In an interview with CleanTech News, Managing Partner, Robert Hokin discussed Greenbackers driving forces, their new virtual pitch, cleantech developments to watch and how best to seek investment in today’s climate.
The effects of COVID-19 on the world of venture are only beginning to be understood. Although reports vary across different sectors, the competitive nature of the industry seems to have only intensified, with the majority of firms reporting increased deal-flow whilst challenged in due diligence due to the unpredictable nature of contemporary markets.
As a result, for cleantech SMEs (small and medium enterprises), raising growth capital from the right investors on competitive terms has never been more important, leaving many in need of support, and introductions to funding sources.
Specialists for climate, cleantech and circular economy investment, Greenbackers Investment Capital offers some thoughts. As summarized by Managing Partner Robert Hokin:
We [Greenbackers] are professional fundraisers, and introducers of entrepreneurs to capital. Usually that’s equity, sometimes its debt, and occasionally its asset or project finance. But securing the capital is the last step in our process.”
First founded in 2013, Greenbackers is a partnership between Hokin, John Steedman (previously at BP Ventures) and Andrew Smith (previously at Scottish Investment Bank), driven ultimately by a desire to accelerate the positive impact on the environment from technology initiatives.
Drawing upon over 4000 funding sources, Hokin explains:
“What we do primarily is catalyse investment and introduce capital into our sector. Although we focus on entrepreneurs within UK and Europe, our base of investors is truly international, and comprises corporate venture funds, VCs that are either in our space or would like to be, angel syndicates, family offices, impact funders, and institutional investors.
We don’t tend to focus on the individual angels, as we’re generally trying to help companies that are raising Series A funds or higher get into the market, but we’ll listen and work with all who express an interest.
We are approached by and always looking for exciting cleantech companies that are well led so that we can shape their offering and ensure it is investor ready.”
A Pitch with a Difference
Alongside brokered introductions, what has evolved into a central part of their operations is The Greenbackers Investment Pitch: a twice-yearly, by-invitation only investment event traditionally held in London.
Addressing the driving forces behind its creation, Hokin explained:
“We went to a lot of pitches ourselves, normally between 20 and 30 a year pre-lockdown, and were frustrated with our personal experiences. There were some great entrepreneurs there, but we didn’t always see a lot of investors in the room. We also wondered what was happening the day after the pitch – pitches can be hit or miss and we didn’t see many follow-ups happening by the events organisers hosting them, their commercial model seemed to be focused more on filling seats than making deals.
So, having already adopted an approach of ensuring the companies are fit for investment, we decided to start our own pitch two years ago – a pitch with a difference, and that difference is that we tightly qualify those who apply for the pitch on both sides of the program, i.e. entrepreneurs and funders. It’s really more of a deal flow event. We also rehearse the entrepreneurs a lot, to make sure that they’re stacking the deck in their favour too.”
With cycles running in both May and November, their last pitch attracted over 60 applications, of which 10 were chosen to present. However, their May 2020 pitch was unlike those that came before it – a change prompted by COVID-19 and the need for social distancing.
“With COVID-19, because of lockdown, we lost the venue so we had to decide whether to scrub it and focus on our November pitch or not,” Hokin began, explaining the effects of COVID-19 on Greenbackers.
“We wound up doing the whole two-and-a-half-hour program online – and it took off. Usually we get 50 investors in the room, but our May webinar had almost 250 participants, mainly funders. It was such a successful program, I would be surprised if we didn’t get at least half of the entrepreneurs funded as a result.”
Aside from the overwhelming increase in traffic, the feedback they received from investors on the May event fell roughly into three camps:
“Many loved the online format and also suggested we make it a little bit shorter. Others still wanted the networking lunch format. I think there’s a strong social need for investors to meet with the teams face to face to test for chemistry and that’s an important aspect to note moving forward. The third camp said they wanted BOTH –the option to have the usual lunch, but if they couldn’t make it on the day, the online process would allow them to catch-up.
So we’ll be aiming to provide just that, both a live event with lunch and as well as an online webcast on the 12th of November at our next Pitch. We’ll start our open call for entrepreneurs in early July.”
