How does General Catalyst think about its cleantech portfolio?

I am often asked what are the areas within cleantech that General Catalyst focuses on. Well, that’s kind of a hard question to answer. Despite what other VCs may try to tell you, VCs are opportunistic and would jump onto any great opportunity regardless of space. A better question might be around areas where the VCs may not invest. It is possible for VCs to write certain spaces off for good reasons: LP concerns, capital intensity, IP quagmires, regulatory risk etc…

When asked about GC cleantech investments, I like to talk about how we view our portfolio. Our investments tend to categorize in three broad buckets:

(a) Deep science projects: These are deep technology startups that often emerge out of academic labs. Many materials science based companies tend to fall into this category. Innovations tend to be in labs of faculty that have spent a long period of time investigating the space, and eventually broke ground on something that is totally disruptive and game changing. In addition to the innovation itself, our observation is that faculty that has spent a lot of time in the space (not just the past few years), tend to have a large body of knowledge/work that supports the innovation to get commercialized. These investments typically have a long gestation period before exits (tending to 6-10 yrs), and technical risk is usually high. However, the bet is on something that would truly disrupt the industry and create large value along the way. (Examples of GC investments: Mascoma, Lumenz etc)

(b) Engineering innovations: These investments tend to involve entrepreneurs who have solved one or more hard engineering problems in already well established industries. Investment revolves around commer cializing innovative solutions that would transform the industry and create long lasting disruptive change. Technology leadership in such companies could emerge out of academia as well, but often the innovators have significant practical experience in the space and leverage their intimate knowledge of the pain felt by the industry to find the ‘painkillers’. The solution could be at component or system level. Market risk is often less of a problem since industry dynamics are either well established or well understood, but in addition to technical risks around scale up etc, there is often risk around finding the right channel partners to commercialize the innovation. (Examples of GC investments: Modular Wind, Advanced Electron Beams etc)

(c) Infrastructure/projects: This is an area that VCs have typically shied away from. Project based capped returns of 15-25% IRR are not sexy for VCs. But we think there are some rather interesting opportunities here for investment. That does not mean we do typical renewable energy project development investments. We think a project development company could be a strong investment if they are working in an environment where they have some level of ability, access or control over a scarce resource – and having that creates a competitive advantage for companies that also execute well and prove they can deliver on time, budget and plan. Strong execution, plus control over a scarce resource, allows a developer to not just create value from projects on the ground but also from future pipeline of projects. (Examples of GC investments: SunBorne, C12 etc)


One Response to How does General Catalyst think about its cleantech portfolio?

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