Green Giants – Episode 31

Todd Crescenzo (01:29)

Sure, yeah, and you did a great job in introducing the firm, so I’ll probably repeat some of that and then come into what differentiates us. As you mentioned, Clear Creek, we are focused on investing across the food, water, and energy sectors. We do that through a lens of innovation and sustainability. And we do that in companies that are really driving climate solutions and climate resiliency. We do that, as you mentioned, as a multi-stage investor, with the exception of we don’t seed or pre-seed. So we really look to not have the technical risks of a lot of these deep technologies that we invest in and look to enter at a commercial inflection point.

And, as we all know, in, sort of the clean tech, renewable energy space, energy transition more broadly, that commercial inflection point happens at different times, right? So sometimes it could be a Series A, sometimes it could be a Series D. And that’s why we really wanted to take the multi-stage approach. And that is what we think differentiates us as investors. On top of that unique approach, one of the key value propositions that we bring to portfolio companies that we work with is our fund structure.

It is also unique. It’s an evergreen fund. So we have no vintage. We have no end dates. That allows us to really be a value add partner at these companies. We typically like to co-lead or lead rounds of financing in the private markets, sit on boards either as a director and observer and be a value add partner. And I think most of us in this space understand that a lot of times, these deep technologies take more time and more money than people realize, right? And that’s not through anyone’s fault, it just is what it is, depending on where we’re at in the cycle. And our fund structure gives us that unique, creative and flexible approach to underwriting and being a long-term capital provider. So that’s kind of us in a nutshell. And I think, again, the differentiating features are the multi-stage approach and the fund structure that allows us to do that in this area.

Wes Ashworth (03:21)

Yeah, no, I love it. And we’re excited to get into this topic, I think, from the lens of the investment side of the equation. It’s a question that gets asked a lot. People want to know about it. And looking at just 2024, I think the projections for global investment in clean energy technology and infrastructure was projected to reach $2 trillion, so nearly twice the $1 trillion allocated for fossil fuels. So, investment is happening, it’s happening frequently.

So from your perspective, when you’re evaluating a renewable energy company or clean tech company for investment, what are the key factors you consider? And then secondly, like what should executives prioritize when positioning their companies to attract funding from firms like Clear Creek?

Todd Crescenzo (03:53)

So I think it goes back to that really key point for us is commercial inflection, right? And that there has to be a roadmap for us to underwrite to, right? A lot of times these deep technologies get stuck in kind of early stage continuation of R&D and it’s hard for early stage companies to prioritize the path forward. But at some point you do need to pick a path forward and commercialize. So when we look initially, is this a technology that has value to whatever subsector or sector of clean tech, renewable, et cetera?

Are they at that commercial inflection point? And then, we kind of just start to look at really, you know, I think the basic type of underwriting process, which is, who the folks involved, other investors, commercial partners, the key employees, right, the co-founders, and then also, valuation. I would say what is different for us is we tend to be very valuation-sensitive because we are going to play a longer-term game here. And there are quite a few investment firms we see in the seed and early stages and then there’s a lot in kind of the later stage whether that’s infrastructure, real asset or buyout and so in this kind of missing middle as some are calling it now or just the valley of death there’s a lot of acronyms that are sayings that kind of come out in around the let’s just say series B and beyond is really do you have folks that you want to be involved with over the long term.

Can they manage stress? Can they make good decisions? You’re there to, as a board member and investor, to be helpful, but you aren’t running the company. You really got to find folks that can enable the technologies that they’ve built, but play the long game.

Wes Ashworth (05:56)

Yeah, no, that’s great stuff and good insight there. And then, I’ve heard these stories of, you know, I talked to a lot of entrepreneurs, people that have started up companies multiple times over. And they’ll, a lot of times, tell you the stories of like, man, it was a rough road, going through the investments, like constantly pitching, hearing no, hearing rejection over and over and over, finally happened. When it’s that, okay, it finally happens.

What are the things that you typically see or maybe the opposite of that? So what are sometimes where you’re like, gosh, that’s a good company, we’re almost there, but this little piece is missing. Are there common threads there that kind of hold you guys back sometimes or?

Todd Crescenzo (06:37)

That’s an interesting question. I think we tend to use the term situational awareness, right? Because every investment you make is very unique from point of entry on valuation to folks involved to incentives of those involved. And you try to do all the upfront work, paint the mosaic, really sort of think about the puzzle. And then you get into it and you realize like, yeah, the puzzle is constantly changing, right? And so you have to remain dynamic.

