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Energize – 2022 Year in Review

Energize – 2022 Year in Review

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A link to the post on the site for the full post can be found here). Below is also the text. My two cents:

At Energize we have 5 ethos written on the wall. One of those core tenets is “We choose to grow, together”. 2022 was a great year for Energize Ventures and our year-end figures show the early results of the major, deliberate internal investments we are making to better scale and deliver value for our team, our portfolio companies, and our LPs.

We are scaling our team, our value-add methodologies, our approach to impact, and our investment strategies to meet the climate opportunity. Generational firms in climate are being built right now and Energize is motivated to scale with our portfolio and be an enduring investor for decades to come!

Portfolio ⚡️

In 2023, we honed our investment themes at the intersection of software and renewable energy, industrial operations, electrification and mobility, infrastructure resilience, and decarbonization. We grew our climate software portfolio through seven new investments out of our second venture fund:

– $10M Series A in Sourcemap, the enterprise software for end-to-end supply chain visibility

– $50M Series B in NCX, the data-driven forest carbon exchange

– $10M Series A in Handle, the software platform for construction payments and notice management

– $55M Series B in Patch, the platform scaling unified climate action

– $30M Series A+ in Monta, the operating platform powering the EV charging ecosystem

– $22M Series A in SINAI Technologies, the decarbonization intelligence software to measure, analyze, price and reduce emissions

– $25M Series B in  Banyan Infrastructure, the sustainable project finance software platform

We continued supporting our portfolio through four follow-on fundings:

– $200M Series D in Aurora Solar, the cloud-based software transforming solar design, sales and delivery

– $30M Series B extension in TWAICE, the predictive battery analytics software platform

– $66M Series D in Sitetracker, the intelligent deployment operations software for sustainable infrastructure

– $50M Series C in Beekeeper, the all-in-one frontline success platform for the deskless workforce

Firm 🏢

We doubled our headcount throughout the year as we doubled down on our efforts to provide our portfolio with operational and commercial expertise. We welcomed 12 new team members with diverse backgrounds – from seasoned software operators to ESG experts and energy industry professionals. Learn more about our team.

In an important milestone for our firm, we published our first Annual Impact & ESG Report. We believe that by more actively managing our impact and prioritizing ESG issues, we strengthen our firm, add value to our portfolio and help scale the next generation of sustainability leaders. We also became members of VentureESG, Responsible Innovation Labs (RIL) and ESG4VC and signatories of the UN PRI. As we progress in this journey, we’re excited to engage with new partners and collaborators to raise the bar together.

What’s Next? 🔮

We’re excited for the enduring growth we’ve seen so far in 2023 for industries like solar and electric mobility – and for the opportunities this growth can yield for our portfolio of climate software companies. On the firm side, we’re continuing to productize our commercial, operational and impact initiatives to accelerate value creation within our portfolio. We also have some exciting events planned throughout 2023 to convene our climate software network!

Finally, our portfolio companies are hiring! Check out our job board to keep up with the latest openings – 176 as of this writing – across our portfolio and work on the front lines of climate action.

This article represents the views of the author and is provided for informational purposes only. It is not intended to be, and should not be construed as, an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice. Readers should not rely upon this information as a substitute for obtaining specific legal or tax advice from their own professional legal or tax advisors. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities.  Information is subject to change based on market or other conditions.
Energize leads $25M investment in Banyan Infrastructure

Energize leads $25M investment in Banyan Infrastructure

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At Energize we have proprietary data sources that reveal the types of assets being deployed within the energy & sustainability movement. We also have the benefit of focus, and our team has been tracking the funds flow of renewables projects for close to 5 years. While utility scale projects capture the headlines and are a major driver in market growth, the number of small-to-mid scale projects has grown at a stunning annual pace. The constituents in that ecosystem (developers, owners, operators, banks, tax underwriters) have grown in parallel as has the complexity of monitoring and optimizing the number of active transactions.

