Cleantech resurgence expected as Element 8 pumps $3.3M into startups in 2015

Madeline Vuong, GeekWire | 3/7/16 GeekWire Logo

Angel investors of the Pacific Northwest collective Element 8, which focuses exclusively on early-stage clean tech companies, put nearly $3.3 million into 17 startups this past year.

That’s the smallest investment made by the angel group since 2011, though co-chair Eric Berman says that clean tech investing is rebounding after hitting a recession in the latter half of the 2000s.

“Clean tech has really hit a turning point,” said Berman in an interview with GeekWire. “Years ago, the kinds of people doing the sustainability thing were doing it out of a green ethos, a desire to be sustainable. Today, partly because costs have come down, you can make the argument for clean tech totally on economics. That’s a game changer…to be able to say you should install solar panels not because you care about your carbon footprint — though if you do and act on that, more power to you — but…because it saves you money on your electric bill.”

Companies receiving first-time investments from the Element 8 angels during 2015 included: Apana, Axiom Exergy, Building Energy, ConnectDER, Energy Storage Systems, IntelliHot, PotaVida, and Honeycomb. Follow-on investments included: SparkFund, TBF Environmental Technology, Indow, Empower Micro Systems, WISErg, and Green Canopy Homes and associated funds.

Since its founding nine years ago, the members of Element 8 have invested nearly $23 million in 63 companies across the clean tech and sustainability industries. The money invested by the angel group, formerly known as the Northwest Energy Angels, came from a number of individual investments from its nearly 70 members, ranging from traditional equity investments to loan and debt financing to the Element 8 Fund, which is new as of spring of 2015.

“It’s not about solar panels, but about the marketing and financing — how to get people to sign up for solar on their rooftops or how to make that installation cheaper now that panels themselves are inexpensive.”

In the past five years, the amount invested by members of the collective has varied between a record high in 2014 of $5.7 million across 14 companies to the $1.3 million invested in 2011 in 10 total companies. Each year brings different trends in investment amounts and the number of companies that get funded, but that shouldn’t be used as an index of whether clean tech is a hot investment area right now, Berman said.

Rather, the investments by Element 8 members depend on the number and quality of deals that particular year and on the individual members’ interest and ability to invest during that time, which Berman says do not always reflect what he sees as promising changes in the clean tech market.

In fact, 2015 was a big year for clean energy investing globally with $329 billion invested, according to Bloomberg. That’s up 4 percent from 2014’s revised tally of $315.9 billion invested in clean tech startups.

Part of this resurgence is that clean tech now cuts across multiple areas, like financial technology, the Internet of Things, data analytics, and more, Berman said in an interview with Xconomy earlier this year.

But the sector also is shifting as raw technologies like solar panels and fertilizers have become cheaper and more readily available. Rather than focusing on technology as the core of their solutions to sustainability problems, clean tech companies now are becoming more oriented toward the business problems of sustainability, offering marketing and financial solutions.

“Perhaps 8 or 9 years ago, we were seeing a lot more companies clustered around a core technology, like solar efficiency or biofuels,” said Berman, a former Microsoft and Expedia manager who serves as co-chair of Element 8. “It’s not about solar panels, but about the marketing and financing — how to get people to sign up for solar on their rooftops or how to make that installation cheaper now that panels themselves are inexpensive,” he said.

Across the Element 8 portfolio, Berman reports changes in the types of companies funded by investors since the downturn in clean tech investment. In the first years of Element 8, most companies were simply selling a technology. Now they are developing energy storage, water, and agriculture startups focused on efficiency and cost-savings, Berman said.

“The first fuel, they always say, is efficiency,” said Berman. “Now, clean tech companies are helping consumers to become more energy or water efficient in a variety of ways…so I think we’re only going to see more of them in the future.”

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