A recent example of a cleantech company securing financing from a regional power company may provide a model for other cleantech companies. When seeking financing, emerging cleantech companies need not limit themselves to angels, venture capital, and private equity firms. The list of prospective investors also can include regional power generation companies. Some utility companies have investment funds that make strategic investments in companies with compelling technologies in their value chain such as companies with a focus on renewable energy, energy technology, or information technology.
One cleantech company that recently tapped this resource is GLO AB, a Swedish-based nanowire semiconductor LED developer. It closed a Series B round in September with investors that included Hafslund Venture and Adger Energi Venture, the investment arms of two major power generation companies in the Nordic region.
From a portfolio company's perspective, a strategic investor can provide significant value beyond dollars invested, including access to a wealth of industry expertise and connections. A strategic investor also may become a valuable customer. Having a name brand strategic investor adds an element of cachet and market credibility to a company's public profile as well. From the utility company's point of view, an investment may provide an avenue to develop a strong relationship with a potential supplier of innovative goods or services. In addition, the investment may provide valuable insight into the business of an eventual acquisition target. Beyond a return on invested dollars, a utility company will have its own business initiatives in mind when making and monitoring its investment.
Strategic investments, however, present their own set of challenges. Having an overlapping relationship in which an investor also is a customer and possibly a competitor or purchaser, presents dynamics that need to be balanced carefully. However, if structured right, a strategic investment can be a great way to accelerate an emerging company's growth.