019 Co_Invest Cleantech event on May 22nd, highlighting innovations in clean energy and resource efficiency technologies. Ticket sales increased 15% year-over-year, and over 300 people attended the event. The event afforded both new and select existing portfolio companies the opportunity to present before the audience. The event also featured terrific conversations between Mindy Lubber, the CEO of Ceres, and Erin Ailworth of the Wall Street Journal; Jennifer Rumsey, the CTO of Cummins, and Betsy Ziegler, the CEO of 1871; and Pratima Rangarajan, the CEO of OGCI Climate Investments, and Amy Francetic of Energize Ventures. A recap video of the event can be viewed at this link: Co_Invest Cleantech.
- At Co_Invest Cleantech, Clean Energy Trust unveiled the 2019 investments made as part of the 501vc® Seed Investment Fund, totaling $500,000 in 4 companies. The investment process began in the Fall of 2018, with the first of two quarterly rounds of applications and review. Overall, more than 100 companies entered the “top of the funnel” for review and vetting by Clean Energy Trust staff and a network of 70+ outside evaluators. In each round, the pool was narrowed to a subset of companies which were subjected to deeper due diligence. This was further narrowed to a total of 8 companies which were invited to present behind closed doors to Clean Energy Trust’s Investment Committee of outside experts. Based on guidance provided by the Investment Committee, Clean Energy Trust made decisions to invest in the following companies:
- C-Motive (Madison, WI): $200,000 — C-Motive Technologies has developed the first commercially viable electrostatic motor, a lightweight, high-torque motor/generator that runs on the principle of electrostatic forces and eliminates the need for heavy rare-earth magnets and costly external cooling mechanisms. With C-Motive’s technology, engineers designing complex systems can now consider electrostatic motors as viable alternatives to electromagnetic motors and actuators, in addition to pneumatics and hydraulics.
- Darcy Solutions (Excelsior, MN): $100,000 — Darcy Solutions has developed a novel approach to the design and installation of ground source heat pump systems that directly addresses the drawbacks of conventional systems by utilizing groundwater aquifers for heat exchange and inducing advection. With their systems, Darcy Solutions can leverage the superior energy storage and heat transfer capacity of water to decrease loop field size and the number of wells for significantly lower up-front capital costs as compared to conventional systems.
- Nikola Power (Denver, CO): $100,000 — Nikola Power is an energy storage company developing software that optimizes and manages energy storage systems in commercial and utility applications. Their Intellect Energy Management System optimizes and controls battery energy storage systems using advanced control theories and machine learning that maximizes operations and maintenance savings.
- Wright Electric (Wichita, KS): $100,000 — Air travel is by far the most emissions-heavy and environmentally damaging activity the average person undertakes each year. Wright Electric is working towards making aviation more sustainable with a goal of building ultra-efficient single-aisle commercial airliners that enable cleaner travel. Wright’s first aircraft, the hybrid-electric Wright One, will be able to improve fuel burn by 45%, reduce engine noise by 50%, and shorten takeoff distance by 25%.
- These new investments will join our portfolio and benefit from our ongoing “full contact” venture development support. The Clean Energy Trust team has been working hard to provide mentorship, analysis on questions such as market size and product/market fit, modeling support, and overall ecosystem navigation and networking support. The structured fundraising program, which helps portfolio companies with capital formation, has been particularly successful with several new funding rounds to be announced soon.
- Two of Clean Energy Trust’s portfolio companies have been acquired this year. Sun Number was acquired by Solar Investments Inc, and, more recently, Go Electric was acquired by Saft, a subsidiary of Total S.A. Go Electric’s facility in Anderson, Indiana, will become Saft’s global Microgrid Center of Excellence, with planned additional investment and expansion of operations and jobs in Indiana. Clean Energy Trust provided the first ‘outside’ investment in Go Electric, and provided the only outside investment Sun Number, demonstrating the catalytic impact of Clean Energy Trust’s early engagement with emerging companies.