Enter Banyan Infrastructure. Led by Amanda Li and Will Greene, Banyan is the defacto software platform to help manage the project finance ecosystem. For those that know the startup ecosystem, think of Banyan as the Carta for renewables. Energize led the $25M Series B and Juan Muldoon is representing us on the board. And as is common with all of our investments, we also have a board observer…. with Honour Masters taking the seat. Honour has a specific skill set in/around the financial services and technology landscape and she and Juan are going to be powerful partners to the Banyan cofounders. In addition to Juan, we already have our operating team fully engaged with the company. Exciting times ahead.

The Energize team is always looking a few steps ahead and this investment is years of hard work and I am excited for us to partner with the Banyan team for the next stage of their growth.

The press release is here and the Energize “Why We Invested” post is here.

Axios had a good summary and I have pasted that below, as well:

How it works: Banyan Infrastructure uses its customers’ data to analyze potential returns for different projects and recommends different types of financing structures for project developers, CEO Will Greene tells Axios.

Between the lines: Project financing is poised to become another lucrative asset for investors working with sustainable developers.

  • Banyan Infrastructure is planning for that shift already, Greene says, with long-term goals to move from a SaaS subscription model to a transaction percentage revenue model down the line.

The bottom line: Billions of dollars in newly available funds will pour into project development over the lifecycle of the IRA, and fintech startups are looking to get a piece of the action.

2 Senior Roles in the Portfolio (Not yet public!)

2 Senior Roles in the Portfolio (Not yet public!)

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A company in the Energize portfolio with a focus on renewables is in a big GROWTH mode to meet the market opportunity. As part of that internal investment, the team is hiring for two key positions. The roles are not yet public but if you know of any candidates (or you yourself are interested) please do reach out! We are helping the company identify the right candidates prior to a more broad reveal.

The company is based in Europe and prefers European to Central US candidates for time zone balancing.

VP of Engineering: Reporting to the CEO to develop technical aspects of the company’s strategy to align with its business goals, oversee architectural decisions, evaluate and advise M&A targets from an IT perspective, lead organizational initiatives and grow and develop the technical team.

Looking for 5+ years as a B2B SaaS hyper-growth startup environment with a prior “Head of Technology” and/or CTO title. Technical expertise in platform scaling, API platforms, integrations and M&A.. with commercial acumen as well! This is a technical athlete in a high impact role.

VP of Product: Reporting to the Chief Product Officer to lead a team of product managers on new products that align to the strategy and business goals . The role is primarily operational in focus (build out new and improve existing product managed processes) and the remainder will be strategic (translate business goals into product goals!). Coaching, training, and hiring will be a big part of the role.

The right candidate here has 8+ years of digital product management experience and 4+ years in a VP of Product role with required experience in the B2B SaaS business model.

Track Record Attribution: Relay Races vs. Sprints

Track Record Attribution: Relay Races vs. Sprints

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To deploy capital as a professional investment firm, first the firm must raise capital for the specific Fund strategy. The capital contributors in a Fund vehicle are called “Limited Partners” and tend to be institutional asset managers, family offices, corporates or individuals. There are several ways these firms evaluate a prospective firm (aka “Manager”), the investment Partners making investment decisions, and the strategies being executed.

A common early request that a Manager receives during evaluation is: “Can you please share your track record, by Partner?”

The Energize answer to this specific question is – and always will be – “no”. For the life of me I can’t understand how in a modern, collaborative investment firm there is such an isolated way of evaluating team performance. Do we have a firm-level track record? Of course. But in the excel column(s) where most LPs want to see deal attribution, we leave it blank. For us that ownership and attribution concept simply doesn’t match our culture and our strategy.

At Energize every investor and most members of our operations platform are involved in EVERY investment opportunity… both before the investment is executed, and especially during the investment period.

