NewNet Investor Profile, Felix von Schubert, zouk ventures

28 October 2008

Felix von Schubert, Partner, zouk ventures

Felix von Schubert on cleantech in Germany, on recent developments in solar, on the need for more capital in the the sector and on breaking into the mainstream.

zouk ventures is a dedicated cleantech investor, focusing on expansion stage cleantech companies in renewable energy technologies, efficiency technologies and environmental services technologies.

zouk also invests in renewable energy and environmental infrastructure projects.

Felix von Schubert has been responsible for the sourcing, managing and exiting of a number of zouk’s portfolio companies. Prior to founding zouk, he spent several years with JP Morgan’s technology M&A and private equity teams. He previously held a research position with the French Ministry of Finance, where he focused on European deregulation. He also advised German corporations while working for the German Chamber of Commerce in Russia.

Board seats include Nanotron Technologies, The CarbonNeutral Company, Sulfurcell (with observer rights) and Zooplus, where he is chairman of the supervisory board.

When did zouk first become involved in cleantech?

‘We did our first cleantech deal over eight years ago, in the carbon space, and this was what led us to focus on the cleantech area in general. Once you look at carbon you have to look at all the underlying renewable energy knowledge within that. About five years ago we decided to focus exclusively on cleantech opportunities.

There was pragmatic reasoning behind our decision to focus on cleantech. We had a lot of experience in the space through carbon investments, and identified that it was an incredible growth opportunity, in Europe in particular. For us, Europe has a clear advantage in terms of technology, market, government support and public awareness. Also, at the time very few people were investing in the space.’

What is your particular area of focus within cleantech?

‘We invest in cleantech opportunities as an expansion-stage investor. Although we do not invest in anything early stage, we constantly monitor the area using sophisticated databases to catch the best up-and-coming technologies.

We have three main themes within cleantech. The first is renewable energy and technology. Within that, solar plays an important part, as well as various wind technologies, waste energy, biogas, biomass and various other energy-based opportunities.

The second area; resource efficiency, is key to our strategy. We define this as including technologies in spaces like energy storage and energy efficiency.

The third area is environmental services technology. This area in particular includes water, water treatment, and condition monitoring technologies. Future developments in all these areas are creating very exciting investment opportunities.

We also manage an infrastructure project finance fund dedicated to solar, and are looking to start something similar with wind in the near future. Going forward, we will be seeking to invest in other infrastructure opportunities in the environmental space with energy as the particular focus. Obviously, there are strong synergies between cleantech investments and renewable energy project investments. We find that this dual-track dynamic boosts zouk’s capabilities, intelligence and deal flow.

Are there any areas at the moment that are of particular interest?

‘I do not think there is a single sector particularly, but a key one for us remains solar. We invest across the whole value chain in this area, and have completed five investments to date in the solar space alone. We think it will remain an important industry and will continue to grow at a good rate. Wind is probably underestimated by many investors and we are currently looking for technology opportunities in various areas related to this.

Another area is energy efficiency, and we recently participated in a $40m investment round for a company called Trilliant. Smart metering technology is one to watch, and we are very happy to be a participant in the sector so early on.’

How much capital do you have under management?

We currently manage close to $300m but expect to substantially increase funds under management over the next two to three years.’

What vehicles do you currently manage?

‘zouk presently manages three funds. On the tech side, one is cleantech dedicated, and the other more generic in focus.

zouk’s solar infrastructure fund, is set to be joined by a wind infrastructure fund of similar structure in the near future.

We get a lot of requests from investors who invest in both areas, and believe it is important to present separate vehicles for both areas and allow investors to choose between technology and infrastructure.’

Who are your investors?

The cleantech industry is progressive and exciting by nature – all investor types are now looking for opportunities in the space. For example, we are seeing quite a few pension funds and a lot of large institutional family offices investing – and with a good understanding of the sector. Slowly but surely, traditional funds of funds are also beginning to display interest, as are some industrial companies, as well as banks and insurance companies are also gradually getting involved.’

