Pangaea invests in early stage cleantech companies with world-class advanced materials innovation.
Fuel cell cars are once again in the spotlight! Hyundai is leasing its Tucson Fuel Cell model and aiming for 1000 units by 2015. Honda plans to start selling their model in 2016 while Toyota revealed its Mirai (Japanese for “Future”) that is slated for release this month (Japan) and later next year in USA and Europe. Ford, Daimler and Renault-Nissan are jointly developing technology for “affordable, mass market fuel cell vehicles by 2017” while General Motors and Honda initiated a development partnership last year. Even the New York Times ran a supportive editorial on November 29th titled, “Hydrogen Cars, Coming Down the Pike”. But despite the big headlines and model releases, it’s still a long, bumpy road ahead for fuel cell cars. Unfilled promises and lofty projections have generated a healthy dose of skepticism. At Pangaea Ventures, we have been and are still on the lookout for game changing technology solutions to remove the high barriers in the way of mass deployment of fuel cells (FCs).
An article published recently on forbes.com by Martin Zwilling highlights his recommendations for “10 calculated risks that lead to startup success”. This article, like so many others, provides some great insights for wannabe or existing founders and entrepreneurs. However, what if you’re in a business that is more capital intensive, has longer iteration cycles or addresses more complicated problems. Say, involving materials or chemistry development?
In May 2014, Pangaea Ventures hosted the Advanced Materials Commercialization Summit at the Vancouver Convention Centre. The invite-only event attracted over sixty major multinational corporations, research centers and investors to discuss key issues in the commercialization of products and technologies enabled by breakthrough innovations in the physical sciences. Key topics included energy, electronics, health, and sustainability.
A while back, Pangaea General Partner Keith Gillard wrote a blog about our proactive approach to generating dealflow and evaluating potential solutions to identified market needs (found here). A consequence of this proactive strategy is that we interact with a whole lot of startup companies from around the world. While the majority of these companies are attempting to commercialize exciting materials technologies to solve some of the world’s bigger problems, we tend to be quite selective in where we place our money. For a typical VC, the percentage of companies invested in compared to companies evaluated is 1% or less. There are many reasons for this, ranging from a lack of confidence in the management team’s ability to execute to technology differentiation to IP concerns to expected long time horizons to revenue generation and possible exit.
As discussed last week in my blog entitled Add Licensing to your Business Model Toolkit, licensing is an important tool for the advanced materials start-up CEO. However as I pointed out last week, concerns about value capture and loss of market influence cannot be ignored if the goal is to build a valuable and important business capable of generating venture capital returns. Furthermore, when licensing technologies in energy or industrial markets that often place less value on IP compared to IP-centric businesses such as IT and biotech., deal creativity can be the order of the day. The four tactics described below should be considered in formulating a start-up company licensing strategy:
Venture capital investments in “hardware” companies such as advanced materials start-ups have typically focused on productization and scale-up as the key value creation activities. Partnering in the form of joint ventures, joint development or distribution agreements have traditionally been the business model of choice. Licensing models are often shunned with the argument being that you leave money on the table and your ability to influence is lost while fate is determined by corporate and market forces beyond your control. Valid points! But these issues can often be mitigated and should be weighed against the advantages of licensing, of course in the context of the market dynamics and industry structure that is faced.
NewLeaf Symbiotics is an agricultural biotechnology company commercializing applications of naturally-occuring plant-associated bacteria for improved agricultural performance.
Have you ever heard of ‘KAITEKI’? This is the original concept of our company, Mitsubishi Chemical Holdings Corporation (MCHC), to promote our business activities. KAITEKI is a Japanese word that conventionally means ‘comfortable’ or ‘pleasant’ for which is no exact English equivalent. It’s a ward that is closely associated with state of well-being, symbiosis, and harmony. We express a sustainable condition which is comfortable not only for people, but also for society and the Earth by the word ‘KAITEKI’. MCHC is aiming to realize KAITEKI by solving issues in various fields including living, information & electronics, medical care, environment, and energy as an integrated chemical company whose business domains include Performance Products, Health Care and Industrial Materials. And I believe the key to ‘KAITEKI’ is breakthrough innovation in chemical and material science, which is where Pangaea focuses.
Pangaea presents a Portfolio Spotlight on smart windows company Switch Materials, featuring an interview with CEO Doug Wiggin.