So I don’t think you could answer, at least I can’t answer that, with sort of a broad paintbrush. And I think one of the key differentiators about us that I sort of failed to mention in the beginning is it builds on the multi-stage. So in the intro, you mentioned that we also invest in the liquid markets or the public markets. That is not, as an allocator would say, a beta play. That is we make very specific and conscious decisions to invest in liquid markets based on our thesis and trends. And we have sort of three real core trends.

One is electrification of everything, the automation of everything, and the datafication of everything. And how those themes play out in various value chains, if we think about the top of the stack is, let’s say solar and wind generation, all the way down into the suppliers. There are a lot of ways that enabling technologies in the value chain can get pulled up by those, let’s say, real assets or the generators. And so sometimes an expression of a view in around an inverter or something that’s differentiated is really best in the liquid markets. Now, when you invest in the liquid markets, we try to take that same approach of engagement. And then when we have our private markets investments in the portfolio, connect those dots, right?

So getting back to your question, I think when you have scenarios that require, let’s just say heavy lifting, a lot of engagement, a lot of mind share and a lot of energy, having an ecosystem with you and behind you to problem solve on that is really key. Because again, as I said earlier, there is no one way to solve problems and a lot of times every situation is quite unique.

Wes Ashworth (08:46)

Yeah, I find myself saying that all the time to my team. They’ll bring a problem to you and it’s like, well, it depends. It’s never a clear cut straight answer. It’s always, it depends. But kind of dig into a little bit of just your investment approach as well. I know it’s flexible, including that focus on scaling companies. And you mentioned certain things, but to dig into it a little bit further, how do you assess a company’s ability to scale and adapt in such a fast evolving market that, of course, we’re in?

Todd Crescenzo (09:16)

Yeah, to be honest, no clue. It starts with, I think, and I’m just being honest, it starts with the core technology. Is it differentiated? Does it provide a value? Okay, great. Box one, check. Is the company at a commercial inflection point? What might that be? Well, in this earlier stage company, could be maybe it’s a cell supply agreement to a battery pack integrator. We had a company that was the case and we looked at that as a commercial inflection point.

Okay, great, that’s there. Now the third part is, do you have the right folks to execute against that? And so I think again, getting back to this like, flexible mind and having situational awareness really needs to drive all these different sorts of potential outcomes. Now the one thing we can control as investors and we try to be really disciplined because there’s so much more, I don’t want to say noise, but variance around what will influence and some of it you control and some of it you don’t is really how we underwrite. And that is paramount and that’s first and foremost valuation. And so we’ve seen a lot of great technologies at commercial inflection points with awesome team around those two scenarios and we just haven’t been able to get comfortable with the valuation and so as an investment as an investor the only point of risk that you can manage is an entry is valuation.

So we tend to be a little bit tighter on that upfront. But then as we invest through the life cycle of the company, the opportunities do come around where we can sort of not be extractive, but the cost of capital has to go up and that’s to the benefit of us and our LPs. But it is in the spirit of a win-win with the portfolio company.

Wes Ashworth (11:08)

Yeah. And I started thinking about too, just as you initially invest and maybe a company that really looked promising, everything was great, checked all the boxes, you invest, and then it doesn’t necessarily happen the way that it was supposed to happen. Not to name any names, but can you share maybe a cautionary tale of that and maybe lessons learned? Like what are some of the things that didn’t go as planned or were missing in order to take that company and then scale it beyond that. Are there any key threads there?

Todd Crescenzo (11:44)

We’re a little bit early in our own journey at Clear Creek for me to have a full look back and say, here’s what went wrong, here’s what went right, and here are the actual underwritten returns on invested capital. So with that as sort of a framing, fortunately, we don’t have any portfolio companies. That’s the case on the private market side. On the liquid side, we have had some and we’ve actually realized losses because we just need to move on because there was a business shift.

On the liquid side, it tends to come down to management changes, right, and or just an inability to execute. That’s at a different scale. On the earlier stage companies where we’ve seen, let’s just say challenges, we’ve been able to mitigate those challenges by rolling up our sleeves. And yes, we’ve provided capital, but also like working hard alongside, whether it’s the founders or the existing executive team or executive team you’re gonna bring on.