- Clean Energy Trust successfully launched its annual Clean Jobs Midwest energy employment survey in April, with strong media coverage of positive findings (e.g. US News & World Report). This work is funded by the Joyce Foundation and the McKnight Foundation, and is completed in collaboration with NRDC’s Environmental Entrepreneurs (E2) and the Energy Futures Initiative. The data has proven to be a valuable clean energy advocacy tool, providing tangible information and profiles of clean energy workers in the region. This year’s report can be viewed at Clean Jobs Midwest.
- The team at Clean Energy Trust continues to work with our corporate stakeholders on core innovation projects. Examples include technology scouting engagements on behalf of Cummins and ComEd, a refresh of the findings from the 2013 Midwest Aviation Sustainable Biofuels Initiative in partnership with United, and the launch of the US Bank Inclusive Innovation Award to support entrepreneurial companies founded by women and people of color.
- Clean Energy Trust strengthened its governance with the addition of Karen Kerr to its board of directors. Karen holds a PhD in Physical Chemistry from the University of Chicago and has deep expertise in venture capital having worked at ARCH Venture Partners, Intellectual Ventures, and, most recently, as the Executive Managing Director of GE Ventures. Karen joins fellow board members Keith Crandell, Amy Francetic, Ashley Grosh, Sanjeev Krishnan, Veery Maxwell, Michael Polsky, Nick Pritzker, and Tim Schwertfeger.
- Clean Energy Trust is excited to welcome Dylan O’Reilly to the team as a program manager. She comes to Clean Energy Trust having recently completed her Master’s degree in City/Urban, Community, and Regional Planning at the University of Illinois at Chicago.
- Clean Energy Trust takes great care in financial stewardship and is proud that Plante Moran completed its financial audit of Clean Energy Trust’s 2018 financials in June and, similar to past years, issued a “clean” audit opinion.
Priorities Moving Forward
Clean Energy Trust’s priorities for the remainder of 2019 and into 2020 include:
- Endowing the 501vc® Platform: Having demonstrated both the effectiveness of the 501vc® Platform in supporting startups, and the compounding impact of its seed investments, Clean Energy Trust will be undertaking a capital campaign to endow the 501vc® Platform. The goal will be to secure at least $20 million in charitable contributions to support seed investing activity and providing ongoing company support. Based on our analysis and modeling, this level of funding will enable Clean Energy Trust to create a self-sustaining investment and support vehicle for advancing cleantech innovation in the Midwest, making 4–6 investments each year and utilizing returns from successful exits to recycle proceeds into new investments into perpetuity.
- Impact Fund Development: Clean Energy Trust received an Innovative Pathways grant from the US Department of Energy to research, design, and structure an investment fund designed to help address the capital gap facing early-stage cleantech ventures. After conducting extensive market and legal analysis, Clean Energy Trust will incubate the launch of a $35 — $45 million fund that will have Limited Partners (LPs) invested in the fund and target venture returns. It is envisioned that this fund will be spun-out from Clean Energy Trust and operated independently in partnership with Clean Energy Trust. As such, to spearhead this effort, Clean Energy Trust is recruiting an experienced Managing Partner who has worked in an LP-backed fund and led direct investments. Please visit this link for more details on the position: Managing Partner Position Description.
- Impact Measurement & Assessment: Collaborating with PRIME Coalition, with funding from MacArthur Foundation, NYSERDA, and MassCEC, Clean Energy Trust has been working to develop a simple software tool that will advance the field of climate impact assessment for early-stage ventures. The goal is to facilitate investment decisions and capital allocation towards those early-stage companies that have the greatest potential for GHG reductions and positive impact. Currently there are no standardized methodologies, processes or tools for making these assessments for early-stage ventures. An alpha version of the tool was released at the annual ARPA-E Innovation Summit in July; the beta version will be available in October, and the final public release will take place in February 2020. More on this project is available at this link and we are actively recruiting impact investors with interest to serve as beta testers of the tool when released user testing.
- Recruiting Communications and Content Manager: Clean Energy Trust is actively recruiting a Communications and Content Manager to share the story of Clean Energy Trust and its portfolio companies with key stakeholders throughout and beyond our ecosystem. The successful individual will be creative, have an “eye” for aesthetic design and visual presentation, and have terrific writing and storytelling skills. Please visit this link for more details: Communications & Content Manager Position Description.
