From the CEO
31 Aug 2016
Our portfolios’ combined revenues for the first half of 2016 were up 214% compared to H1 2015, and are already higher than the full year in 2015. This comes after an already very impressive 2015, with 200% revenue growth compared to the previous year.
Online cosignment store Swap.com and renewable energy provider Nocart both stepped into multi-million EUR revenue levels last year and will clearly be outperforming those levels this year again, with Nocart having already announced 12.9 MEUR worth of signed contracts and Swap.com crossing 1 MUSD in monthly sales. Solar thermal company Savo-Solar, listed on First North Finland and Sweden, also had strong sales in H1 with 3MEUR, doubling the sales of the corresponding period last year. Sofi Filtration, which does fine particle filtration for recirculating water, has had a market breakthrough during H1 with a total of 8 new installations sold, which is more than the company has sold in its whole 5-year history. Our latest investment, restaurant food waste minimiser ResQ Club, grew its registered user base to over 30,000 during H1 and the monthly gross value of food sold via the platform reaching 47,000 EUR in the month of June alone. The company has since launched in several cities and it needs to be noted that Resq Club was founded only year end 2015. Software-As-A-Service company Nuuka now has over 600 buildings connected to its building sustainability management system. Enersize signed a revenue sharing deal with Foton car factory in China, which produces more than 70,000 vehicles each year and has over 3,000 employees. Foton operates more than 10 similar factories in China. Enersize also received its first major payment of 300 000 EUR from an ongoing revenue sharing project.
I could hardly be happier with how the combined portfolio is currently performing. However, none of this happens automatically, and it does not mean that there have not been considerable obstacles and barriers to this development along the way.
In terms of continued accelerating revenue growth of our portfolio, the biggest risk is no longer whether the technologies work as they should or whether the market finds the offering attractive enough. The biggest risks relate to securing an adequate amount of growth capital and top quality human resources to back the growth opportunities ahead. Two factors that also go hand in hand.
Securing funding to fuel growth of our companies has therefore been our key priority and has taken up a lot of our time in H1.
A few examples:
- We handled the recent funding round for our industrial energy efficiency company Enersize and we also raised a project financing package to fund the initial installation cost in a number of upcoming revenue sharing projects. We have also strengthened the company’s management team. Enersize is now performing extraordinarily well on the Chinese market, partly as a result of the timely injection of customer project financing;
- We gathered funding for a Special Purpose Vehicle (SPV) and took the lead investment role in the recently closed round of 3 MEUR in Watty, which develops software to understand household energy consumption. We had less than 1% of Watty before this round, as it was a peak hole investment to check them out for a year. After being impressed by their achievements we would go so far as to say that we believe Watty’s software-based break down of energy use will be the energy bill format of the future. Our ownership increased from 1% to 4% in the funding round, however we only invested a minor part and got most as sweat-equity for arranging the round. This is a good example of how our accelerator model delivers value to our shareholders while ensuring the growth of our portfolio companies;
- We raised another SPV and also did a small share issue of our own to be able to participate in the latest funding round in Swap.com. This funding round has now brought in approximately 8 MEUR into the company.
- Finally, we also assisted Sofi Filtration and Nuuka in funding rounds, with Sofi Filtration securing funding last period and Nuuka currently fundraising
H1 has been a crucial period for several of our companies. One during which the situation for several of them has been, as it is popularly called, make or break. The increased efforts to assist has required more travelling, working straight through summer, and using somewhat more external resources. Every penny has been well spent and this increased effort is what has resulted in us securing portfolio growth as well as us being able to maintain, and in some cases increase, our ownerships in several portfolio companies during the period. The value implications of this as a shareholder are significant.
Key priorities for shareholder value going forward
Increasing our international investor networks
You may have noticed that our portfolio is a group of companies more or less ‘born global’. This is a pre-requisite when we choose our investment targets. In order to support and accelerate their development, but also to make sure that our own unique listed share gets the international attention it deserves, we decided to become a more globally visible company ourselves. I say our share is unique not as a buzzword but because no other listed share gives shareholders a diversified portfolio of the top Nordic cleantech growth companies.