And that is part of risk management from our perspective in the private markets. Right? So you have your point of entry, you’ve done your underwriting, you’ve done your diligence. The valuation allows you to sort of manage risk on the front end. But then you get into the situation and, I don’t know, maybe the commercial roadmap you thought, was you were underwriting against to takes longer. What does that mean? More capital? Or is it taking longer because there’s technical difficulties with the technology. Those are two different sort of ways you may risk manage and provide solutions.

So those would be examples of, I think, things that have less gone like absolutely wrong and more just, I think we all should expect when you invest in the private markets that there are challenges, right? And you need to meet them head on and be a solution provider. Where maybe we’ve seen that take longer is maybe a lack of alignment across the cap table.

So maybe there’s someone that’s an early stage investor, they’ve had a series of markups, they’re feeling pretty good. And so you’ve come in the next round and you’re like, well, for us to get a markup, we’re gonna work really hard. So is that a challenge or is that just reacting to the incentives that are embedded in that cap tape?

Wes Ashworth (13:42)

Yeah, good points there and good perspective. And just thinking about the renewable energy market as a whole, it’s known for volatility. I guess from an investor’s perspective, what are the biggest risks that companies face? And then how can they mitigate these risks to appeal to investors?

Todd Crescenzo (14:06)

Sure. I think it really depends on where you sit in the value chain, right? So I think regulatory risk and let’s just say solar and wind is traditionally, always been a little bit volatile, right? Or the PTCs and ITCs is to get signed up again. It’s every five years and it’s like, kind of this boom bust cycle. And obviously that has an impact for the enabling technologies down in the value chain. I think what we’re seeing now is, energy transition broadly is to say the genies have a bottle is kind of an understatement, right? And so we’re correctly moving away from like, embedded regulatory risk, although they still exist, to just more general business risks, right? Like, is this a good technology? Yes or no?

Does it have a place in the market that folks and users are going to pay for them, right? I mean, and thus, can you really build a commercial enterprise around it, right? So for us, as we think about, a lot of folks ask us, we are impact investors and we say we’re impactful. And what we mean by that is, we are looking at really deep technologies that can have a meaningful impact in society. And the quicker and bigger we get those technologies to market, and particularly faster, so speed and scale. That’s very impactful for us all, right? As we think about whether one believes in climate change or not, we’re in an ever competing resource constrained global economy. So we have to do more with less, that is the essence of innovation and getting these technologies with speed and scale to market.

Wes Ashworth (15:37)

Yeah, in thinking about mitigating risk, when a company does successfully mitigate risk, are there specific signs you look for to indicate? I guess they’re truly prepared for volatility rather than just masking potential problems as you’re in the early processes with them and going through that.

Todd Crescenzo (15:54)

Yeah, again, private or illiquid and liquid markets may be a little different. So on the liquid side, you might look at things like cap structure, right? Like how much leverage is there? You know, can they withstand sort of top line retreat with maybe still, you know, reasonably high costs on the illiquid side of private markets? I think it really comes down to the human side, which is do the folks at the table, and the table being everything from the operators, the executive team, the founders to the investors, have the ability to see through stress, right?

Whether stress is a macro event, whether it’s an idiosyncratic technology risk to that company. I think Elon Musk is one that proves this out, most problems are solvable. It’s just how much tenacity and time and money do you want to put into it? And so that really comes down to character of the folks you’re surrounding yourself with.

Wes Ashworth (16:48)

Yeah, it’s cool to hear you say and it makes sense why that would be so important just in terms of the character, who the folks are at the top and who’s leading the company. How do you vet that out? Like what are some of the things that you look for or cause everybody’s probably going to put on their best face when they’re going through that courting process. Like how do you, what are some things you vet, or use to vet that out or what do you look for?

Todd Crescenzo (17:01)

Everyone’s going to use their bias and their incentives to tell a great story, right? And that’s, you can’t fault people for that. That’s just, you know, if you’re a founder, why wouldn’t your technology be the best, right? If you don’t believe that, that’s a problem. Right? So, we often talk about maybe we should do a better job on this front of using real deeper background checks and personality tests and looking at, let’s say business chemistry across that spectrum, whether it’s a smaller company or larger.

I think for us in the private markets, what we try to do is start early with these companies, but with very low risk. What does that mean? Not investing, but building a relationship. And so we spend a lot of time in sort of like accelerators, venture studios, speaking to dedicated pre-seed and seed investors that are really taking that technical risk on. And then those investors and those types of platforms know that we exist out there, right? And then when they’re at a commercial inflection point, we can get a call, right? So that’s the inbound top of the funnel, if you will, on sort deal origination or investment opportunity sets.

