With fluctuating oil prices and inconsistent demand, some have been wondering what the future of the energy industry will look like. But the participants in the 8th Annual Mid-Atlantic Energy Technology Forum showed that, even in an unstable market, there’s a lot to be excited about.
The April 7 event was hosted by Pepper’s Energy and Emerging Company Groups, in partnership with the Cleantech Alliance Mid-Atlantic. More than 200 attendees participated in the program, which was held at Philadelphia’s Academy of Natural Sciences of Drexel University.
Pepper partner Thomas P. Dwyer, co-chair of the Energy Industry Group and a member of the steering committee of the Emerging Business Group, began the event by highlighting positive developments in the energy tech industry, including a “groundswell of corporate interest” and Bill Gates’ recent pledge to invest billions of dollars in energy technology innovations.
Closer to home, Mr. Dwyer noted that several organizations that started out as presenting companies at previous Energy Technology Forums had gone on to achieve great success. PetroMar Technologies, Inc. was named to The Philadelphia 100, a list of the fastest-growing, privately held companies in the Philadelphia region. SoloPower Systems Inc. was sold to London investment firm Opera Investments PLC in a $220 million deal. And former presenters Preferred Technology, LLC and NavPort, LLC have grown so much that they were co-lead sponsors of this year’s event.
Mr. Dwyer then introduced the Energy Technology Investment Panel, which featured Bruce Chung, managing director, Energy Impact Partners; Patricia Glaza, vice president, Invest Detroit, and managing director, Detroit Innovate & First Step Fund; Karl Khoury, co-founder and partner, Arborview Capital; and Michael Smith, vice president and head of Constellation Technology Ventures, Exelon Corporation.
Mr. Dwyer began by asking the panelists what kinds of investments they were looking for. Chung said that Energy Impact Partners is a relatively new fund and should be closing its first deal in the next few weeks. It has identified a number of strategic areas of focus going forward, including energy storage and customer engagement. Glaza said that Invest Detroit mostly provides gap equity financing (between seed and Series A rounds), and 10 percent of its investments are energy related. She referenced recent oil price instability and said her firm is “looking for investments that are not subject to commodity fluctuations” in order to mitigate risk.
Khoury noted that Arborview Capital is a small, focused firm that specializes in energy and resource efficiency. Arborview spends time building companies, concentrating on taking products to market and scaling businesses. Khoury said his firm’s latest investment was in Rachio, a smart sprinkler controller that helps save water.
As head of Exelon’s venture capital arm, Smith has a unique perspective. He said Constellation looks to invest in technology that could disrupt Exelon’s core business or that could disrupt adjacent businesses. By developing these companies and possibly deploying their technology within the Exelon family, Exelon is able to provide new solutions to its customers.
Mr. Dwyer next asked the panelists if low oil prices had affected their investment choices or if they had negatively impacted any of their portfolio companies. Each panelist noted that, although oil prices are still a hot topic of discussion, the outlook is not as bleak as some would have you believe.
“Oil prices haven’t impacted the way we are looking at companies, though they have maybe impacted valuations. It hasn’t changed our underlying philosophy because our limited partners are interested in combating lack of demand growth,” Chung said.
“We’ve seen this cycle before, and the economy always rebounds. If you’re forward-thinking, it doesn’t matter what industry you’re in,” Khoury added.
Mr. Dwyer then asked the panel what they expect to see in the next year. Both Smith and Khoury said their funds would be making additional investments in 2016 — with Constellation doing another two to three investments and four to five follow-ons, and Arborview doing another one to two investments this year. Glaza noted that Invest Detroit will continue to make investments, but that it has seen a shift in how the fund invests.
“Capital is getting much tighter for our companies, and we’re looking at 24 months for a funding round now. We are deploying the same amount of capital this year, but there is a shift to more follow-on investments than investments in new companies,” she said.
Mr. Dwyer noted that throughout the panel there was a theme of both investors and portfolio companies looking for strategic partnerships. He asked the panelists whether they expected this trend to continue or if the industry would see a return to early-stage venture capital investment.
“We definitely have seen a shift toward companies looking for strategic money. Relying simply on Silicon Valley isn’t going to cut it anymore,” Chung said.
“I don’t see us going back to the frenzy of the cleantech days. It’s a very difficult space to operate in, and the complexity will prevent a typical venture group from investing,” Glaza added.
Mr. Dwyer concluded the session by asking the panelists to discuss the positives and negatives of the Mid-Atlantic energy market. Both Smith and Khoury noted that the geography of the region can be challenging because it is spread out over several states and metropolitan areas, instead of one central location. But this variety can also be seen as a benefit.
“We have fantastic universities and fantastic research institutions throughout the region. Our human capital really sets us apart,” Smith said.
After the panel discussion, Kevin Brown, co-founder and chairman of the Cleantech Alliance Mid-Atlantic, introduced the Energy Technology Company Showcase, where cutting-edge companies had the chance to present their innovative ideas and visions for the future. The companies featured this year included the following:
The event concluded with a cocktail reception in the dinosaur hall of the Academy of Natural Sciences, where attendees could network, meet representatives from the presenting companies and check out exhibitions from other up-and-comers in the energy industry.