The number “10” has been particularly prominent in my thoughts as of late. Perhaps the end of the decade prompted me to reflect on the past 10 years and to look forward to the next 10? Perhaps my youngest daughter celebrating her 11th birthday has left me acutely aware of how quickly 10 years roll past? Or, maybe, it was 10 years ago when the Chicago Blackhawks ended their epic Stanley Cup drought by defeating the Philadelphia Flyers? In any event, I have decided to celebrate the number by highlighting 10 things to know about Clean Energy Trust.
1. This year is our 10th Anniversary!
There’s that number again! It’s hard to believe that over 10 years ago Nick Pritzker and Michael Polsky shared with each other their mutual frustrations that the Midwest was punching below its weight in cleantech commercialization. Being men of action, they set out to do something about it. They recruited Amy Francetic to be the founding CEO, secured a 501(c)(3) exemption for the organization, and went to work. Today, Clean Energy Trust is the leading organization working to find, fund, and grow the region’s most innovative startups working to better the environment.
2. Although our name is Clean Energy Trust, our work transcends energy and electrons
Yes, the majority of our startups are working to provide clean energy or enable the better and more efficient use of energy. However, with the goal of bettering the environment, we also support innovations that deliver solutions for decarbonization and environmental sustainability. As such, we are working with exciting technologies involving water, agriculture, bioproducts, recyclable materials, and sustainable proteins, among other innovations.
3. We are based in Chicago and we support entrepreneurs and startups across the Midwest and then some…
Our mission is to support high-potential entrepreneurs and startups working in underserved, undersupported markets. Originally, our target geography encompassed the core Midwest. As we strengthened our organizational processes, and added resources, we’ve broadened our geographic focus to include Pittsburgh to the East, Tennessee and Kentucky to the South, Denver to the West, and points in-between. We are open to considering additional markets, but we will do so only with strong funding to underwrite the expansion.
4. We do not maintain a “brick and mortar” incubator space by design
We are not in the real estate business. Rather than rent space, we believe our time and resources are better spent working directly with startups to make them successful. We also believe there are many sound reasons why startup companies should remain in the communities in which they were launched. For instance, the intellectual property of nearly half of our companies originated at universities in the region. We believe it makes a ton of sense for these companies to stay close to the professors, labs, student workforces, and other resources that gave rise to their innovations, whether in Madison, Ann Arbor, or Columbus. Moreover, what could be better for communities navigating a post-industrial transition than to witness the emergence of startups pursuing one of the greatest economic opportunities of all time: decarbonization!
5. We make investments to demonstrate that there are financial rewards in supporting early-stage startups working towards a decarbonized and an environmentally sustainable future
Venture capital is not supporting the innovation necessary to address our environmental imperative. According to Pitchbook, over $646 billion of venture capital investments were made in the U.S. between 2010 and 2018. Sadly, less than five percent of these investments went into cleantech startups and only $400 million went towards seed-stage investments. Promising innovations risk dying on the vine!
Clean Energy Trust certainly can’t deploy enough capital to singlehandedly fix this problem. However, we can demonstrate that investing in early-stage cleantech startups can be financially rewarding. To this end, we have made 31 investments since 2014. Our company’s survival rate is 90 percent and our portfolio has a conservative internal rate of return (IRR) of 10 percent. Most importantly, we’ve been able to attract over $135 million of additional investment into our portfolio companies. We call that leverage!
6. Our Investment Committee helps us see around corners
Early-stage investing will always be fraught with “known unknowns” and “unknown unknowns.” Given this ambiguity, it is essential to get a handle on the “knowns.” We have assembled some of the most experienced and active investors from venture capital and industry to help us navigate these challenges. Our Investment Committee is world-class and helps us see around corners to identify both opportunities and challenges so that we make the best decisions possible. We are grateful for their support and their commitment to our work.
7. Our open process creates an opportunity for founding teams led by underrepresented entrepreneurs
Launching, funding, and growing clean technology companies is difficult. It is even more difficult for founders who are women and people of color. We are proud that 55 percent of our portfolio companies have founders who are female or people of color. We attribute this remarkable statistic to the fact that we run an open process. Unlike most traditional venture capital firms, we don’t require warm introductions from an exclusive network of “friends” in order to consider an investment. The best minds need to be working on the best solutions to address the climate crisis and this requires being inclusive.
8. Our revolving model amplifies the generous funding we receive
We make our investments through our 501vc Seed Fund. The Seed Fund is designed to be revolving and we reinvest our investment returns into the next crop of promising startups. We significantly amplify the philanthropic support we receive by putting these grants and contributions to work again and again. For example, we have realized 4 exits since 2014. Our original investments were made possible by $300,000 in grants. The gains we recognized from these investments totaled over $413 thousand. As a result, we were able to reinvest over $700 thousand in new companies, translating to a 2.4x amplification of the original grants!
9. We are a small team, but we punch above our weight
There are only 8 of us on the Clean Energy Trust team. However, we have learned to bootstrap and build valuable relationships. We are fortunate to be in close proximity to both Northwestern’s Kellogg School of Management and the University of Chicago’s Booth School of Business. These top-ranked MBA programs have venture lab courses that enable super-smart students to work at Clean Energy Trust as part of their coursework. Clean Energy Trust benefits by “flexing out” its team with very smart and hardworking students, and these students gain experience identifying investment prospects, performing due diligence, and learning how to value and structure deals.
We also benefit greatly from our external network of mentors, evaluators, and subject matter experts. Cultivated over 10 years, we are fortunate to be able to draw on the expertise of these generous people when seeking to understand new technologies or when evaluating investment opportunities. It would be prohibitively expensive for anyone to try to build an in-house team with the range and depth of expertise embedded in this network.
10. We enjoy terrific support from federal, state, philanthropic and corporate funders
As a 501(c)(3) public charity, we rely on grants and contributions to fund our work and investments. And, over 10 years, we’ve built a strong network of stakeholders and supporters. We’ve been fortunate to receive funding from the U.S. Department of Energy, the State of Illinois, large foundations such as MacArthur, Joyce, and McKnight, and many family foundations and individual donors. We’re equally grateful to have developed strong partnerships with over 30 major corporations from a variety of industries. Our corporate members and partners value our expertise and recognize that Clean Energy Trust provides a valuable window into the region’s ecosystem. Moreover, our corporate members and partners recognize that we serve an important role in advancing innovations that may one day transform their respective industries. A heartfelt thank you to all our supporters!
We are looking forward to our next 10 years and continuing to work with a broad and diverse range of entrepreneurs and startups. What we need to see this upcoming decade, though, are some outsized successes in the region. Quite frankly, we need to see some fortunes created. Such large outcomes will inspire other entrepreneurs, attract investors, and drive reinvestment. We’ll be doing our part to help make this happen.