But in that, I think building relationships is really key to discerning whether or not, to your point, or a question that is the character there, is the fortitude there, is the resiliency there, is the intelligence there? And so along the way, you’re consuming that and kind of putting together that longer term mosaic.

Wes Ashworth (18:49)

Yeah, I think it’s a good strategy, especially just getting in there early, developing that relationship. You know, you’ve got a longer, it’s harder to fake it for a long period of time. And the more you get to know somebody, the more you talk to them. I always have a thing, we look at it on the recruiting side and candidate side, it’s like, man, do I like that person more every time I talk to them? Do I feel better about them every time I talk to them? Or do I feel a little worse? Or do I feel a little more like, I don’t know, something’s not right here. So that’s a lot of it at the end of the day.

Switching gears a bit. Thinking about the investment side of the equation, any, I guess what emerging opportunities do you see in renewable energy or in the greater clean tech sustainability space that leaders should be focusing on to stay ahead of the curve?

Todd Crescenzo (19:31)

As leaders of existing companies or just kind of more broad strokes?

Wes Ashworth (19:36)

Yeah, just maybe if you’re seeing, there’s a lot of new technologies out there. There’s a lot of trying different things. There’s a lot of new markets emerging and things like that as well too. I guess from the investment side of things, are there components of that where you’re like, yeah, I don’t know. This actually looks pretty promising or maybe companies probably should be paying attention to this technology.

Todd Crescenzo (19:46)

I’m a rational optimist, so I see a lot of things that are very compelling and exciting. I think if we sort of flip it to like what those companies with exciting, compelling technologies should be doing and should be is always a tough one. You don’t want to say you should definitely do this. But, one thing that we’ve seen really work is when a company that has a really differentiated technology, a value add technology, spend some time looking up and downstream of where they sit in the value chain and seeing what partners can enable their growth. And this is something we do try to do once we’ve invested. It’s part of the reason we invest in liquid markets is we’ve got a core thesis, a lot of particularly publicly traded large industrial companies in the US have under invested in R&D or innovation.

And so they’re now sort of looking up and downstream at where they sit in their value chain based on a lot of the secular thematics we talked about earlier, a lot of the policy framework, broadly energy transition and saying, okay, we’re behind the ball here, right? And we got to find technologies that either enable our core business or widen the moat around our core business. And so they’re going to do outright M&A to acquire that innovation or that technology. They’re going to maybe make minority investments, whether that’s through our fund or other funds, or they have their own CBC group. Or the third is commercial partnering.

So, when we get involved, we really try to push companies to look up and downstream, but I think as an entrepreneur, as an early stage executive leadership team, doing that all the time is important. And then reaching out to those suppliers, reaching out to those service providers and having constructive conversations on maybe just what they’re seeing, right? It’s intel gathering, but it often will lead to broader discussions around maybe those groups make investments, maybe commercial partnering, right? And there’s just a lot of information flow that both sides get that can really validate or not validate the technology. But that’s worth a lot, right? Like even if you fail fast, that’s better than just going on and on and not being a solutions provider, right, with your technology.

Wes Ashworth (22:17)

And this may go in tandem with that thought, but thinking about, so companies out there, you go through the process, you invest, you’re just on the other side of that. What’s like, the first priority, like number one priority? What’s the first thing you guys are trying to accomplish with that company?

Todd Crescenzo (22:34)

Wes, I’m going to use your line earlier. It depends, right? It depends where the company’s at in its journey. It depends on is it rainbows and unicorns or has it been challenging what have been the challenges, right? So, not to skip the question, but I mean, I think it really does depend. Is it a capital? Is it an operational thing? Is it a scaling thing? You know, it really is a lot. It could be a lot of different things. And then there’s just things you haven’t seen before. So I think when we’re on the other side of investment, whatever that challenge is, we’ve tried to be thoughtful but not prescriptive on where we can be influential and of help.

So in a control investment, that’s a lot easier to execute on because you’re the control investor. And by the way, we have done a control deal. In a minority deal, are you on the board as a director or are an observer? How much of the stack are you? Have you built enough social and political capital with your co-investors to bring forth good ideas and sort of run with it? So all these dynamics are at work that are, I guess upstream of what the challenge is.