Advice for Entrepreneurs
Drawing on 25 years of industry expertise, Hokin continued on the subject of pitching, imparting valuable advice, and insight, for entrepreneurs seeking funding in today’s difficult climate.
“Either side of COVID, investors have been busy,” he began. “They have loads of deals coming at them from a variety of sources. One of the reasons I feel that Greenbackers has been successful is because we’ve been very careful on how and when we approach investors and they appreciate it, so I would suggest founding entrepreneurs, whether they’re using an advisor or not, should do the same.
Really research investors, and not just make scattergun approaches – seek to engage, seek to understand what deals work for an investor and have as professional of a pitch deck as possible.
On the subject of pitchdecks, I think a lot of content is moving towards video and audio, so at the very least I would suggest any pitch deck should have an audio recording. This might be being driven by crowdfunding platforms which are very content-rich. I think a lot of lessons can be learnt from crowdfunders for larger raises.
I think ultimately, it’s about communicating many elements: what their value proposition actually is, the team, the addressable market, why the solution is going to work, how they know, how they validate, how they make or will make money. For investors, it’s all about understanding and mitigating risk so entrepreneurs need to be conversant with how the business plan will be risk managed and risk minimised.
Above all, do your homework, especially on the investors before approaching, and surround yourselves with the best business and strategy advisors you can afford. If you’re UK based there is a lot of financial support right now, like the Bounce Back loan, definitely something to look into.”
CoolTech & the Keys to Successful Investment
With Greenbackers at the cutting edge of cleantech development, when asked about the developments that excite him the most, Hokin explained:
“Sometimes amongst climate tech and cleantech you come across a company that has what you can almost call ‘cooltech’, and one of them is a company called Electro Aero. They were one of our May finalists and they’re electrifying aviation and marine transport.
They don’t build electric aeroplanes or electric boats, but what they do is provide the propulsion systems for those and obviously for a craft of that nature, reliability, longevity, and power to weight is important, and they seem to have really gotten a toe hold in that.
They’re operating the first, and as far as I know the only, commercial small craft flights in Australia. Australia has a very robust aviation regulatory regime, and to have the first operating license to do so – we thought that was quite remarkable. We think these guys are ones to watch.”
I think there’s a triangle between the quality of the core team, the technology and its scalability, the size of the addressable market and how they execute their plan of attack – a bit of a magic soup, but these are just some of the ingredients that made those investments and business models compelling.”
Venture Investment & COVID-19
Discussing the effects of the pandemic on investment practices, Hokin explains that:
“We have seen a number of venture funds hold back some dry powder (funds) to support existing projects under management, so I think there was a bit of a knee jerk reaction when lockdown really started to bite, with investment firms not necessarily withdrawing but pausing their investment activities while they digested the impact on their portfolio companies. I think that’s starting to relax a bit.
I don’t think that the corporate funders have done anything other than just slow down their process a bit, I haven’t seen too many withdraw from the arena.
I think Angels have been the most noticeable ‘pausers’ on opportunities, and– I’m speculating here – it could be because the exchange-traded market (stocks and shares) has had a strong correction – but it’s hard to know how that’s impacted our particular sector. I think that family offices and impact funders are unlikely to be affected by this. Bottom line is we are still seeing deals get done.”
Looking to the future, Hokin says of Greenbackers:
“One thing that we strongly believe in is that post COVID there will be a strong green bounce, with higher prioritisation by corporates on ESG.
Overall, we are optimisitc. We are bullish on the sector by nature – we believe in it, we’re passionate about it – and as far as we’re concerned climate, cleantech, and the circular economy is the only game in town.
Reflecting on their own approach over the last three months, Hokin was clear that:
“We’re not pausing our support program for a second – we’re coming out fighting, we’ve been investing in our back-office systems and streamlining things so we can be even more efficient on behalf of our current clients and clients to come. We’re very strongly committed to this sector, and if anything, we’re accelerating.”
For more information on Greenbackers November Pitch and application process, see the Greenbackers website here.