How do you identify potential investment opportunities?

‘We are seeing between 50 and 100 opportunities per month at the moment. We have a comprehensive cleantech database developed in-house, with 3,500 cleantech companies which we are actively tracking. We are also very diligent in keeping track of those that do come to us. A lot of companies may come to us too early. In such cases we might keep in touch and monitor their progress, and when the time is right we may then make an investment. As the industry is developing we are seeing an increasing number of opportunities at the expansion stage – it is an interesting time for us, and a busy one.

This process of in-house research is ongoing, but many companies also contact us directly. This is a great benefit of our early start in the space – we are now a fairly well-known name, so deal-flow is consistently strong.’

How many investments do you make per year?

‘Between five to eight on the technology side and probably about same amount on the infrastructure side. Over the coming year I would expect it to stay the same. Our tickets however, which at the moment are between ?5m-?10m per deal, may increase to reflect the requirements of the expanding companies in the market. We intend on staying flexible to optimise opportunities and returns – while maintaining our proven and prudent strategy.’

Which region is of particular interest at the moment?

‘Germany is probably one of our most important markets, certainly within Europe. We have seen a lot of deals there. There are very few dedicated funds focused on the German market, probably because you need to have the necessary language skills and cultural understanding and background to invest there. We have three German-speaking professionals in the team and are looking to add to that and extend our capabilities in the region.

After that, I would say Scandinavia and the UK. We also look at the US, obviously, but less than 25 per cent of our activities are outside Europe. Asia is also presenting some very interesting opportunities; for us as well as a number of our portfolio companies.

In the US and Asia we probably would not lead ourselves, but co-invest if we can add value through our European network. Our investment in Trilliant is an example of this – the round was led by a US fund and we were the co-investor. We were chosen as the preferred investor in part because of our strategic relationships in the European market. As I mentioned before, Europe’s acceptance of cleantech, from finance to producers and consumers, makes it a great place for cleantech companies to expand.’
Is it important to have a good understanding of the sector?

‘I think it is important to understand the technology, and to realise that we look at hundreds of different companies before we invest in one. This is not like other technology investments – the cleantech sector requires a much longer time frame, more capital and different approaches to exit. A lot of the generic funds who are trying their luck in cleantech will face problems if they are not careful in managing these issues.

What are the challenges you face when investing in this sector?

‘I think the industry requires a lot of capital, and I do not think there is enough yet. We believe the industry still needs more certainty on the state support side. A few countries have shifted their stance and the terms of their incentive programmes. This makes it very difficult to plan long term developments in some markets.

I think another very important area is the quality of portfolio company management teams. The industry itself is too young to have produced many of its own cleantech-type CEOs. Those with good experience are in high demand. We regularly have to look outside of cleantech for good management teams to bring into these companies. Naturally, we expect this issue to wane as the sector expands.’

How can you see the industry developing?

‘I think it will become a broader theme. Cleantech today is a very specific area. I think down the line many different industry areas will become relevant as more areas increasingly need to look at energy consumption and efficiency.

The energy component in other industries is becoming increasingly important, as are carbon emissions and other factors. Industries will have to enter the cleantech space to solve problems they didn’t have to think about a few years ago. This has resulted in the industry becoming more mainstream – all of which is a good thing for cleantech.

Today, you can clearly define cleantech as an area, but in ten years many more industries will be related to cleantech in one way or another.

There are a lot of opportunities, though not enough capital. From an investment point of view, I think it is important to recognise that a differentiated strategy is required in order to be successful and optimise growth in the sector. With the right focus and strategy, cleantech is a space in which substantial returns can be generated.’

Copyright © 2008 newnet

Tags: biogas, biomass, cleantech, gp, infrastructure, investor profile, solar, waste energy, wind

This story was published on Tuesday, October 28th, 2008 at 12:37 pm and is filed under profiles. You can follow any responses to article entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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