How? The investor tracking a theme may not be the individual who has the most interest in the topic by the end of a deep dive. The Energize board member(s) and observer that we and the entrepreneur agree upon may be an entirely different individual who has the best founder-firm match. Furthermore, the board seats at Energize tend to rotate every few years as a company’s scale and opportunities/barriers change with the market. We also have two strategies now: ventures & growth, and each strategy feeds off the other, enabling enduring success.

As a thematic investor, the ability for our entire team to bring a “communal prepared mind” to an investment opportunity is one of our greatest assets. Any attribution or compensation structure that rewards or implies individual deals is a flaw in the system. My point here is that when an Energize team member is on the board of a company there is no “my deal” in the association. Rather, you will hear Energize team members say “I represent the Energize team on our investment into [company].

I can see how attribution works at more horizontally spread firms. But even in those situations, I struggle to see how that investment partnership isn’t more than the equivalent of a shared dentist office business model, with Partners renting out the available chairs. Our approach to this attribution is non-standard and the structure has pushed several high-profile LPs away because we are not fitting the regular mold. The most common criticism we receive is the inability for us or the LPs to identify potential or future underperformers. We understand the discomfort with our communal approach, and we are OK with this being a meaningful barrier for new stakeholders (new employees, new investments and new Limited Partners) to consider before opting into the team.

We believe that value creation and business building is a long-term game and the best teams are running “relay races” vs the single runner sprints. As Energize scales, we intend to maintain this team-first approach and I think it will be a positive contributor to the portfolio performance in the long run, regardless of who represents the firm at any given time.

The Targets of Big Balance Sheets

The Targets of Big Balance Sheets

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Goldman Sachs has a podcast called Exchanges at Goldman Sachs. They kicked off their 2023 series with a summary on the M&A outlook for 2023, titled “Complex but Optimistic Outlook for Deal Making”

There were 5 topics in here that jumped out to me for their relevance in the current environment. I also thought these were helpful in simplifying what megatrends the biggest balance sheets in the world are focusing on right now.

Corporate Simplification: investors are looking to invest in companies that have exposure to specific sectors. The economy is being affected and rebounding quite differently depending on the sector and investors are heavily using a lowest common denominator approach to multiples if a company has a sector with material headwind exposure. This is causing spin-outs at larger corporations and firms with more clear growth opportunities to receive more attention.

The Trend of Technology Shift is Still Accelerating: technology companies that help corporates meet strategic goals are still high on the priority list- COVID made clear where certain companies were unprepared in their technology stacks, supple chains, customer engagements. Corproates are still trying to reposition their companies for the increasingly digital economy and finding ways to drive customer value through technology acquisitions.

Focus on ESG is Still Accelerating: most large corporates have long-term strategic goals to better incorporate ESG targets into their businesses. Activists are beginning to launch ESG-specific campaigns.

Private Market Liquidity is High: Private market investors have record cash levels. But these investors are very comfortable, and already imposing, heavy structure on investments. Europe is also more favorably priced (both due to valuation multiples and currency fluctuations) and this is creating US private equity firms increasing deal interest in those markets.

Financing and M&A: Record high cash balances at the Fortune 2000 and investment grade debt is still reasonably priced and available. The ability for large corprorates to get creative with their balance sheets will create a wave of M&A opportunity IF sellers are willing to come down to market on pricing. Rate volatility is currently hurting deal volume, but higher rates wont crush volume – so long as the rates settle at those higher levels.

A summary topic is “Confidence” at the C-suite level. Executives are thinking longer-term and trying to prepare companies to be more resilient so that there is near-term quarterly hits but as well as long-term risk preparation for resilience.

Drivers to “Confidence” at the Fortune 500 level and Series A-D level can be quite different. The startups that successfully emerge from the last few chaotic years will be strong and resilient. Many of our investments that have exposure to “technology”, “ESG” and have “simple” industry and customer value propositions are happy with their current market position.

The Current State

The Current State

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Hello everyone… I hope your 2023 has been starting well! Our team is back and already geared up for another tremendous year. But first, a quick look at the current market.

