Anya Breen in conversation with Susannah McClintock of Sustainable Ventures: Diversity, growth and drivers of change in the CleanTech space
Susannah McClintock is an Investment Director at Sustainable Venture Development Partners, sits on the London Sustainable Development Commission's Women in CleanTech Steering Group, and is co-founder of a non-profit aimed at improving gender diversity in CleanTech.
Starting her environmental journey in a government funded organisation to promote investment in the waste and recycling industry, she has invested in and incubated businesses from within the Carbon Trust and the Government’s Energy Entrepreneur Fund, as well as holding several executive roles within the industry itself. In all, she has over fifteen years’ experience investing in, shaping and building environmental technology start-ups.
I met Susannah over video link to discuss her thoughts on the ever-evolving CleanTech space and the future of sustainability investment.
What were your original motivations for moving into the sector?
When I graduated from university I joined HSBC on their international management program, and I got to spend time in graduate and early career roles in banking, predominantly in Asia. That was an amazing formative experience career-wise, as well as an amazing personal journey to be living and working in those countries at quite a young age. The reason for mentioning this is that the whole concept of waste does not exist in India: every single item that you purchase and have in your house has value to someone else, to the extent that people will come to your door and ask for your bottles, your newspapers and your bottle lids. I was really taken by that notion of all products having a value no matter where they are in their lifecycle, and I was really drawn to doing something around waste and recycling.
I know that driving diversity is a big part of your objectives within the space currently, can you tell us more about that?
I lead the finance workstream for the Mayor of London's Women in Cleantech, and just recently I launched a new initiative called FiveThirteen with a number of colleagues from the industry, based on SDG5 [UN Sustainable Development Goal 5] Gender Equality and SDG13 Climate Action. We are trying to shine a spotlight on some great female led businesses within climate change, and also bring together a lot of female investors, who are themselves trying to bring more female led capital to more female led businesses.
The stats on diversity in all early-stage investing are horrific but they are as extreme as they get with science and engineering topic areas. You know it's something like 1% of venture capital went to female led businesses in the last 12 months? That feels like a crazy, crazy stat when we know that diverse teams outperform, we know that female led businesses go further with less money, and so there's this combination of social injustice and investors really missing an opportunity to invest in some of the strongest led businesses that there are.
It would be great to hear more about Sustainable Ventures, what is the vertical split there?
Our vision is a world in which the challenge of both climate change and resource scarcity are solved by technological innovation, so we'll only support businesses whose activity directly impacts climate change or resource scarcity. No one can define cleantech, so we have our own verticals which are: food and agritech, building technologies, mobility, future energy (everything around renewables), and then circular economy (everything to do with using resources more efficiently).
There's currently a massive shift towards circular economy driven by digitalisation. Whether it's Uber using vehicles more efficiently or OLIO doing food sharing, the last 5 years circular economy businesses have really boomed through digitalisation that wasn't there before. The other thing that we see is much more AI and software-based planning, algorithmic planning, for how energy is sourced, used, and managed, so whether that's how to optimise for wind farms, the grid, or for batteries. Whilst there is still new hardware there's an awful lot more new software and we now don't see any hardware businesses that don't have an IoT piece on top.
How else has the space changed in previous years?
On the investment side, 15 years ago, it really was ‘there is a cleantech fund and it will invest in this’. Now I feel that it's acceptable for all investors to look at a cleantech or environmental asset class if that's the best performing asset. It's almost no longer a category of its own, it's just the most sustainable way of doing things. We all know that we have to shift everything that we do to be more sustainable, more environmentally focused, and actually there's no reason why every business in the future wouldn't be the most sustainable option. Assuming that the economics are the same and you can make money and you can make a return for your investors, why on earth would you choose brown or grey or dirty when you can choose green or clean. I do really feel that it's now moving that way, and it feels like a tipping point in terms of investment into cleantech.
What do you think this shift is being driven by?
I think the reality is that it's being driven by legislation; oil and gas, energy, utility, had to move because of the quotas that are based on them. I think there is a bit of public perception pressure as well: are the main utilities losing out to Bulb and Octopus because they don't have a fully renewable offer? Probably, a portion of their market share is under threat.
I also don't think that the David Attenborough effect can be underestimated, there has been this galvanising of public pressure, and I think also for younger generations that's now the acceptable level, they make more sustainable choices than the generations before them, partly because they can and partly because of their social conscience. I think predominantly legislation, but public pressure has definitely helped.
Moving on more generally to the investments that you're making in the space, what are the success factors you look for?
The stage that we invest at is pre-seed, often we’re the first money in, so there's not a lot to assess in those companies, in human terms they are like new-borns. My mantra is team, traction and pathway. Do I think this team is credible? They can't already be a unicorn otherwise they wouldn't be coming to me for pre-seed funding, but have they achieved something that's pretty impressive for how long they've been around? Do they have a credible plan and pathway to roll this business out and scale this up? And, do I think that that team can do it?
There's obviously a point around the market, but in general as long as they show us that the market size is large enough, we're looking at what business model they're going to use to capture part of that market. So, I guess the biggest point is what have they achieved so far and is that impressive for who they are, what they started with and how long they've been doing it?
When looking at such early-stage businesses, how has it been possible to drive diversity?
Often the teams will be two or three, and that means that they can be quite homogenous, as we're limited by people that we know, but I do look at whether they have tried to bring diversity into their broader horizon. If they can't yet diversify in their team because their team isn't big enough to do so, have they brought in a diverse group of advisors? Are they partnering with someone? Are they making some strides to show that ‘I recognise that there's a pool of thinking beyond me and some of the people that might look like me and think like me’?
I was actually just talking today about the fact that good hiring is hiring people that know things that you don't know. So, are they making efforts to bring people into their world that will bring diversity and inclusion in?
We've covered how the space has developed, but looking towards the future, the next 5 years perhaps, how do you see things developing from where they are now?
I think a whole load of money is going to pile in. We know we have a finite set of resources, investors are starting to recognise that, the effects of climate change are starting to affect countries and institutional funds, so they're really starting to see it bite at the top and I think there's a bit of ‘I'd rather be seen to be doing the right thing’ from an institutional perspective, they’re happy to showcase the investments that they do make in the cleantech and climate change space. But I also think there's this wholesale shift, if cars are an analogy, a few people are driving electric vehicles right now, from 2030 there'll be no new fossil fuel vehicles, and by 2050 or so we'll all be driving EVs. I think that investment is following a similar pathway, soon all investments will have a sustainability or a cleantech lens.
This interview series is a collection of articles commissioned by Atara Partners with some of the world's fastest-moving technology businesses and their leaders.