But recognizing whatever that challenge is, engaging those folks that could be solution provider. And then within Clear Creek, we’ve been thoughtful about how we’ve built out our team, right? We have a day-to-day investment team, then we have a venture partner team, and then we have an operating executive team. And the spirit of that is between those layers of the team, we have some solutions, to at least help with where we might not get to the answer, we can work hard alongside the companies to work towards a solution.

Wes Ashworth (24:11)

Yeah, I’ll ask you another question where you can answer with “it depends.” Think about a company, a founder, they’ve got something going, they’ve got a good technology, they’re building it right. When’s the right time? Like when’s the right time for them to seek out external investment? I guess, do you see any patterns to where, yeah, maybe some people come in too early, maybe they come in too late, but what’s the right mix in terms of when’s the right time to go out and start seeking that?

Todd Crescenzo (24:13)

That is another depends. Yeah, I mean, in some of the depends on is it hardware, is it software, you what is the underlying business model? What’s the end game, right? And so if you’re always working backwards from like, what the long-term objective is, then I think that starts to define some of the generally accepted right ways of bringing in capital. At the earlier stage, I think, you know, is there one founder? Are there two? Was there original, your own capital, you’re bootstrapping it, right? Was there a pre-seed investor?

I mean, again, this isn’t the ilk of it depends, but from our perspective, again, that commercial inflection point is what we really see as, is the right time to raise sizable capital because you have that roadmap to sort of not only underwrite but execute against. And that’s an alignment that we like to see.

Wes Ashworth (25:34)

Yeah, love it. I’ll change gears a little bit in talking about some of the investments you’ve made. So thinking about some of the companies in the portfolio. And I know that companies like Ion Storage Systems and others, but can you share how your fund structure has benefited these companies? Maybe give us some examples of those things and what lessons can be drawn from those experiences.

Todd Crescenzo (25:38)

Yeah, I mean, we hope and you know, we should next time do this with like, some of the portfolio companies as co-guests and we can be collaborative, like, hey, has Todd and Clear Creek really done what they say they do? And I hope that they would say, “yes,” but, like most things, do your best and there’s challenges that come up. You mentioned Ion Storage Systems. I mean, this is a really interesting company that has a very, very deep differentiated technology around really a material science, right? It’s a ceramic electrolyte that enables battery technologies as a starting point and it is a platform technology and that ceramic electrolyte allows for entry into everything from consumer electronics to EV to eventually grid storage.

With that, I mean, that is a complex roadmap, right? Like the end market needs in the EV world is very, very different, not only from a cost structure and how you price that, but the qualification process versus consumer electronics. And even within consumer electronics, someone like an Apple would look to do things very differently than maybe a Microsoft versus a Dell, et cetera. And so when you’re working with companies that have this platform ability, you will stay focused, but yet nimble. So you’re situationally aware to your roadmap, but you’re trying to execute against the first market.

And so in Ion’s case, it’s broadly, loosely speaking, consumer electronics and then stepping off that into the next market, stepping off that into the next market. And then when you step into these markets, are you building a full scale cell, battery cell, might you look to do something in around licensing? May you have a critical component that could be sort of its own skew, right, that enables other technologies?

And so I think in Ion’s case, we’ve been key to sort of bringing that to the table on recognizing as the point of entry has changed based on the market segments, making sure we’re very flexible, situational aware, but also rooted in reality of timing, and what are the business needs as we evolve, right? So there we recently were part of sort of broadening out the executive leadership team’s core capabilities, the first five years of that company’s existence looks and feels very different than what the next five will. And sometimes those are the same folks, right? Cause everyone grows and evolves.

Sometimes it’s not, and sometimes it’s supplemental. So in that case, we were able to sort of bring in some folks that will really elevate the totality of the technology as we enter that next growth chapter. So that would be an example. Another example that is more on the liquid public market side is we owned a company in the contract wind blade manufacturing space. And they had a business unit in there that was, I say, not exactly orphan, but it was hard for it to do its own thing when the core company’s competency was essentially wind blade manufacturing. So as a shareholder, we worked with that company to spin this business unit out. That is a control deal that we have.