2022 was a tumultuous year with dramatic public market swings. There are now daily announcements of sizable layoffs from technology giants like Salesforce, Amazon, and Facebook. I believe that these foundational companies have firm grasps on their businesses and foresee top line softening in 2023. With those weakening indications, many software companies are now cutting personnel costs to manage 2023 free cash flow. As a result of muted growth expectations, Energize is now seeing public market valuation declines for technology companies find their way into the earlier stage.

Across the technology markets, we are seeing (whether publicly announced or not) nearly every company reduce current workforce by 10-20%. These adjustments are happening through Reduction in Force events, standard performance reviews, or more managerial tactics (return to office requirements, etc.) I personally believe this “trimming” is probably healthy for the market as cost of capital stabilized to more traditional levels and is forcing more focus at every maturity level.

There is also a bifurcation in the market. While technology budgets and valuations are currently under more scrutiny, corporate support for sustainability and energy transition related budgets has grown materially over the past 12 months. Companies with direct exposure to renewables, the electrification of mobility, materials efficiency and the carbon markets are overachieving. The corporate demands in these areas are overcoming interest rate and recession concerns and we expect that these sustainability markets will be rare greenshoots for the entrepreneurial ecosystem in 2023.

The holding horizon for an investment in the venture and growth investing markets is guided to be 5-10 years. With that long duration, great companies compound value in good and hard years. The best companies compound value and maintain cash efficiency so that they can identify the optimal time to create liquidity for shareholders. 2023 is going to a tougher year in the markets and I do not see many liquidity events. But, energy and sustainability will be uniquely positioned to grow amidst the broader macro concerns. I’m both an optimist and a realist and am cautiously optimistic for our portfolio and investment pipeline.
The Annual General Meeting

The Annual General Meeting

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Yesterday Energize hosted our 5th annual investor day. While these events can be high stress, I enjoy them because they give the team the ability to show our LPs all of the work going on behind the scenes.

The sentiment was positive but cautious. On one hand we have macro concerns and on the other we have a sustainability and renewables market with roaring tailwinds. Execution will drive the best companies to win and will anoint the enduring companies.

At the end of the day portion of our scheduling we took a team photo. I thought it was worth sharing.

DroneDeploy acquires StructionSite, M&A is here

DroneDeploy acquires StructionSite, M&A is here

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We are in the stage of the innovation cycle where capital costs are driving consolidation as investors and customers alike are looking for scale and value. Specifically, big corporates are very focused on moving budget to well capitalized and enduring technology companies and the the tech firms in this pole position are about to be major beneficiaries of this budget consolidation. I believe we are going to see a lot of this M&A within our theme over the next 1-2 years.

Energize has been an investor in DroneDeploy since 2017 and our thesis was reality capture technologies to advance the sustainability markets. We believed that there could be one defacto capture and analytics platform and have witnessed the DroneDeploy team achieve that mission.

Today DroneDeploy announced the acquisition of StructionSite. While DroneDeploy is the leader in aerial capture and increasingly in robotic ground based capture, they were missing the handheld and more indoor capture method. StructionSite brings that technology and customer set to the platform.

This is what the company wrote on LinkedIn:

We could not be more excited to announce our agreement to acquire StructionSite, the leading provider of ground reality capture for the construction industry.

Together, we will create the world’s most complete reality capture platform – enabling users to perform aerial, ground, interior and exterior capture in one integrated solution.

This agreement meets industry demand for and accelerates both DroneDeploy and StructionSite’s roadmaps to build “a single platform to document, inspect and measure the exterior and interior of their assets and infrastructure”.

For more information 👉 https://lnkd.in/d3jnG-5t

It will be exciting to see the new scale of DroneDeploy.

