ENGIE New Ventures, ENGIE’s Corporate Venture Capital arm, recently achieved its 25th direct investment since its creation in 2014, in H2SITE, a startup specialized in the decentralized production of high purity hydrogen. Being conscious of the impact of the current Covid-19 crisis on its young businesses, the ENGIE fund remains committed to supporting the startups in its portfolio as best as possible. How is it continuing to support its start-up partners at the time of Covid-19? Nigel Purcell, its Investment Director, outlines measures put in place in spite of the current difficulties.
It’s important to bear in mind that ENGIE New Ventures’ relationship with its start-ups is a long-term investment. Throughout the investment period, a venture capital investor must be prepared to deal with all kinds of unforeseen events. From our standpoint, Covid-19 is simply one of the events to be overcome in the life cycle of each of the start-ups in our portfolio. Our relationships with start-ups fall into three categories:
The effects of Covid-19 are different in each case.
“During this period, ENGIE New Ventures has given its start-ups as much support as possible.” Johann Boukhors, Managing Director of ENGIE New Ventures
ENGIE New Ventures is a permanent investment fund with a long-term strategy. This means that we always have a reserve to draw on, unlike other funds that may be at different stages in their investment cycle. Our managing director, Johann Boukhors, said: “During this period, ENGIE New Ventures will provide as much support as possible for its start-ups. The start-ups in our portfolio know that if they urgently need funds – following a shock event such as Covid-19 that has impacted their cash flow – they can turn to us.” The ENGIE New Ventures governance structure enables us to respond quickly, even outside of the monthly Investment Committee meetings.
For these start-ups, our daily business is continuing. ENGIE New Ventures is working as usual, but the situation differs depending on the start-up, the stage reached and our relationship. For example, in the case of a term sheet1 filed before the crisis, we will respect this commitment and follow the normal closing procedure. If the start-up is at an earlier stage, there will normally be a delay: for practical reasons, the due diligence2 required for an investment is problematic if it has to be carried out over a videoconferencing platform. In this situation, we juggle with the elements of the investment process, doing what is possible in the immediate and leaving the rest for later. Consequently, the time needed to conclude new investments may take longer.
The identification of potential partners is continuing by way of contacts made by telephone or videoconference. Under normal circumstances, we would meet at events such as the Cleantech Summits, but these are currently taking place online. Other types of contacts continue, whether initiated by the start-ups themselves or following the recommendation of other investors or people at ENGIE. Nevertheless, the main difficulty lies in engaging in-depth with start-ups, as this generally involves spending a few days with them to discover their expertise. During the Covid-19 crisis, it was impossible.
To sum up, we are increasing investments in the companies in our portfolio due to the current situation, but the process is slower for start-ups under evaluation and for identifying promising start-ups.
Covid-19 is a global shock which, on a commercial level, will have a varied impact on different industries. From the perspective of cleantech investments, certain trends are likely to accelerate, such as the acceptance of digital tools in the industry. Remote working has received a huge boost in the past few weeks. In the long term, it could also represent an opportunity for the integration of technologies such as video, AI, connectivity and automation in the industry.
The impact of Covid-19 will show that the green agenda and the energy transition have become more resilient compared to previous economic crises we have experienced. Today, climate change is seen by many as the new global challenge. As such, there’s no evidence of investor disengagement from start-ups contributing to this change. European governments are aware of the importance of these innovative ecosystems across all sectors, and are currently setting up support programs for start-ups. France, Germany and the UK, for instance, have been quick to act. In the long term, all this may well result in European companies becoming more competitive.
We need to keep a sense of perspective. This pandemic is a global shock the consequences of which will remain with us for a long time to come. For investors, it is part of a long-term relationship and one event among others, an integral part of any long-term capital management process. Since the creation of the investment fund in 2014, several hundred start-ups whose projects echo the ENGIE Group’s drive for innovation have been looked at each year.
It is an ENGIE corporate investment fund that invests in disruptive start-ups to acquire strategic options in support of ENGIE’s carbon neutral strategy. The €180 million fund was set up in 2014, and has offices in Paris, San Francisco, Singapore, Santiago, Mexico City and Tel Aviv. To date, ENGIE New Ventures has invested more than €120 million in 25 businesses around the world, particularly in Europe, North America, Israel and Asia.
1 Summary of the main terms of interest to investors that make up the shareholder agreement.
2 The detailed examination of a company and its financial records, done before becoming involved in a business arrangement with it.