But it’s also getting it out and then now reconstituting it into growth mode. Prior to that, was just sort of sitting in a publicly traded company, it was well resourced. Now you have to change mindsets about having a growth mindset, really moving towards other markets. The core competency was automotive. And so that’s great, but as I said earlier with Ion, in the automotive space, you’re really competing on cost, cost, cost, and it’s hard to differentiate a value add product via pricing. So okay great let’s use that as the base case for production but then let’s look at other markets. So we’ve identified three other markets of that company. One is industrial technology and here you can think about battery enclosures for data centers, grid scale, energy source systems.

Composites are non-thermal, right? So metallic material often used in those end markets are. They tend to be lighter and cheaper. And so you have a lot of flexibility. And as we think about the electrification of everything, composites are a key component of that, right? It’s not super deep tech, but it’s going to have sort of a really strong tailwind. So industrial technology in addition to the automotive, then there’s sort of aerospace and defense within that, you think like drones, right? I mean, those are just, have more and more of a play in, yes, warfare, but even more so like monitoring technologies around wildfires and assets monitoring, et cetera. And then the fourth piece is what we would call the built environment. So as we think about substitutes within materials for built environment, composites really could play a key role.

I bring this up because I don’t think in a public company it’s harder to build those kinds of independent growth models of what the core business is. And so that’s an example of like, being thoughtful, being value add. And we’re in early days of that, right? So speaking of challenges, it’s, you got to get folks who, you know, we’re at a big company thinking more like a small company, you need to be sort of, yeah. So it’s fun, stressful, all rolled up into one big ball of wax.

Wes Ashworth (30:50)

I can imagine so. Thinking about another topic that we’ve gone into is just Clear Creek’s approach to building an ecosystem around your portfolio of companies, and you’ve touched on some of that throughout, but offering more than just capital. How does that create a competitive advantage, and what does that look like, I guess, in real life, and how that’s played out?

Todd Crescenzo (31:08)

Yeah, sure. I mean, I think it is a competitive advantage. I think a lot of folks say they do that and often maybe fall down on it, right? And so it’s something we take really, really seriously. It’s something that we don’t have perfect yet. It’s part of our continued growth mindset of, as a firm and as an investment partnership. And so we initially started as an early company with a pretty robust, I think, team structure, right? That I mentioned earlier in terms of venture partnering and operating executives.

And then as we go through time, we think about the compounding effect of that core team, right, and its ecosystem and being part of conversations like this, frankly, right? You know, early stage venture studios talking with early stage investors and frankly, later stage investors, right? Just being one that people want to talk with you, not because you’re cool or smart, but just because you’re able to connect dots.

And to the benefit of your portfolio company, that’s a fiduciary responsibility I have. I mean, as in running the firm, we have to make sure that we do our best to provide a financial return to our LPs. Now, our LPs have mixed views on the world in terms of like, are they just a financial investor or are they a strategic investor? And we’re trying to build out, even within the LP base, roughly 50% from strategic, maybe like an ABB, a Schneider, et cetera. And we can sort of supplement their CBC groups, but we also get to tap into their skill sets on maybe upfront diligence technically or thoughtfulness around how to actually commercialize this. And then half the LP base just being typical financial investors, whether that’s individuals, family offices, endowments, foundations, et cetera, who also are very interested in broader strokes of energy transition because they have their own stakeholders that they’re answering to on this.

So when you provide a solution to both your LP bases that could then compound into the portfolio and creates a really nice flywheel of collaboration within that ecosystem. So that’s how we’ve thought about it. Again, that’s an evolution. We don’t have all that perfectly squared away yet, but that’s kind of the long-term goal and where we’ve started.

Wes Ashworth (33:35)

Yeah, and then to touch on this a little bit more, just thinking about all the companies out there, the renewable energy sector is highly competitive when it comes to securing funding. We’ve talked a little bit about that throughout, but any other strategies or approaches that you’ve seen companies use to successfully stand out and capture investor interest?

Todd Crescenzo (33:56)

I mean, again, I think it starts with the technology, right? In order to get investors’ interest, it has to be something that has a use case and can make money and is scalable. That aside, I think companies that are open-minded, right, to maybe forms of capital. So looking at non-dilutive capital, right, there’s a lot of interesting grant programs out there to using regulatory capital like tax credits, et cetera. Also debt.

There’s some interesting formats of debt that sort of backstop up against some of these regulatory regimes or government programs. And then your equity capital. And so I think folks that sort of really look across the form factor of capital are thoughtful about who is coming in with the capital and does it really advance the technology or that’s kind of the holy grail.

