September 12, 2012
Interviewed by: David Snow
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Corporate Venturing in Energy

New, sustainable energy technologies require capital, and traditional venture capital funds are not the only source. Girish Nadkarni, Managing Director and Head of ABB Technology Ventures describes the mandate of his firm, a division of renewable energy corporation ABB. In an interview, Nadkarni explains the range of technologies that his firm is seeking to back, why he is optimistic about marine energy, and why some venture capital firms see corporate venture groups joining a consortium as a “double-edge sword.”

New, sustainable energy technologies require capital, and traditional venture capital funds are not the only source. Girish Nadkarni, Managing Director and Head of ABB Technology Ventures describes the mandate of his firm, a division of renewable energy corporation ABB. In an interview, Nadkarni explains the range of technologies that his firm is seeking to back, why he is optimistic about marine energy, and why some venture capital firms see corporate venture groups joining a consortium as a “double-edge sword.”

Privcap: What are the key areas within energy innovation that your group is seeking to back?

Girish Nadkarni, ABB Technology Ventures: As a corporate venture fund, we have to look for investments which are of strategic value to us. So to some extent we are constrained by where we have a business interest or a strategic interest. But fortunately, being ABB, we have a very large range of interest.

So the areas, particularly on the energy side, we’re looking are renewables and the whole value chain in renewables. We’re looking at energy storage. We’re looking at waste to energy. We’re looking at home automation and smart grids, of course. So there’s a large number of areas in energy we are interested in.

Privcap: How do you decide which opportunities to pursue?

Nadkarni: Well, that’s an interesting question. We start by looking at technologies, again because we’re a corporate fund. There are certain segments we are interested in.

As a financial VC, you can decide this is an area I want to invest in or this is a sector I don’t want to invest in because of the financial or commercial implications. But because, as ABB, there are certain sectors we operate in, there are certain sectors we’re committed to. We have no choice but to look in those sectors. Obviously we make sure that they’re smart investments. But we can’t walk away from segments just because they’re unfashionable at the moment.

So we do look at technologies. We look at emerging trends. And obviously, like any other investor, we look at the team and make sure that that is world class.

Privcap: Which potential energy technology breakthroughs are you most excited about?

Nadkarni: Breakthroughs are obviously always around the corner. And you talk to any entrepreneur, and it’s a matter of months or a matter of weeks of things around the corner. And sometimes it happens. Sometimes it doesn’t.

The idea we are perhaps to some extent excited about and interested in is marine energy. And it’s also an area where there’s a lot of effort and money gone in the last 10, 15 years. The venture community jumped in there five, six years ago thinking it was around the corner. But unfortunately I think they mistimed it a bit.

And as a lot of the venture capital community is realizing, the world of renewable and cleantech is a difficult one. It takes a long time for it to gestate and a lot of money to go in. But we think, given some of investments and some of the companies we are looking at, we do think that the time for marine energy, whether it’s wave or whether it’s tidal is no more than three to five years away. So we think it’s around the corner, so to speak.

Privcap: What role does regulatory change play in the success of your investments?

Nadkarni: The single biggest thing in renewables is, if you look at renewables, for example, is as I said earlier, it takes a long time for it to gestate. So the learning curve takes a long time. And so you go from proof of concept to building these things, et cetera.

The key to having these things is the right regulatory support, in terms of whether we call it feed-in tariff, whether we call it ROCs, as they do in the UK, or some of the other. So they survive mostly either on grants or on some kind of revenue support. And if these things disappear or are somehow reduced, then it’s going to be very, very difficult for any cleantech industry or any renewable generation industry to survive.

Privcap: What advantages does your affiliation with ABB bring?

Nadkarni: In many ways, being a corporate or strategic investor is looked upon as a double-edged sword by many venture capitalists. On the negative side, if I start there first, the concern is we are slow, big, demanding, et cetera. And we have, of course, worked very hard to make sure that’s not the case. Based on experience we have had we are very welcome in many places because we move very quickly and we are responsive and we understand the venture capital community and its needs.

Once in a while the issue arises as to if they take out investment would the company be able to do business with our competitors. And we are sensitive to that. And so if that’s the case, we make sure that we keep a low profile.

From the positive side, we can bring a significant amount of technological knowledge. We can bring a significant amount of support, whether it’s in terms of design, whether it’s in terms of manufacturing, supply chain management. And the single biggest thing we can bring is market access. So if you’re an American company, we can take you to Europe. We can take you to China. We can take you to Asia, or vice versa.

And in the case of energy, unlike a consumer-oriented business, you’re really dealing with large customers as your clients. And very often large customers are concerned about dealing with small startups, from a credit or from a credibility or reliability perspective. And that’s where we can help them by providing the credibility to them to say, look, ABB is behind us.

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