Startups supercharging the energy transformation
Our fourth episode of the “Uutta voimaa” -series concentrates on supercharging the future. Together with Managing Director of Inventure Sami Lampinen, and Vice President of Helen Ventures Terhi Vapola we discuss investment opportunities in the energy sector.
What are the most important things that venture capitalists pay attention to in the energy sector? In Lampinen’s opinion, when looking at any startup, it is all about the team and entrepreneurial drive. Venture capitalists always invest in teams and give them the energy to take their business forward. Lampinen looks for very simple mechanisms of impact: bottomline reduction or topline growth. He says that the energy sector is not the most typical industry in which venture capitalists work but that revolutionizing existing value chains in the energy sector is a huge opportunity. The most exciting opportunities for startups Lampinen sees close to customer, and especially addressing a global consumer potential for example in energy efficiency.
Helen Ventures is Helen’s corporate venture capital arm. How does their work differ from venture capitalists and what do they invest in? According to Vapola, the same rules, methods and approaches as in venture capital apply. However, energy corporate ventures capital firms, CVCs bring something more to the equation: sector insights, networks, ability to manoeuvre in the energy sector, and also piloting opportunities, data and customer access. The objective is to bring about fundamental change and transform the energy industry. Helen Ventures invests 50 million euros in European startups in e-mobility, renewable energy technology, smart energy solutions, distributed energy solutions, circular economy, decarbonization and digital solutions applicable to energy sector.
How can startups make an impact in the conservative, even dull utilities? Utilities are not dull, but of course regulated, Lampinen says. One of the enablers of success is building as open ecosystems as possible. Startups can play a role in initiating these ecosystems, and bringing competing utilities, corporations, integrators or software players together. Initially the ecosystem may not be a big business for the startup but it can be way to build awareness and momentum.
But what about risk of failures? Ventures capital and corporate venture capital firms alike filter through a huge number of companies, select a top few, and build portfolios of startups over time. Vapola says that anyone investing in early phase companies is playing in a world that is highly uncertain and is betting on trends that are happening in the industry. The investment timeline is 5‒10 years ahead and anything can happen. Therefore, it is expected that failure is a part of the innovation process.
When it comes to the current global situation and its impact on venture capital and startups, Lampinen is optimistic. Everyone has become more conscious of environment, the use of energy and sustainable investing. These themes are becoming more valid than just a few years ago. Also, despite the global pandemic, funding has not dried out. There is a lot of money in venture funds, corporation and family offices, and they are constantly looking for new opportunities. Deal-making is currently taking slightly longer, as investors do not get to meet teams face-to-face, but new tools are utilised to get references, to get to know the entrepreneurs, and to make the investment decisions.
So what differentiates the most potential companies among hundreds of startups? Vapola emphasises the product/market fit. You need to be smart and able to spot the opportunities in the changing environment that are big enough in the market, growing fast and scalable. You have to develop a product that solves a fundamental problem that is so important that people are willing to pay for it. But once more, Vapola emphasises the team, its vision and its execution capabilities. Startups are all about promise for the future, and it takes exceptional people to make it happen.