Wes Ashworth (34:45)

And again, another thing we’ve talked a little bit about, any common mistakes that you see companies make during the fundraising process and how can executives avoid those to secure the capital they need?

Todd Crescenzo (34:56)

I think the common mistake we see is it may depend on a little bit of where you’re at in the cycle, but getting a little bit too hung up on valuation. I think obviously early stage investors on your board are going to want you to promote a very high valuation. There is a trade off on that. If it’s too high, you’re setting up your future investors for tougher times. Moreover, could take longer to raise the capital.

So I think you need to always have that situational awareness around what are those trade-offs? And it’s not to say you should give away the company, right? But looking for the win-win versus the I-win, whatever side you’re on, is something to strive for but often gets lost in the fog of war, if you will.

Wes Ashworth (35:39)

Yeah, and it’s something you see a lot and I guess it’s understandable that often these founders they their mind they value the company way higher than probably in actuality. I think that’s a common thing and I think that that openness and what you just shared makes a ton of sense

Todd Crescenzo (35:55)

Yeah, we’re relying on the spreadsheet too much, Like, here’s the DCF. This is why we think this round should be sort of floored at this valuation. Yeah, that’s great. That’s really cool spreadsheet math. But to get to that end point, there’s so much work , it’s probably going to require more money and time, right? And so how do we think about haircutting that base case? So you get to a win-win where if it took more time, if it took a little more capital, there aren’t too many upset folks around the table. Because if you minimize that, you maximize the odds of longer term success.

Wes Ashworth (36:26)

Sure, makes a ton of sense. I’ll change up, we’re getting close to time, still got a little bit of time, but I wanna cover a few more topics. Just thinking about trends in renewable energy investments, are there any specific sub-sectors within renewable energy or clean tech, like energy storage, grid technologies, general electrification, that you believe are poised for significant growth? And I guess, any insights there?

Todd Crescenzo (36:37)

Yeah, D, all the above. Broad strokes in material science that enable some of these technologies are very, very interesting. But more specifically, like data centers, right? I mean, get a lot of hype now and there’s realization that it’s AI, but the reality is that trend has been ongoing for quite some time and just general computing going up, right? Whether we call it AI or it was cloud, I mean, you need more places to store data. Those data centers require a lot of energy.

And the form factor of that energy is constantly changing, right? So maybe your UPS backup was lead acid batteries in the past. You know, those only have a certain attribute to perform and based on where these data centers have gotten to and where they’ll continue to go, kind of a deem that technology irrelevant, right? Not only from a sustainability standpoint, but also just from a performance standpoint. So we see a lot of interesting things around, you know, data centers, battery technologies, whether it’s short bursts, UPS backup or actual storage.

You know, getting into storage, that’s a very kind of big category. Are we talking about your Tesla Powerwall at the house that’s looking to do a couple hours here and there? Or are we talking about bidirectional sending back to the grid based in challenging times or high demand periods? Are we talking about popping down a battery pack next to a bunch of wind turbines that are going to store when the wind isn’t blowing? So within the segmentation of energy storage more broadly. There’s some really interesting sectors, right? And particularly the utilities scale. We’re really excited about that.

Wes Ashworth (38:39)

Yeah, and thinking about a little longer, like, you even over the next five to 10 years, how do you see the landscape evolving for renewable companies over that time period in terms of investment opportunities?

Todd Crescenzo (38:49)

Yeah, and renewable companies, it’s like a general term, right? So we’re talking about the generation side, are we talking about the battery side? If we sort of just say all of it, right? And just say clean tech or renewable energy. I think what is likely to happen is consolidation right up and downstream of the core technologies and then also across geographies because the electrification trend does not know borders right I mean it has different incentives based on what’s going on in Europe versus Asia versus the US adoption and South America is more challenged versus North America for obvious reasons so as those trends play out, scale is going to be increasingly important. And so we see a consolidation trend that will be both horizontal and vertical.

So, horizontal will be a developer in the US will acquire a developer in South America. Now you’ve got sort of a two continent player, but then also up and downstream. Maybe they’re going to backward integrate and acquire a differentiated inverter technology that allows our panels to be more efficient. I don’t know, right? So I think that’s a trend that has somewhat started, but it feels very early stage, right? And so as most trends mature, you typically see that consolidation. So we do expect that to happen.