Choosing to Grow, Together- New Hires

Choosing to Grow, Together- New Hires

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Here at Energize we have our “Ethos” on the wall in our main room… and speak about our core tenants frequently. One of those is “we choose to grow, together”. The implication there is that we could stay relatively small and constrained. But, we want to scale with the space so we can continue to serve our entrepreneurs and LPs as the sustainability industry advances.

Part of that scale means bringing on new talent to help us achieve our goals. This week we formally announced that we added 4 new team members. I have mentioned some of them before on this blog, but worth the aggregate announcement as well!

Energize has built out a portfolio services group, (codename coming out soon!) and made two additional hires. First is Jeff Schmidt, Head of Commercialization. We first met Jeff through DroneDeploy and are very fortunate to have him full-time with us here in Chicago. He helps educate our investment team on all-things revenue and Go-To-Market…. and most importantly is an active advisor to our portfolio on their growth strategies in this area. He is already spending A LOT of time with our emerging companies and it is clear his skillset is truly rare. Jeff is also managing the commercialization relationships between our portfolio and our network.

David Yi and I go way back. I first met David in 2013 when he became the part-time CFO for Choose Energy. We worked together through the exit in 2016 and I have long considered him one of the smartest strategically oriented finance professionals in the Bay area. We have had him work with several of our portfolio companies already to get models/fundraise presentations ready and is the acting CFO for 2-3 of them right now as well. Hiring great finance leadership at the emerging stage is hard and we intend to make this a strength and resource for our portfolio.

On the investment side we added Meredith Breach to the Growth Equity platform. She joins us from Vista Equity and has hit the ground running. Her financial and executive partnership strategy is already paying major dividends. She and Kevin are a powerful duo.

And finally, we hired Jarell Mason as a Senior Associate to our Ventures platform. Jarell is a Chicago Booth MBA graduate and spent time in the traditional energy space prior to getting his MBA. Jarell is very active on our research deep dives already and I have been fortunate to work with him on the cybersecurity and OT ideas. He has a few special projects that we will be announcing soon, as well.

We will continue to add team members to accentuate our strengths and complement our weaknesses. Each of these employees makes Energize and our portfolio better. I am excited to see what they can accomplish.
Brief Interview with Axios Pro Climate on State of the Market

Brief Interview with Axios Pro Climate on State of the Market

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Energize’s work over the past few quarters came to public attention this week. As a result I was interviewed by Axios Pro Climate around the state of the market. I liked the direct framing of the questions and wanted to share. Axios Pro Climate has quickly become a leader in Climate tech reporting. You can sign up here, if interested.

Here is the post:

This week we’re talking with John Tough, managing partner of Energize Ventures, a Chicago-based VC that focuses on early- and growth-stage companies in climate tech.

Why he matters: Energize had a big week, announcing lead investments in Sitetracker, which has developed management software for critical infrastructure, and Sinai Technologies, a San Francisco-based decarbonization software provider focused on industry. 

What in your view has been the big story in clean energy/climate tech this week?

  • The Energy Independence & Security Act initially included parameters to rapidly expand transmission lines and renewables-related interconnection requests in the United States. 
  • It now appears that the transmission portion of the bill is off the table, likely impacting both the timelines and unit economics for large-scale renewables projects.

What would you add to the narrative?

  • The best renewables firms were already charging forward and not relying on government funding. Renewables developers are taking lessons from the construction technology landscape and adopting digital solutions that help manage the deployment of increasingly distributed assets. 
  • Critical-infrastructure-focused software can help deliver and manage the increasing scale, interconnection needs, and network management of solar and wind projects. 

By contrast, what’s going under-noticed?

  • An overabundance of decarbonization tools focus on serving the technology landscape, while ironically, asset-heavy and emerging market emitters — where the bulk of greenhouse gas emissions reside — lack access to effective reduction strategies. 

In three-ish words, what change would you make to clean energy/climate-tech investing?

  • Cost of capital matters: Renewables and sustainability-focused capital projects have historically been hurt by rising interest rates that are passed through in project finance mechanisms.