7th Annual Green Finance Forum, Jan 21, 2021
PEDC & Leaders in Energy Green Financing: Panel 1 Recap Article
The first panel of the 7th Annual Green Finance Forum focused on Grant and Equity Financing for cleantech start-ups. The panel was moderated by Dave McCarthy which included three panelists from True Algae, ARPAE of the US Department of Energy, and the Maryland Momentum Fund. The session lasted for 30 minutes followed by 20 minutes of Q&A.
Panel Speakers included:
- Nathanial Jackson – CEO, TrueAlgae
- Dr. Madhav Acharya- Technology-to-Market Advisor, ARPA-E, DOE
- Claire Broido Johnson- Managing Director, Maryland Momentum Fund
The session was opened with each panelist giving a brief overview of their organizations and backgrounds. TrueAlgae, represented the test case for Panel 1, with its CEO, Nathaniel Jackson highlighting the start-up’s journey from the ideation phase, to testing and validation phase, to getting funded. Dr Madhav Acharya from ARPA-E, DOE spoke on the public resources elements in terms of funding and resources required for clean energy start-ups. Claire Broido Johnson represented the Venture Capitalist (VC) perspective. Claire highlighted what VC’s look for in a Start-up team before deciding whether to fund.
Nathaniel Jackson of TrueAlgae shared the approach he company employed in securing funds. This ranged from networking, to finding angel platforms, and working to various investment vehicles. TrueAlgae is an algae production company focused on the production of high-quality liquid soil amendment using vertical photo bioreactors. With approximately 3 years in operation, the Florida based company has successfully raised funds of up to $3 million. CEO, Nathaniel highlighted that the fund was acquired by a series of funding rounds, with an early contribution from family and friends. Their initial funds were used to set up a test facility of 0.5 metric tonnes to produce high quality soil amendment. In the initial stages, they focused on serving the small to medium sized berry farms as target customer segment. This eventually led to raising another round through several angel which enabled their expansion to service the California Market. They have recently been able to raise another round of funded from angel groups such as PEDC.
When asked about what TrueAlgae has done so far to reach its milestones, Nathaniel elaborated on their journey to finding early adopters and expanding their market niche. The lean development cycle was their main approach. Initially they acquired funds of $80,000 from family and friend which they then used in developing a prototype of 0.5 metric tonnes. They then went on to test their prototype with about 3 to 4 farms in Florida, Sweet Life Farm amongst. They succeeded in improving the productivity of strawberries by 25 to 39%. This proof of concept ultimately encouraged Sweet Life farms to invest $200,000 in TrueAlgae. This investment fund was used for expansion to more farms in Florida. Market R&D made them realise that California has the largest fruits and berries market. With a target to expand to California, they hired someone to carry out marketing activities there. Initially they knocked on doors of several farms for free testing of their product. Their success there ultimately sparked an interest in their product, and they were able to raise another investment round to develop their current plant facility. Nathaniel advised that they also worked with third party data sources to show validation of their numbers as this beneficial in convincing investors.
Dr Madhav Acharya who serves as a technology Market advisor at ARPA-E discussed the type of support ARPA-E gives to start-ups in the energy space. The support includes customer identification, IP filing, techno-economic analysis, and crafting a business plan. ARPA-E is an agency within the DOE and is focused on funding transformative technology in the energy space. This can range from scope within energy generation, storage, and carbon emissions. Dr. Madhav highlighted that program directors narrow down on 6 to 8 specific themes of focus which early-stage start-ups with proof of concept can apply if they fit into any of the themes. However, every three years, there is an open call to applications where any idea within scope of energy space is free to apply. As 2021 falls under the 3-year period for open call, he encouraged Start-up founders in clean tech with early-stage proof of concept looking to get their idea into the marketplace to apply. More information on how to apply can be found on ARPA-E website.
When asked what milestones looks attractive for ARPA-E consideration, Dr Madhav pointed out that it would depend on if it were a focused program or open call program. Typically, metrics to be met are both technical and business targets for focused program, while the case of open call, negotiations are made with the teams to achieve set targets. Their approach involves setting milestones that would enable the start-ups fail early. The reasoning behind this is to de-risk waste in terms on resources. Start-up team would then be given the option to stop pursuing the idea or pivot to something else that people will buy, thus profitable. Dr Madhav also said that ARPA-E does not fund start-ups still in the basic science discovery stage of understanding what is happening in a particular space and have not figured out how to generate leads yet.
Claire Broido Johnson from Momentum Fund provided insights from a VC perspective for funding early-stage start-ups. She is an angel investor and has been in the energy space since the 90s. Currently, she manages $10 million in funding for the University of Maryland. The funds are available to start-up founders affiliated to the university system. In addition to funding, the organization supports business development, finance, and operations for early-stage start-ups. She pointed out the key things she looks for in a start-up includes market traction, a clear channel to market, and the management team. She highlights that it is very important for the CEO to be coachable, able to appreciate feedback as well as deliver an elevator pitch quickly and clearly. Typically, Momentum Fund offers between $200,000 to $500,0000 in funds and is industry agnostic.
Claire Broido Johnson pointed out that in terms of milestones, it depends on the type and size of the start-up. Momentum Fund currently invests in pre-seed, pre-revenues, and series-A with an excellent management team and solid business plan that show diversity and inclusivity. Sometimes, they could place milestone conditions on the team a requisite to receiving funds. They explained that of most importance is the ability to show some form of traction which prove people are willing to pay for the product or services. She started that article publications are also a bonus as that shows that what the start-up is doing makes sense to people. Also having a channel partner that can vouch for the tech is sound is added advantage when seeking funds. While she personally stated that evidence of revenues is not requisite to obtain funding with Momentum Funds, she pointed out that funding criteria differ for each VCs. Hence, she advised researching VCs to better understand what they expect before approaching them.
Damilola Adeyanju recently completed her master’s degree in Renewable Energy, Enterprise and Management from Newcastle University, UK. She has a background in geology and is interested in the green energy space. She is passionate about developing sustainable energy solutions and is an aspiring clean tech start-up founder.