I would venture that ~80% of the people I engage with over email on a weekly basis are also readers here.

So, if I am slightly slower in responding the next 2 weeks, it is because I am out on vacation with my family. Need time to recharge… and am aiming to cap work at 1-2 hours per day. Yesterday had the hours creep back up… but there are exciting developments underway here at Energize. And sometimes (increasingly all of the time) the work feels like the “fun”.

We kicked off our midyear review process here at Energize last week and I held my 1:1s with my team this week.

Every year we have a robust planning and strategy session for the firm’s top 5 goals. Then every individual (investor, platform) identifies how they will contribute towards those efforts through individual and team-oriented metrics. As a team we have truly embraced the structure and it is one of my happier implementations here at Energize.

Investing can become a single player game. Almost all of our development efforts are around enforcing a team approach where we feel success in the firm’s collaborative advancement. I kick off every review with a 2-3 page summary of my sentiment towards the firm’s current status. VC funds tend to define success in longer (5-10 year) increments that match the development of the portfolio. Investment firms can have an even longer horizon as talent and multiple portfolios develop. Balancing the short term quarterly progress with the long-term horizon can be hard. In my midyear review I talked about that trade-off and wanted to share it here:

In many ways I judge our near-term success by constantly asking myself these three questions

1. Are we making long-term investments, and avoiding short-term thinking?
2. Are the correct teammates in positions where their strengths can be maximized?
3. Are we responding to our stakeholders (entrepreneurs, LPs, co-investors) and iterating to stay sharp on near-term execution?

These questions stirred some good internal conversations. I will post some of the takeaways over the coming weeks.

I worked at UBS right after undergrad. It was the mid-to-late 2000s and there was an abundance of press (and hysteria) around two key items: Private Equity, and Oil & Gas prices.

Blackstone, as the face of mega-PE, went public to a heap of fanfare in 2007. Oil and gas peaked in June 2008 at $170/ barrel. Both topics covered CNBC for months. Due almost entirely to the financial collapse, the subsequent 3-4 years were quite dismal for both themes.

PE began bouncing back in the early 2010s and oil-related commodity prices have stayed depressed over the past decade. While there has been some recent resurgence on oil prices, the O&G private equity firms that dominated the markets in the 2000s are far less influential than their earlier vintages. Some of those oil & gas firms are pivoting to renewables.

One of the most traditional O&G names that is attempting a renewables pivot is EnCap. Long a carbon-based investor (and still has exposure there) the firm is beginning to invest a fair amount into renewable efforts. One of those examples is Jupiter Power, a battery developer, where a number of great contacts I met through Energize’s LP base are now working.

Another pillar of the the traditional infrastructure PE world is EQT. They used to invest in more carbon-based firms, but now are moving to next-generation infrastructure, including renewables. They had previously founded O2 Power, a utility-scale renewables-focused developer JV with with Temasek.

EQT announced another interesting deal today, with the acquisition of renewable energy developer Cypress Creek Renewables. Cypress has developed over 11 GW of power and currently operates nearly 2 GW of assets. My suspicion is that EQT is not investing here just for the asset in its’ current form, or even the current trajectory. I suspect that EQT is also going to be adding a lot of capital to EQT’s balance sheet to help Cypress grow to meet the major demand for community solar and utility scale projects in the US. Net while this is a full buyout, I expect there to be a “growth equity” looking incremental capitalization to the company.

This may seem like a more standard deal, but this buyout + growth capitalization deal is specifically new to the energy transition. Most of these transactions to-date have been exclusively project finance or growth equity. The shift for EQT to control ownership shows a desire to be a larger player in the space, and also shows greater conviction on renewables as an asset class. Given EQT’s brand presence, I predict that more large PE players will be entering the renewables arena.

PV Tech also covered the deal here:

Earlier this week one of our portfolio companies, Jupiter Intelligence, announced a strategic relationship with Guidehouse. Guidehouse and Jupiter created a strategic alliance to help utilities quantify climate risk and build resilience. As the energy transition intensifies, energy providers must create and implement integrated plans to address climate resilience. Guidehouse (formerly PWC’s public sector consultancy) is a leading global provider of consulting services to the public and commercial markets, with broad capabilities in management, technology, and risk consulting.

Many technology companies actively avoid working with consultants to deliver commercial traction. It implies a few negative traits to the sale:

1- Indirect access to the end customer

2- Implied lengthy integration or sales cycle

While there is no universal rule, I tend to believe that consultancies, like Guidehouse, can be a very important part of a start-ups journey. I see 4 main reasons:

1- Validation and trust: Big corporates have been burned by committing to a startup, only to see that NewCo go out of business…or worse, be adopted or acquired by a competitor! Consultants vet the startups and will maintain the technology relationship, and find an alternative, should the startup go down hill.

2- Corporates require white glove service: if you are an early stage startup, you are likely going to get overwhelmed with corporate demands. The consultancy helps manage those requests (and bills hourly, accordingly!).

3- Finding budget: If your technology is new, or solves a new problem in the organization, consultants can work wonders in helping you find the internal champion, and budget. Their presentations will prove RoI and then also identify the best groups in the organization that will benefit from the new technology.

4- Reference and Distribution: Consultants make money on advisory services and integration services. With a new technology start-up, the consultant makes $ from both opportunities. With a proven ability to help a client, a consultant can quickly replicate the offering for the other, large customers. The start-up is essentially a medium for the consultant to grow a relationship with a corporate. But, all three sides win: more tech sold & adopted, more digital corporate, well-paid consultant.

Guidehouse checks a lot of these boxes for Jupiter and I am excited for them to help address the energy and industrial verticals within the Fortune 2000.

Kevin Stevens tweeted the below about how cars are going digital – and posits how a more digital mean of transport requires investment into more traditional IT themes: data analytics, cybersecurity, etc. Check out the graph below. It will surprise you.

Everything about the current state of the energy transition is better. We have better people working on the companies, and making investments. We have better market conditions. We have better acquirors. I am seeing this “better” / next level improvement in our people and market conditions on a weekly basis now. Here are a few examples, with more to come.

Case 1- The Energize Team: I was fortunate to draft the first real investment memos at Energize back in 2017 with SparkCognition and Nozomi. And I am pleased to say that our process of identification and evaluation improved with each passing year. I taught that investment approach to Juan and Tyler and Katie and this past week I was walking by a conference room and I saw Tyler trading notes with Mark and Eileen and developing an investment memo that took some of the original strengths but expanded in certain areas. The company and analysis is world class and our system is working. I didn’t pop in, just smiled and thought: “the next generation is better… And already here” and was very happy about the arrival.

Case 2- The Energy Transition Acquirors: Last week a recently IPO’d energy transition company (NOT an Energize company!) was trying to acquire a Series B start-up within our investment pipeline. After a split moment of annoyance I was as incredibly pleased (and similarly happy as my earlier team stepping-up observation). Why? Our best energy transition companies of the most recent wave are graduating from start-ups to platforms that will implement strategic M&A. Unlike most of the industrial buyers over the past decade, this new wave of energy companies understand the value of growth and is willing to pay growth multiples for start-ups that align to the energy transition.

This exit option has NEVER existed before for start-ups or investors specific to the energy transition. I’ve witnessed this type of exit pathway strength within traditional IT and wished for that to come to the energy transition / sustainability. That M&A exit opportunity is now here.

With growing investors and more exit options, the next generation of the energy and sustainability transition is already upon us – and is about to get far more exciting.