Lightrock, a London-based private equity firm, closed an $860 million fund in October. This was to help a new generation of founders “take on the biggest challenges of the world.”
In a world where every business claims it is profitable, how can investors discern the wheat from chaff?
Lightrock Partner Kevin Boone Impact AM sits down with him to discuss the fund’s strategies.
You claim you go back to purpose driven entrepreneurs. Can we really make the distinction in these days when almost every business claims a purpose beyond profit??
The Lightrock Climate Impact Fund invests in companies that make a tangible contribution to reducing or eliminating greenhouse gas emissions. These topics align with technology needed to achieve net zero in 2050. They include areas such as the energy transition and decarbonization industries.
We don’t just focus on the “top down” aspect of investments. We also assess each investment for its potential impact using our own impact assessment framework, which is based in market best practices and externally verified and approved by an expert third party.
Only companies that pass a certain threshold following our evaluation will be eligible for investment.
2: What criteria are used to invest in this new fund? What are you looking at?
The fund will make investments with a typical initial ticket size of €10-40m in growth-stage companies in Europe and North America that work across one or more of our climate themes.
We are looking to find companies that are working towards a net-zero economy. Companies must be able show clear and significant greenhouse gas reductions and/or mitigation. We are especially interested in sectors that have not made significant progress in decarbonization, but where the impact of climate change is very large.
We are growth stage investors so we don’t take any science risks (i.e. “Will this work?” We do our due diligence and look for new business validation. These are often the most knowledgeable clients in the industry, often the most successful. in the purchase of products and services.
We are willing to take on the risks of scaling up and cost-cutting, as well as helping entrepreneurs with their challenges in areas like governance, institution building, finance, and strategy. We are committed minority investors who support and engage entrepreneurs. We often partner with like-minded investors in order to provide the best support for entrepreneurs.
3: What are some areas that you have already set aside for this money?
We have supported many companies in this fund across the five themes. These include green hydrogen production, anchoring solar and grid resilience, sustainable wood product, and circular solutions around waste/bioenergy.
We are constantly engaging in areas where technologies with significant greenhouse effects potential are maturing. These include batteries, long-term storage of energy, green industrial processes and carbon capture and removal.
4: What are the most exciting areas of technology that are emerging in the UK?
The UK is showing promise across many areas, including new chemistry for batteries and carbon capture, waste utilization (“Waste 2X”), and household energy management, to name just a few.
5: How do you make a growth plan to attract climate investors when you raise money?
Although the technology is available to reach net zero by 2050, it will take a lot of money to make it happen at scale. Current technology can save about 85 percent of greenhouse gases. Many companies have used early stage capital to explore and develop these technologies. However, investors with more experience and deep pockets will be needed to help them grow and realize the financial potential of their technology.
6: Do people still view this as an impact investment or do investors take credit that there are returns?
Over the past two years, we have seen the tailwinds for the topics we invest with the Lightrock Climate Impact Fund grow stronger. The climate emergency is becoming increasingly urgent and is a key area of focus for all governments, businesses, consumers and businesses. Companies that can provide scalable solutions for these challenges are experiencing strong demand and strong returns on investment, as well impact returns.
We believe that financial and environmental returns can be mutually reaffirmed through the flow capital, talent, brand loyalty, as well as other factors that help companies drive environmental (and sometimes social) change.
The post Lightrock: City AM Q&ADebuted CityAM.
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