We started thinking about pop-up offices in selected places across the globe when we realized that more or less every time we go on a trip to one of the global hot spots for Cleantech we come back with valuable connections that lead to new investments in our portfolio companies, or new market introductions. So instead of travelling back and forth we have decided to truly dedicate ourselves to building awareness of Cleantech Invest and our portfolio on selected, suitable geographic markets, and build long lasting relations with investors in those places. So far, we have opened ‘pop-up’ offices in Stockholm and Los Angeles and are starting tomorrow (!) in Berlin.
Those of you following us via social media, newsletters, events and other channels will notice that we have stepped up our communication efforts quite a bit. This is a conscious effort. We see a lot of value in having a big following, it makes it easier to reach people when they know who you are already, and it makes the threshold to invest in our portfolio companies lower if they are already well known and have shown investors how they proceed. And finally, for a company like ours with 15 different companies to describe, our own share also needs to be marketed and explained to new and existing investors. Our number of shareholders clearly shows that our following is increasing. We now have 2,639 shareholders compared to 844 in the corresponding time last year. We are proud of what we have achieved so far but will do even more on this front. Make sure you follow us as we set a new bar for shareholder communication We have plenty more in the pipeline!
Securing ownership and growth
The combination of the two is extremely important. To be able to defend ownership or in some cases even increase as a target company performs well is in reality one of the biggest challenges in early stage investing. Our companies are now doing funding rounds that are sometimes size-wise completely out of our investment capacity. We have been told often that we would not be able to maintain our ownership stakes through our portfolio companies’ growth journeys, yet we have for the most part managed to do just that.
The term Special Purpose Vehicle (SPV) demands a bit of explaining in this context. This is simply a holding company where professional investors that we know well (and who are interested in entering that specific company) invest together with us. It is an efficient way for us to secure additional ownership in our portfolio’s strong performers using legwork instead of money, and for the growth company it is a way to secure funding from an entity they already know and trust. We have raised two SPV’s in the last three months (one in Watty and one in Swap.com), which is an impressive feat in itself. Both companies are performing well, although in very different stages of development.
In one of our super performers, Nocart (yes that is the correct term for it), we converted a previously given convertible loan. The conversion increased our ownership to 21.5% from 20%. This 1.5% may seem like a small increase but considering our value expectations for Nocart, it is anything but small and another example of how we increase ownership during strong growth.
Exit and IPO preparations
We are approaching suitable points at which to exit or stock-list several of our firms. To successfully do this requires a couple of things, the most important being the stage of business development of the company itself but not far down on the list is the company’s ability to communicate its case and continuously deliver results to the market. We are already working hard and will continue to do so in order to put several of our companies in positions to successfully list, and successfully grow in value once listed.
Finally, some predictions...
We see no signs of growth slowing down during the second half of the year, on the contrary, we expect strong sales development for our combined portfolio this year. We expect that Swap.com and Nocart both become 10+MEUR revenue companies this year. We also expect strong revenue development to continue in Enersize, Sofi Filtration, ResQ Club and Nuuka Solutions.
We take pride in having again been able to deliver strong portfolio value growth. I have said it before and I will repeat it: By the end of 2017 we will be the leading European Cleantech accelerator. One yardstick for this is obvious: companies that enter need to grow quickly while in our arms. The other yardstick, obvious if you are a shareholder (which by the way we all are, management and board), is our ability to generate superior returns for our shareholders. This is how we will ultimately be measured. We know this and embrace it.
Our share has developed very well but it is merely a reflection of how our companies have grown, and it is important to note that our portfolio companies and our growth stories are still in their infancy. We aim to build a number of global success stories and expect strong growth to continue into the foreseeable future. Join us or stay with us as we maximise the positive environmental impact of our companies.
The time to harvest is approaching…