Wes Ashworth (39:58)

Yeah, I was gonna say, think you’re spot on. You’re already seeing some of that happen with the consolidation and I think that is spot on. Couple additional questions. Just, again, thinking about maybe executives, others who are leading companies at an inflection point, looking to scale, your opinion, what should they focus on to ensure they attract the right type of investment?

Todd Crescenzo (40:14)

Execution. Make sure whatever your commercial roadmap was or is, you you want to remain nimble, but in a great case, you’ve got a PO, right? Deliver to the PO, don’t get distracted. I mean, you always want to have R&D and, thinking about the next generation of product, of your technology, right? For it to have durability and have a moat. But you can’t lose sight of like actually getting to market, right? And if you get to market, then the next rounds are gonna be easier and of higher valuation. So stay focused on that commercial inflection point and executing against it.

Wes Ashworth (41:00)

Yeah, perfect. And just looking ahead a little bit, what are your goals for Clear Creek in the next few years, particularly in the renewable overall sustainability sector? How do you see your firm’s role evolving and helping those companies meet the growing demand? You know, there’s power demand, as you mentioned, data centers, that demand is growing. We’re going to need a lot more of it. But what are your goals for Clear Creek over the next few years?

Todd Crescenzo (41:17)

Yeah, it’s a great question. I think we’re at our own commercial inflection point, right? So whenever we talk to early stage companies, we always sort of hit out on the stresses and strains of being an early stage company or firm, right? And so, we’re really entering this next chapter of growth. We called it phase one, which was to put our own money to work, friends and family, folks that trusted us, prove out the concept, build the track record, do it with institutional process, people and outcomes. And that was phase one. That’s years really zero through three. And now we have a three year track record. We’ve deployed capital, the track record’s good, we entering our next chapter of growth, is what we would say is our own commercial inflection point, which is attracting LPs that we hope map against what we would like is this mix of strategic capital, commercial folks with financial investors that are aligned with what we’re doing and why, and further building that ecosystem.

It sounds sort of counterintuitive to say like, you always want to work backwards from a goal. What’s the objective? Works backwards from that. But you don’t want to define that goal too much because you want to have situational awareness along the way. I don’t think it’s appropriate for us to say we want to be this size fund. That’s not our objective. Our objective is to be damn good investors, enable technologies to get to market, and that will take care of itself. But just continue to compound our own capital, our LP’s capital, have alignment of interest towards advancing these technologies and returns. And that’s what we’re trying to knock down every day.

And then when we look back in five years, maybe we’ll do this again in five years, Wes, and we’ll say, did you do a good job, Todd, and team or not? And what was the success of that? Well, maybe it, we didn’t grow at all, but we got five companies to market that are doing great. Maybe it’s a combination of the fund has grown, our ecosystem has grown, we’ve gotten technologies to market. And I think there’s something really exciting in that, and that’s what drives us every day.

Wes Ashworth (43:20)

Yeah, no, agreed. So kind of final parting wisdom here. So as you wrap up, what are the key lessons you’ve learned throughout your career that renewable energy leaders, sustainability leaders should take to heart as they navigate the investment landscape and grow their businesses?

Todd Crescenzo (43:35)

Geez, that would mean I know something. I think just being disciplined, staying focused, but also flexible. You can’t be so disciplined and so focused that you’re not seeing the forest from the trees, but you need to know your core competency and technology. Look up and downstream where you sit that value chain, create the long-term objectives, execute against the roadmap, stay disciplined, stay focused, but also have fun, right? I mean, there’s a lot of stress in this industry that some folks feel, some folks don’t.

You see it, you don’t see it, but you know, if this was easy, everyone would do it, whether that’s clean tech, renewable, just investing in general, right? And building companies in general. So try to have some fun along the way too, because life’s pretty short and there’s plenty of times to get stressed, but be productive around that stress.

Wes Ashworth (44:28)

Yeah, no great, great parting words and words of advice and wisdom there. And that’ll wrap up another insightful episode of Green Giants. A huge thank you to Todd for sharing your experience and vision for driving sustainable investment in the renewable energy sector. And your insights on scaling companies and navigating the energy transition are invaluable for leaders across the sector. So great to hear your perspective and your wisdom.

To our listeners, as always, thank you for tuning in. Don’t forget to subscribe to Green Giants wherever you listen to podcasts. And if you enjoyed this episode, please leave us a review, share it with your network, spread the word about the innovations transforming our world. And with that, we’ll see you next time.